will give the protection necesary. Great Britain, for example, to protect its optical industry, allows no imports without specific permission. If this were based on prewar volume of imports, or even at the 1948 level, it would permit domestic manufacturers to realize sufficient sales to keep their production organizations intact and to develop and improve their products and product lines and keep American industry at its present top level both as to design and quality.

It is plain that a continuation of the Trade Agreements Act in its present form will offer no solution to the problem. On the other hand, it is at least a possibility that if H. R. 4294 is passed the industry will be able to obtain some relief. Its provision giving relief in the event of "unemployment of or injury to American workers *** producing like or competitive articles, or impairment of the national security" and permitting the Tariff Commission to limit the quantity of imports, if properly administered, can give the industry the protection it requires.

The CHAIRMAN. Your industry is essentially located in Rochester, is it not?

Mr. MCKINLEY. Yes; that is the only industry.

The CHAIRMAN. How many people do you employ?

Mr. MCKINLEY. At the present time, it is around 5,000.

The CHAIRMAN. In the city of Rochester?

Mr. MCKINLEY. Yes, sir.

The CHAIRMAN. Mostly men?

Mr. MCKINLEY. I would say over 70 percent men, yes. On the spectacle end, they use women.

The CHAIRMAN. What is the size of your payroll?

Mr. MCKINLEY. I am sorry; I do not know really.

The CHAIRMAN. They pay quite high wages?

Mr. McKINLEY. They are very high wages.

The CHAIRMAN. What do they average?

Mr. MCKINLEY. On scientific instruments, they are running about $2 average. That is on scientific only.

The CHAIRMAN. $2 an hour?

Mr. MCKINLEY. Yes, sir.

The CHAIRMAN. Could you estimate a little bit how much that average would be with all your employees?

Mr. MCKINLEY. $1.75 an hour.

The CHAIRMAN. That is quite a payroll in the city of Rochester, is it not?

Mr. MCKINLEY. It is that.

The CHAIRMAN. And it goes to help out all your civic activities in the city.

Mr. MCKINLEY. That is right.

The CHAIRMAN. Rochester is a beautiful city.

Mr. MCKINLEY. We are quite proud of it.

The CHAIRMAN. As a matter of fact, the payrolls in the city are the important thing. They are more important to the community than the profits, are they not?

Mr. MCKINLEY. Much more, sir.

The CHAIRMAN. So we reduce the standard of living if we let the people from abroad take over. We would increase their standard of

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living, and your people would have difficulty in going into another business.

Mr. MCKINLEY. That is right.

The CHAIRMAN. What is the average age of your employees?

Mr. MCKINLEY. I do not know that I could answer the average age. We have over 625 employees who have been with the company over 25 years.

The CHAIRMAN. Many of them have their homes established, and it is not easy for them to pull up roots and go elsewhere?

Mr. MCKINLEY. A man who has been in one industry for 25 years finds it almost impossible to go elsewhere. He is too old to be accepted elsewhere because he cannot compete with younger men, and he has a real problem.

The CHAIRMAN. There are about 800,000 new workers coming into the market every year. That is not a small item just to take care of that. The private enterprise system would soon smash up if we did not find a way of taking care of the number of people coming into the industry.

Mr. MCKINLEY. That is right. I think you are familiar with the training program our company has carried on in the city of Rochester, our relations with IRT and Edison Tech, and the training we have done for new technical people.

The CHAIRMAN. It is a very commendable work, and you have a great company there, one I think everybody admires.

Thank you for your testimony.

Mr. MCKINLEY. Thank you, sir.

The CHAIRMAN. Reference has been made to Japanese competition. Whatever agreement is worked out with Japan, it is a great international headache as far as trade is concerned. I remember that the people who make zippers have informed us that Japan can undersell them.

Mr. MCKINLEY. I would like to bring out one more point. If we have a reciprocal agreement with Great Britain whereby all nations are supposed to be treated the same, why is it that Great Britain will not permit scientific instruments to come into their country without permission from the Board of Trade?

The CHAIRMAN. They have a license system on most of the products, do they not?

Mr. MCKINLEY. No; you have to get permission to bring in any scientific instrument into Great Britain, and get specific approval from the Board of Trade.

The CHAIRMAN. It is another name for it, but it is essentially a license system.

Mr. MCKINLEY. Yes, sir. So trade barriers mean nothing as far as tariffs are concerned.

The CHAIRMAN. We have testimony here that Britain is claiming to make some concessions and lower the tariff 10 percent on bicycles and then turned around and would not let any bicycles into their country.

Mr. Simpson will inquire.

Mr. SIMPSON. There are areas, if I understood your report, wherein even if we went back to the tariff rates which prevailed prior to these trade agreement acts, back to the 1930 and 1933 law, the possible relief in those areas would not in your opinion be sufficient.

Mr. MCKINLEY. That is right, sir.

Mr. SIMPSON. It is for that reason that you would hope to have some relief available to you upon application within H. R. 4294 under parts that permit the imposition of quotas?

Mr. MCKINLEY. That is right, sir.

Mr. SIMPSON. That part of the proposed bill becomes very important to your industry?

Mr. MCKINLEY. We feel it does, sir.

Mr. SIMPSON. Of course, from the national interest standpoint, as contrasted with your own individual company and its employees, this matter of your essentiality with respect to war is a vital interest that the committee must consider here. Two figures would seem to indicate that if we go on in a short time you may only have 175 men skilled in the lines of making microscopes and binoculars which are necessary during wartime.

You might repeat, in the event you had so few men available and we were called upon to expand the industry, in the United States, comparable to the extent we had to expand it a few years ago, you say it would take quite a long time.

Mr. MCKINLEY. During the last war it took us 2 years to build up to a peak and that was the 2 years we had before we entered the war. It gave us a chance by having 2 years' leeway to build up an optical industry. Even during that time we were supplying Canada and England with binoculars, so that gave us a start in the direction of building up. So at the time Pearl Harbor happened, we were in very much better position of having had 2 years of expansion. If we started out with 176 men to expand and had lost the others, as I said in my report, we have not lost those men, we have maintained them on Government contracts, but we all feel that Government contracts are going to be withdrawn in a short period of time-we hope-and in that case we are going to depend entirely upon the commercial business which, from these figures alone, would indicate that we have gone down to 70 percent of our production.

Mr. SIMPSON. Your considered opinion is that the only way to preserve your industry for essential and necessary work during wartime is by giving it a substantial part of the domestic market in peacetime years?

Mr. MCKINLEY. That is right, sir.

Mr. SIMPSON. And you further believe that the only way to do that is by the imposition of a quota under certain findings on the part of the accredited agency of government?

Mr. MCKINLEY. That is right. I would like to say this: In nearly every case where there has been a petition to lower tariffs, that country which has asked for the lowering of tariff has not benefited in the optical industry, at least, from the reduction of the tariff. Some other country with lower labor rates has come in and taken away the market. In the last meeting it was France who asked reduction on the binoculars, and from the record you can find that France is not producing anything like the binoculars that they were before because Japan took that market away from them.

Mr. SIMPSON. I assume you manufacture many things other than those you have emphasized here?

Mr. MCKINLEY. Yes, sir.

Mr. SIMPSON. I want to ask you, and I would like to know, do the other parts of your business benefit greatly by reason of the cuts that have been made in the trade agreements?

Mr. McKINLEY. I beg your pardon?

Mr. SIMPSON. Are you heavy exporters in other lines of your products?

Mr. MCKINLEY. I gave just the binoculars. Our total exports, including the spectacle lenses, have dropped at least 90 percent from where they were.

Mr. SIMPSON. So far as your whole operation is concerned, the trade agreements to the extent that they were intended to help American business as we have been told in the past have not operated to your advantage, then?

Mr. MCKINLEY. None whatever.

The CHAIRMAN. Any other questions?

If not, we thank you for your appearance and the information you have given us.

Mr. MCKINLEY. Thank you.

(The following material was submitted for the record:)

SUMMARY STATEMENT BY THE OPPLEM CO.

This statement is submitted by the Opplem Co. of New York City and Lynchburg, Va., importers of scientific instruments for 26 years. While favoring extension of the Reciprocal Trade Agreements Act, we oppose passage of H. R. 4294 because the act would be crippled by the amendments proposed therein.

Opplem manufactures scientific instruments in the United States and distributes microscopes and other scientific instruments imported from Italy. Long experience qualifies us to state unequivocally that Italian microscopes together with all other imports are not causing harm to United States security nor to United States industry or labor. The facts on this are very clear.

A. UNITED STATES PRODUCTION OUTSTRIPS IMPORTS BY AT LEAST 25-30:1 Domestic production in 1952 appears to have been a minimum of $20 millions, probably much more; imports only $700,000. Does this suggest that United States industry is threatened by imports?

B. UNITED STATES EXPORTS EXCEED IMPORTS BY 50 PERCENT

United States microscopes and accessories obviously must be competitive with foreign products, for United States products valued at $1,034,000 were exported to 77 countries and dependencies in 1952. Moreover, these exports exceeded imports by 50 percent.

A sharp drop in exports from the United States since 1948 has been attributed to imports. This is unrealistic. Firstly, imports into the United States do not affect United States exports. Either United States products are compteitive abroad, or not. Obviously, they were in 1952-over $1 million's worth. Secondly, 1948 was an abnormally high year for exports because foreign supplies from war damaged Germany, Italy, and Japan had not yet returned to international markets. Thirdly, exports to Soviet bloc countries have fallen sharply as the result of strategic export controls. For example, exports to China fell from $310,000 in 1948 to $47,000 in 1949, to zero in recent years. Finally, the drop in exports was nowhere near as sharp as claimed. According to official statistics, from 1948-52 exports by the United States industry dropped less than 58 percent, not 97.5 percent as the report of Bausch & Lomb Optical Co. might lead one to believe.

C. LOWER LABOR COSTS ABROAD ARE SO OFFSET BY OTHER HIGHER COSTS THAT IMPORTS CAN BARELY COMPETE WITH UNITED STATES PRODUCTS

There are three very important points here.

1. Because of heavy distribution costs, duty, etc., Italian scopes are only about 10 percent cheaper than United States scopes. Bausch & Lomb admit their net

costs are $293; Italian scopes can be offered dealers at an average price of $263. 2. Italian labor is 133 percent more expensive than Bausch & Lomb reports. Verified statistics show average labor costs in Officine Galileo, Milan-a completely privately owned company-to be about 70 cents per hour, not 30 cents as reported by Bausch & Lomb. Overlooked is the fact that Italian companies are required to pay heavy social security charges, Christmas bonuses, housing contributions, etc., which jack up wages from 43 cents to 70 cents.

3. Several factors cancel out the advantage of lower labor costs in Italy. First, labor accounts for less than one-third of the final cost of an Italian scope sold in the United States, so lower labor costs are not of much advantage. (In the United States, the Census of Manufacturers shows the comparable laborcost figures as 38 percent.) Second, other costs in Italy, of money, materials and machinery, are far higher than in the United States. Third, heavy costs are incurred in distributing Italian scopes in the United States. Fourth, United States output is high enough to permit some mass-production economies, which economies are not possible in Italy because of low output. The fact is that the net profit per dollar of sales for Bausch & Lomb exceeds greatly that of the Opplem Co., and of the Italian manufacturer.

D. IMPORTS ARE NO THREAT TO THE UNITED STATES PRODUCTION BASE OR TO NATIONAL

SECURITY

The largest single purchaser of microscopes is the Defense Department. Instructions to contracting officials require that they assure protection of the United States mobilization base before making awards to foreign firms (par. 4-A of an unclassified memorandum of June 19, 1952). Furthermore, the Joint Optics Committee has recommended stockpiles of optical glass adequate to protect us in the event of an all-out war. Also, the skills required for microscope production are used widely in several other branches of the optical industry, in several branches of which there are virtually no imports. Unlike prewar, there is a large optical instruments industry in the United States today; output was $94.8 million in 1951 and growing, against $8.7 million in 1939. Finally, foreign labor is not displacing United States labor for, indeed, New York State reports a shortage of skilled labor for the optical industry.

E. IMPORTS HAVE SAVED MONEY FOR THE TAXPAYER

Government agencies buy imports at prices below the protected, high-profit United States price. As a result of this competition, American firms have dropped their prices to the Government nearly 20 percent and still make handsome profits. Note that before foreign competition the United States industry was able to bid higher, and identical prices to Government agencies. (See annual report 1951, Senate Small Business Committee Report No. 1068.) Extensive antitrust litigation in Federal courts involving United States industry makes crystal clear that there has been an absence of real competition in the United States optics industry.

F. IMPORTS BENEFIT HOSPITALS, CHARITABLE FOUNDATIONS, AND RESEARCH INSTITUTES

Import prices may be lower or at least may hold down the United States price. The savings that hospitals and research foundations thus make permits more research in medicine and science. Besides, foreign skills, techniques, and equipment are essential to high-grade research.

G. AN INCREASE IN DUTY, OR IMPOSITION OF QUOTAS, COULD KNOCK ITALIAN MICROSCOPES OUT OF THE UNITED STATES MARKET

Competition with United States scopes is already intense and profits are low. A price increase, therefore, forced by duties could be a disastrous blow. Quotas could also be dangerous for they arbitrarily limit the kinds and quantities of imports. If imports were reduced or eliminated for either reason, the domestic industry would have a virtual monopoly on the market, with all the undesirable effects that this would entail.