program and thereafter observing the administration of the program from the industry viewpoint has been invaluable.

In reviewing the trade-agreements program from its inception one is immediately struck by the fact that World War II intervened between 1939 and 1945 and thereby prevented a proper test of the soundness of this program during those critical years. It was, therefore, only when normal trade relations were resumed at the end of World War II that the trade-agreements program could be fairly evaluated. Any fair comment with regard to the success or value of this program must take that important factor into account.

The administration of the trade-agreements program was placed in the executive branch of our Government without any judicial review and only subject to a periodic review by the Congress when the Trade Agreements Act itself came up for legislative renewal. The record will bear out the fact that with each renewal of the act more segments of American industry complained to the respective congressional committees regarding the fairness of the administration of the act by the executive branch of our Government. The textile industry has been in the forefront in that regard. As tangible evidence that the Congress has given some weight to these complaints, we find that the Trade Agreements Act now contains a peril point provision and a requirement that every trade agreement negotiated must contain a so-called escape-clause provision to protect domestic industries against serious injury from competitive imports.

Your committee has undoubtedly already heard from many other witnesses how ineffectual the escape-clause provision has proved to be in practice because the intention of the Congress to make this an effective remedy when serious injury was found by the United States Tariff Commission to exist has, in practice, been overruled by the economic advisers to the President. The truth of the matter is that the rules of the game as laid down by the United States Tariff Commission for the escape-clause proceeding have been frequently totally ignored by the executive branch of the Government whenever it sees fit to do so. The record has caused us to conclude that an escape clause petition is an illusory remedy without practical relief.

An examination of the outcome of applications for escape clause investigations up to January 7, 1955, as prepared by the United States Tariff Commission and previously submitted to the Committee on Ways and Means in conjunction with the hearings on H. R. 1, readily bears out the conclusion on the part of the textile industry that the escape-clause procedure as a practical remedy has proved to be of negative value in most cases. Because of that fact the textile industry has felt it advisable to turn directly to the Congress for legislative relief rather than go through long-drawn-out administrative proceedings which are most likely to end in a negative decision upon review by the President's economic advisers.

In the opinion of the writer any determination of serious injury to a domestic industry to be administratively fair must be made by an independent agency of the Government and any review of that decision should be determined by an appropriate court of law. As long as the office of the President has the right of veto of any decision of the United States Tariff Commission it represents an example of an administrative agency that placed the reduction in duty into effect having the right to determine the fairness of that reduction in duty. As anyone who is familiar with administrative law knows such a situation violates a basic principle of administrative law.

Even the language of section 7 of the Trade Agreements Act, while seemingly intended to benefit industries that manufacture multiple products, results, in effect, in giving the administrative branch of the Government an added reason for dismissing escape-clause proceedings brought by an industry who can show an overall profit, but finds that one of its products is being seriously injured by a competing imported product. In theory, such an industry can now qualify for applying for relief under the escape-clause provision, but it is highly questionable whether it can obtain such relief in view of the present attitude of the economic advisers to the President, as shown in past cases.

Section 3 (a) (1) of the Trade Agreements Act requires the President to find as a fact that any existing duties or other import restrictions of the United States or any foreign country are unduly burdening and restricting the foreign trade of the United States before he is permitted to enter into foreign trade agreements with foreign governments that result in lowering existing rates of duty on imported products into the United States. In practice, whenever the executive branch of our Government has contemplated entering into such foreign trade agreements it has given industries that might be affected thereby an

opportunity to be heard before a so-called Committee for Reciprocity Information. The textile industry has made it a practice to appear before this Committee whenever it indicated that the existing rates of duty on textiles or textile products may be reduced as a result of a trade agreement to be negotiated with one or more foreign countries. It must be therefore assumed that when the rates of duty on cotton textiles or textile products were reduced in 1955 that the President must have found as a fact that the existing rates of duty on such textiles or textile products were in the language of the act, "unduly burdening and restricting the foreign trade of the United States" in such products.

As a glaring example of an instance when this provision of section 3 (a) (1) of H. R. 1 was totally ignored, we would cite the reductions in duty in textiles that were negotiated with Japan at Geneva just prior to the enactment of H. R. 1. The State Department had publicly announced that its plan was to ask other countries to lower their import duties on textiles so that Japan could sell more of her textiles to those countries and in return therefor, our Government would grant those countries concessions in import duties on products that they desired to sell in the United States. Aside from the fact that there is a very serious legal question as to whether the authority granted to the executive branch of our Government under the Trade Agreements Act permits such an arrangement, the entire plan fell through when other countries refused to accede to it at Geneva.

Our Government apparently then felt compelled to reverse its strategy and granted Japan very substantial reductions in duties on cotton textiles, in spite of the prior warning on the part of all segments of the domestic textile industry that this would result in a flood of imports from Japan. The textile industry had already shown by ample proof that the advantages which Japan had in terms of substantially lower labor costs, lower raw cotton costs, and the most modern textile machinery, made it possible for that country to sell here very substantial quantities of her cotton textiles and textile products at existing rates of duty. Accordingly, it is highly unreasonable to assume that there was any reliable economic data available on the basis of which the President could have made a positive finding that existing rates of duty in any way restricted trade with Japan in cotton textiles.

This undoubtedly represents an example where the State Department took a calculated risk that the reduction in the rates of duty on cotton textiles would not result in serious injury to the textile industry in this country. However, it is submitted that the application of such a principle in this instance was totally unwarranted in the face of the hard economic facts available to the State Department and in view of the record submitted by the textile industry at the hearings before the Committee for Reciprocity Information and also at the hearings before the Committee on Ways and Means and the Senate Finance Committee on H. R. 1.

We are well aware that the executive branch of the Government justifies its action in this instance because of the desire of our Government to sustain the economy of Japan and thereby prevent that country from becoming a Communist satellite. This major decision, of course, has not been publicly admitted, but it is common knowledge that it was the major consideration that prompted the reductions in duty granted to Japan on cotton textiles.

In our opinion the Trade Agreements Act was never intended by the Congress to bear the burden of sustaining the economy of a foreign country by a radical reduction of our import duties for political reasons. If it is a matter that entails our national security, we believe it warrants our Government in taking such steps as to place the burden of sustaining the economy of Japan upon all of our citizens rather than upon those industries in our country, such as the textile industry, which is in no position to meet such unfair competition from Japanese cotton textiles. We further believe that our country can ill afford to undermine as basic an industry as the textile industry when so many persons depend upon their livelihood on this industry.

It must be remembered that the cotton textile industry in this country finds itself in the unenviable position of having the cost of its raw cotton artificially controlled by virtue of Government regulation, its labor cost governed by the minimum wage law and its profits have unfortunately been substantially lower than those of any other major industry in this country by virtue of the keen competition that exists between producers and from foreign imports.

On the other hand, we find that our Government has supplied Japan with the necessary dollars to buy the most modern textile machinery, the producers of cotton textiles in that country have received expert advice from Government

officials as to what products would sell best in the United States market and in general, our Government has done everything to encourage the rejuvenation of the textile industry in Japan. Lipservice has been given to the idea of creating markets for Japanese textiles in other countries, but in actuality that has proved to be of little or no practical value.

Aside from these factors, the firms in this segment of the textile industry have been affected by Japanese competition in other ways as well. Japanese producers have not hesitated to copy exactly the patterns of American producers of fabrics and have offered them for sale in this market at substantially lower prices. All of these elements add up to a case of the most aggravated unfair competition which the laws of the United States distinctly frown upon if practiced by one domestic firm against another. However, the present administration apparently justifies this type of competition on the score that our foreign trade policy under the Trade Agreements Act permits it and our national security, insofar as our relations with Japan is concerned, justifies it. Under section 7 (a) of the Trade Agreements Act, the Tariff Commission may recommend in an escape clause proceeding the establishment of import quotas among other things to prevent or remedy serious injury to a domestic industry from competing imports. Since the Congress saw fit to include import quotas as a possible remedy, one would assume that the Tariff Commission and the executive branch of the Government would feel constrained to use that remedy if the facts warranted it. The record indicates, however, that the executive branch of our Government has pledged itself under GATT not to establish any import quotas. Such a commitment in effect would seem to mean that the possible remedy of import quotas as set up by the Congress under section 7 (a) of the Trade Agreements Act is not to be used in practice no matter how serious an injury a domestic industry can prove that warrants the imposition of import quotas. The strong opposition to OTC by industry during the last session of the Congress can be largely accounted for on the score that we are convinced that commitments to GATT will in practice be given priority over the will of Congress, as expressed in the Trade Agreements Act, if the two are in conflict. The administration of the import quota provision is a glaring example of just that.

Another example of what I believe represents maladministration of the Trade Agreements Act occurred when the President increased the duties on imported watch movements and parts thereof. As a result of this action, Switzerland had the privilege of being compensated for the withdrawal of the concession on watch movements granted to her by the United States under the bilateral trade agreement of 1936. Since Switzerland had undoubtedly granted to the United States under that agreement concessions in duty on certain American products in return for the concession in United States rates of duty on Swiss watch movements, one would assume that the natural thing to expect was that Switzerland would be allowed to withdraw the concessions granted to the United States on those products at the time the agreement was negotiated.

Instead, the State Department ruled that Switzerland could be compensated for the withdrawal of the concession on watch movements by granting her concessions on other products she exports to the United States. As a result of this ruling, Switzerland applied for and was granted a number of concessions on various products. Aside from the question as to whether this action conforms to the intent of the Congress, the legal validity of this action becomes all the more doubtful in terms of its effect on those domestic industries affected by the reductions in duties on those other products.

From the broader aspect of the economic value of the trade agreements program it would be most interesting to have this committee determine whether concessions originally granted by other countries to the United States have been circumvented by such devices as import licenses, quota restrictions, currency manipulation, and similar devices. The purpose of such a study would be to determine whether or not there has been true reciprocity in the trade-agreements program in the sense in which the Congress intended. The justification for the further extension of the Trade Agreements Act must rest in part on an affirmative finding in that respect. Likewise, a continued delegation to the executive branch of our Government of its existing authority under the Trade Agreements Act must be on the basis of a finding by this committee that the administration of the act has been fair and has followed the intent of the Congress. The instances cited in this statement and other testimony given before this committee should go a long way to prove that the executive branch of the Government has not adhered to the intention of the Congress as set forth in the Trade Agreements Act.

On the basis of the record we strongly recommend that our foreign trade policy be revised so that the vital interests of such important industries as the textile industry be given fair and adequate consideration. We further recommend that the escape-clause procedure and the determination of serious injury be made by an independent agency only subject to review by a competent court of law, if review is deemed necessary. In our opinion these changes will go a long way to convince industry in this country that it is not being sacrificed by arbitrary executive edict.

Hon. HALE BOGGS,

OCTOBER 8, 1956.

Chairman of the Subcommittee on Customs, Tariffs, and Reciprocal Trade Agreements, House Office Building, Washington, D. C.

DEAR SIR: We appreciate the opportunity to express to you and your committee some of our views regarding the competitive textile imports and the problems which increased Japanese competition in our home markets has created.

The textile section of the New York Board of Trade is comprised of 82 member companies with offices in New York but with plants running from the New England area into the deep South. Cotton processing and cotton fabric production are of major interest to our membership. In addition, we are interested in the cutting and fabrication of finished articles, in various items of wearing apparel and numerous other uses both in the home and in the industrial field.

Various textile companies and associations have in the past few years presented to congressional committees and to the Tariff Commission statements and testimony regarding the industry and its problems. These presentations have included, among other things, considerable statistical data relative to employment, investment, profits, production, and import statistics. This data is available in the printed records of the hearings of the House Committee on Ways and Means and the Senate Finance Committee regarding various aspects of foreign-trade legislation such as the trade-agreements extension acts, the customs simplification bills, and the more recent measure, H. R. 5550, which would have provided for United States membership in the Organization for Trade Cooperation. Similar data has been presented from time to time to the Tariff Commission and the Committee for Reciprocity Information for their investigations and studies preceding trade-agreement negotiations and in more specific fields to the Tariff Commission in connection with escape-clause applications. It might be noted here that three applications are now pending before the Tariff Commission asking for relief under the escape-clause provisions. These cases involve velveteen fabrics, cotton pillowcases, and gingham cloth.

It is not our purpose here to attempt to repeat all of the information and data which is already a matter of record. Rather, we would like to explain briefly the various segments, which when put together, comprise the overall textile industry and some of the more important factors which contribute to what we firmly believe to be an unfair and injurious competitive situation. It has often been said, and statistically it can be shown, that the volume of Japanese imports comprise only a small percent of the total domestic production. This may be true when all segments of the textile industry are considered as a whole. However, this principle seems to us to be completely unreal. It would be just as logical in our opinion to say that the multibillion dollar chemical industry would not suffer injury if it were to lose a substantial portion of its domestic market to foreign dye and dye intermediate producers simply because that portion of the chemical industry represents a relatively small percentage of the overall.

As examples of the impact of imports on segments of the textile industry as against the use of the overall average of 1% to 2 percent of the total United States textile production of various kinds and qualities, we wish to note that in 1955 the domestic production of cotton velveteens was 4,245,000 yards. Japanese imports alone in this type of fabric in 1955 were 5,754,000 yards or 135 percent of the total United States production. Further, in this segment of the textile industry alone the voluntary quota proposed by the Japanese for 1956 will still be over 100 percent of the total United States production for 1955.

The proposed Japanese voluntary quota in gingham yard goods for 1956 equals about 28 to 30 percent of the total United States production of gingham fabrics. In gingham fabrics the Japanese shipments to the United States for only the first quarter of 1956 equaled about 48 percent of the entire United States production for the whole year of 1955. The preceding figures deal with fabrics

only and not with finished articles. If the yardage of cloth in finished articles were included in the above figures the ratios would be considerably higher. As an example, Japanese cotton blouses shipped to the United States in 1955 were equal to about 33% percent of the total United States cotton-blouse production. The above figures illustrate how import drives on particular segments of the industry result in serious injury which would not even be suspected when total imports are compared with total production in all of the different segments combined. In this connection it should also be remembered that statistics available show only those shipments of goods imported directly from Japan. They do not include shipments of fabrics and finished articles of Japanese origin which are imported by transshipping and perhaps fabrication in other foreign countries before ultimate shipment to the United States. Such shipments would not only be over and above the figure shown, they would also be over and above the voluntary quotas set by Japan on exports direct to the United States. Neither do the figures include any data relative to foreign export markets lost by United States producers in competition with Japan in various foreign countries.

We feel that the measure of injury and threat of future injury must be considered and reviewed in the light of effect on particular segments and, in the case of the textile industry, the relationship of one segment to another is most important. It is important also to other distinguishable industries whose business is affected. For example, the chemical industry supplies chemicals such as bleaches and dies to the textile industry. Every textile importation, depending upon its degree of advancement, in condition, affects some other branch or branches of our Nation's economy. In other words, it may be said that whatever adversely affects one segment of our economy directly also affects, either directly or indirectly, other segments which go to make up the whole economy of the country.

A shutdown or layoff in a mill town has an immediate and direct effect on all of its inhabitants. The loss of business to the management, the loss of work to the employees and curtailed spending will be felt immediately by every merchant, banker, and contractor in the area. For purposes of study the cotton textile industry might be broken down to the following segments:

1. The cotton grower and ginner;

2. Fiber spinning;

3. Weaving and production of raw fabrics;

4. Fabric processing (finishing, dyeing, printing, etc.);

5. Cutting and fabrication of finished articles;

6. Other industrial uses such as plastic-coated fabrics, or impregnated fabrics for industrial uses which in turn are fabricated into finished articles of various types.

Imports have their effect on all of the mills and plants concerned with the production of cotton fabrics up to the identical point of advancement of the imported merchandise. It may be well said that processing and fabricating segments of the industry are not affected when they import material and carry it forward. If the problem were to stop there it might be that the industry as a whole could adjust itself to the circumstances and still carry on profitably by concentrating on the special or quality materials to keep their machines reasonably occupied and to assure a reserve of equipment which the country could fall back upon in case of a grave emergency, which might arise and cut off the source of supply. However, the problem does not stop there. The increase in competitive imports has moved from low quality to the better quality fabrics and from the unfinished to the finished fabric ready for cutting and fabrication into the finished article. These changes do not represent the end, either. The volume of imports in the form of finished articles and other items has also increased down the line as indicated by the following extract of a message from Representative John J. Flynt, Jr., Democrat, of Georgia, to the Chairman of the Tariff Commission:

"I am reliably informed that imports of cotton velveteens increased from 64,000 square yards in 1954 to 5,754,000 in 1955. Imports of cotton sheets and pillow cases increased from 1,322,000 in 1954 to 11,726,000 in 1955 and this present rate of increase over 1954 is continuing into 1956. Cotton wearing apparel increased in dollar volume from $1,315,200 in 1953-54 to a projected dollar volume of $44,055,600 in 1956. Imports of handkerchiefs increased from 139,200 dozen in 1953-54 to a projected figure of 1,208,400 dozen in 1956. Overall imports of cotton cloth into the United States increased from 30,666,000 square yards in 1953 to 99,534,000 square yards in 1955 and a projected figure of 243,756,000 square yards in 1956."