The CHAIRMAN. Any further questions?

Mr. MCCARTHY. Mr Chairman?

The CHAIRMAN. Mr. McCarthy, of Minnesota, will inquire.

Mr. MCCARTHY. Are you prepared to tell us whether there are any agricultural commodities which are now protected on which you think reductions might be negotiated?

Mr. SHUMAN. Was the question, are there any agricultural commodities now protected where negotiations for reduction could be made?

Mr. MCCARTHY. Yes.

Mr. SHUMAN. I am not prepared to answer directly. Actually, all we have studied here is H. R. 1, which is the reciprocal agreement authority. We have not studied the individual tariff schedules on different commodities, so we are not prepared to answer with any specific commodity.

Mr. MCCARTHY. Thank you, Mr. Chairman.

The CHAIRMAN. Are there any further questions?

If not, we thank you, Mr. Shuman, for your appearance and the very helpful information given the committee.

Mr. REED. Mr. Chairman?

The CHAIRMAN. Mr. Reed.

Mr. REED. I ask unanimous consent to insert into the record a short speech made by Fred C. Foy, the title of the speech being "Free Trade-Panacea or Poison."

The CHAIRMAN. Without objection, it is so ordered. (The matter referred to follows:)

[Publication No. 139, the American Tariff League, Inc.]

FREE TRADE-PANACEA OR POISON

By Fred C. Foy, vice president and general manager, Tar Products Division, Koppers Co., Inc., at the annual dinner of the American Tariff League, Inc., on October 27, 1954

The title which I have selected tonight is printed on your dinner program: Free Trade-Panacea or Poison. I selected this title rather carefully, and the thing that put it in my mind is that I happen to be one of these fellows who likes to read O. Henry. I imagine everybody in this room has read O. Henry in the past. wrote about pretty salty characters, most of whom were able to take care of themselves as they got around the world. Some of you may remember a character in one of O. Henry's stories called Jeff Peters.

He

Jeff worked his way around the countryside selling something he called "Resurrection Bitters." It was a sort of elixir, good for man or beast, bound to cure aches and pains and fallen arches and fallen hair-good for what ailed you—a sort of cure-all. As I listen to the free-trade folks, it seems to me that they are in somewhat the same category; they are selling a sort of panacea or magic elixir that is good for the entire field of international ailments whether in trade or politics.

On the other hand, I also have talked with a lot of folks who find that free trade is not a panacea but a poison, and some of them have had a little dose of this poison already. This poison hasn't done them any good. It has hurt them in spots. In fact, this free-trade poison is one of these selective poisons that we hear about. It doesn't hit everything to the same degree, but it will certainly kill some industries. Even some of the most ardent advocates of free trade admit that. It won't kill other industries, but the dead industries, it seems, are going to be pretty dead, and the people that work and invest in them are going to be poisoned economically. So tonight I thought I would like to see if we can examine for a little while some of the arguments of the freetraders and then I would like to look at the other side of the coin.

I hope we can do this together with an open mind, because in talking with some of my acquaintances of the free-trade side I find they consistently recognize there

are two points of view to this question-the wrong side and their own. I hope we can get away from that tonight. As we go along I would like to ask one question. It is this: Will this bottle of free-trade elixir cure the particulɛ r ailment we are talking about at any given time?

Our friend Jeff Peters sold this panacea to make a living. I am impressed with the fact that some of the freetraders who are selling this free-trade panacea want to make a better living because they're operating in foreign fields. I have no objection to their wanting free trade for that reason, but I think they should admit it. I think another group is selling it because they believe in it as a world philosophy. They are entitled to that opinion, but there is one important and very marked difference between old Jeff Peters and his panacea-his elixir-and these other fellows. In the old days you bought his elixir and if it didn't do you much good the most you were out was a buck or two. You could take it or leave it. But if the freetraders have their way American businesses can't take or leave it because they are going to change the law and they admit changing the law is going to hurt some of the people, is going to cost some of the people their jobs, and it may bankrupt some businesses. In other words, we are not talking about a situation in which somebody loses a dollar or two. We are talking about some people losing their economic shirts, and therein lies a big difference.

It puts me in mind of the old colored mother when her daughter came in on her way to school one morning and said she had to have a quarter to take to school. The mother said, "What for you need a quarter?" and the daughter said, “We has to give a quarter for charity." The mother said, "A quarter is a lot of money and we's a poor family, so you go and tell that teacher you ain't bringing no quarter for charity. Tell her to put us on the getting end instead of the giving end." That's the way these fellows are talking about free trade. They say if we hurt these businesses we will give a subsidy here or a reallocation or retraining or some kind of reparation. In other words these businesses that have been paying taxes are going to get on the getting end instead of the giving end, and I am not so sure that is so good.

I was interested to see in the Randall report what our Pittsburgh friend, Mr. McDonald of the steelworkers, said:

"When the President finds it in the national interest to lower a tariff below the peril point, or to maintain a tariff concession despite a finding of injury or threat of injury by the Teriff Commission in an escape-clause action, the affected companies, their employees, and the ccmmunities in which they are located should become eligible for assistance under an adjustment assistance program. existence of such a program would provide the President with an alternative to a tariff restoration, and it would provide those injured with assistance in making needed adjustments."

That is the end of the quotation.

The

It sounds like a pretty dangerous philosophy to me--and it raises in my mind a number of questions.

SOME QUESTIONS FOR MR. M'DONALD

In the first place I would like to ask Mr. McDonald what is wrong with tariffs that they are a thing to shy clear of, and what is so good about free trade that it justifies injuring people and forcing people to make what the freetraders call adjustments? And who says lowering the tariff below the peril point is something that is in the national inte. est, and how do you tell when such a move is going to be in the national interest, and how do you tell how much good it will really do?

I would like to point out to Mr. McDonald that he ought to read the testimony of some of the local union leaders that have been before that same Commission testifying in behalf of people who want to work where they have always worked, at jobs they like, and continue living in communities where they want to live, among people they like. Those folks-these people that want to work at these jobs-they know something about peril points, too, and the peril point they know most about is that pink slip that says don't come back to work tomorrow morning because there is no work to be had. That is the kind of home-folks peril point Mr. McDonald's local level confederates in the labor movement have been trying to point out in Washington.

Perhaps some of you remember the testimony of the president of the American Watch Makers' Union who went to Washington and pointed out that one company alone, Elgin, with which he was familiar, was employing less than 50 percent of the employees today it had in 1940 in the production of jeweled watches. He

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went on to point out that this company is using the most outstanding technological movements known to the whole industry; that it is today producing watches in 40 percent of the time it did in 1940 and yet finds itself in the position of being an importer of watches. He asked the committee why. He said he would answer his own question because the wages on imported watches and the cost of production on imported watches are approximately half of what they can be produced for in this country.

Let me stress again that this situation developed even after Elgin was using the most modern and efficient technological improvements known to the industry. I want to add a thought on our so-called technological superiority. I have traveled around the world quite a little and I can tell you this-the rest of the world has access to the same kind of technological improvements and know-how and machinery that we have. If they do not have access to them somebody in Washington will try to give them to them and if Washington doesn't give them to the rest of the world, they can buy them if they will put up their money. Once they get this important know-how and machinery they can operate with a lot lower wages with that machinery than we can and they can beat the pants off of our American production costs.

But let's get back to our friends, the free-trade medicinemen, and to their arguments.

One argument that intrigues me is something they call the world-leadership concept. I will present some of their arguments first and I will make a few comments that are my own. This world-leadership concept rolls around first of all to the argument that we need allies and all the friendly nations must be helped in order to strengthen them against the Communist world. Everybody agrees with that. This is not so profound. Even we tariff folks agree. The freetraders point out that our overburdened allies had an awful time because not only did they have to build up their military strength but at the same time they had to satisfy the postwar needs of their citizens in order to keep those citizens from wanting to turn to communism or socialism. This is very, very hard on them and they must have some trade in order to help carry the strain because they don't have all the resources they need and they have to sell goods in order to buy machinery and that sort of thing.

THE EAST-WEST TRADE ARGUMENT

Another argument they keep bringing in is East-West trade. They say that the United States and the Communist bloc are the only two major outside markets for the type of goods that our friends in the non-Communist world make and also that we and the Communists are important sources of agricultural, mineral, and manufactured goods that they need.

Now, they say, if the United States tells these free world countries that they must stop trading with the U. S. S. R., or cut such trade down to a minimum, then we have to take from them the goods we won't let them buy and sell behind the Iron Curtain. And since present tariffs and quotas won't let them do that, so we must have free trade or turn them back to the Communist world.

As

I cannot quarrel with any one of these theories but I would like to turn this coin over and see where we stand with respect to these theories and see what kind of burden they have been on us. In the first place, let's face it. All of you who have traveled abroad know this. Most of the non-Communist nations are very well on their way to recovery. a matter of fact, as anybody in the chemical industry knows, they are well ahead of what they were prewar and they are getting to the point where they are ahead of us in some instances. They have better equipment and better machinery than we have. This has been accomplished through a combination of their own efforts, the foreign aid program, and also the lower trade barriers that we have given them since the war.

There has been a lot of progress made. That progress has been made with a lot of help and for nations that were as badly beaten up as I saw them in 1945, I think they have done a tremendous job.

I think the whole question in this foreign recovery business remaining unanswered is how the elimination or reduction of the now-remaining tariff barriers can help these countries abroad enough to outweigh the detrimental effects such action might have in our own country with displacement of industries here. As to the restraint of trade with the Co nmunists: I get a little cold on this one because it seems to me that the remainder of the free world has just as great a stake in resisting Communist aggression as we have and their policies with respect to

It seems

Communist trade should be in their own self-interest as much as ours. to me, as I listen to that argument, that all that has happened here is that the free-trade proponents in this country have cooked up a readymade argument European countries have picked up and are throwing back at us. Beside, when I look at the figures I can't find any that indicate that any of those countries, with the exception of Germany, had as much as 7 percent of their trade flowing in either direction with Communist nations or those now in the Communist bloc before the war.

SOUND ECONOMY HERE IMPORTANT

This leads me to say to myself that a sound economy over here is pretty important to the world too and that anything that happens that does harm to the United States economy is going to do harm to the world economy. Any action that we may take that would have a recessionary influence here is going to be felt abroad pretty heavily, probably a lot more heavily than anything we have done to date in the tariff field. Lord knows our tariffs are not very tough in any direction and I ask myself again the question I have asked of the free trade people which nobody has answered-"who knows really how much impact this free trade would have on America?"

We have never had full free trade. We have grown strong as we have been operating up to know, with even higher tariffs than we have at present. Nobody can tell me what would happen in the future if we did have free trade. They tell me, of course, what a great thing it would be. They argue that it wouldn't have much effect on us, only a few industries, nothing serious. I see figures that there might be as little as 100,000 people displaced and I see figures that it might hurt 42 million people. Some folks think it might hurt even more.

At this point I ask myself, and I have asked some of the free traders, who is it that has a right to say that certain citizens and certain businesses and certain stockholders ought to give up their life's work and their investment in order to comply with a political decision that the world would be better off if we had free trade? I say, "we" because I haven't seen any signs of the other countries willing to dish any free trade out, not in any of the fields with which I am familiar. I have said also to these free traders-who says our taxpayers are no longer willing to lend support as a whole to strengthen the free world if that is what it needs to be done.

These elixir boys tell us our taxpayers are tired of this foreign aid bill.

But I am not so sure about that. I suspect what they are really saying, if they would be honest, is that it is politically easier to take things from a few than to tax everybody and they are getting a little squeamish about taxing everybody for something that is wholly theoretical.

As a matter of fact when I talk to these people I am put in mind of a statement that is attributed to Mr. Emerson in which he says "the less a man knows about something, the madder he gets when you argue about it."

Of course I feel that a speech before a group like this should give some facts. If I don't give you some facts you won't think I know anything about the subject. Maybe you won't, anyway, when I have finished. But somehow I ought to give facts. I will take two instances of allowing things to flow to the United States on an unrestricted basis.

TROUBLE IN THE COAL COUNTRY

The first concerns the coal industry which has been hurt by low-cost residual fuel oil. The estimates I get—and I live out in the coal industry country so they might be a little high-say that between 30 and 50 million tons have been affected. The mineworkers, who might be inclined to put it a little high, say that $77 million a year in wages has been lost as the result of it and jobs have dropped by 30 percent as almost the direct result of these imports. Next come the railroads, which were hauling a lot of that coal. They are quick to join in and point out that they have lost 25 million tons of coal traffic, and the railroad brotherhoods add very quickly that this represents a loss of $43 million in wages and that 80,000 operating and nonoperating railroad employees have lost their jobs between 1948 and 1952.

Both groups say they think a good part of these losses are due to fuel oil imports. Now, I don't know whether this is so or not, but I have ticked off more than 100,000 jobs right there that have been affected.

Of course you can't stop there because the railroads have a heavy investment and when they don't haul coal they have got to put the tariffs over on something else to get their investment covered. This raises the price of transportation to

other users. That, in the end, raises the cost of manufacturers' finished goods and they can't compete with foreign producers as well as they could before, so the circle goes round and round and round and yet all parties admit we have to have a sound and adequate transportation system.

I was in the Army in World War II and I know the great bulk of everything that was carried was carried by the railroads of this country, so the railroads are definitely an important industry and very much needed. So what I have to ask myself and Mr. McDonald_now is this: At what point do the railroads become eligible for some of Mr. McDonald's adjustment assistance because they have lost traffic they would have hauled?

When do we give the railroads some of this adjustment assistance? Then, of course, since the railroads have cut down a little we may have to give some adjustment assistance to their suppliers and since their suppliers won't be doing so much business we will have to adjust the suppliers' suppliers, until the whole thing just gets out of hand. That's the trouble with wholesale tampering with a welloperating economic system.

TRADE ALWAYS OUT OF BALANCE

Let's get off the world concept for a minute and get to another area, the balanceof-trade problem. This balance of trade has confused me for years because it has always been out of balance one way or the other, always something wrong, but the patient seems to live on.

The diagnosis of the freetrader is about like this. Since World War I, United States exports have continually exceeded imports and the difference was permitted to become so great in postwar years that outright aid has become necessary to achieve balance in international payments. Foreign nations, they tell me, have not had sufficient dollars to pay for all they needed-end I am going to add to that all they wanted, because nobody ever had sufficient dollars for all the things they would like to have and what they need is a matter of opinion. But, these nations said they needed to buy from us, so foreign aid was used to make these purchases possible and now they tell me that Congress and the American people indicate the end of foreign aid is approaching rapidly, and if it does end-and no other way of achieving a dollar balance can be discovered-we have to have 1 or 2 things happen.

Imports must either increase, and they say we can't increase them if we don't relax trade restrictions, or, exports must decline, and at that point they say this is tough because it will penalize industry.

One of these fellows in a speech summed this as follows: "Despite reductions through trade-agreement negotiations American tariff barriers are one of the important causes of the rest of the free world's shortage of dollars."

I won't argue but I don't believe it. And since I am just quoting him, I will continue. He said further:

"Aimed particularly at those classes of goods which our major allies are best able to produce and export, our present tariff policies reduce the ability of other countries to sell their products on the American market.

"We then tax ourselves or go into debt to give our allies the dollars they need to buy the exports we will not let them earn for themselves. Our restrictive trade policies thus add substantially to our tax burden and lower our living standards.” When I listen to this stuff about lowering our living standards in this country I begin to get a little skeptical. They don't seem so low to me and to the extent that these arguments imply our tariffs are a really serious barrier to more trade with the United States, I can only point out that which you all know, that our tariffs have been reduced many times over the past 20 years; that more than half of our imports come in duty free; and that, as a matter of fact, under these same restrictive tariffs that our imports are 50 percent higher in physical volume and many times higher in dollar volume than they were in prewar years.

Furthermore, it is my observation-and you may correct me on this-that most duties are too low to be a real competitive factor, especially when you get into style and consumer goods. I mean if European goods have style and consumer interest they will sell here if our people like them.

A LOOK AT THE FOREIGN CAR

Let's take a look at the foreign sports cars that have been sold over here in the past few years. Those cars found a market at pretty good prices because they were a type of car that some of our people wanted and we didn't make here. They tried to bring in what might be considered cars competitive to standard