came 10 percent. Anyone can readily understand why other countries didn't like our countervailing provisions. They gave us a chance to charge as much as they charged us, and for many years back these European countries have felt that we owed them preferential treatment while they gave nothing in return.

In our written statements we have shown that the 10-percent rate of duty into the United States did not immediately increase imports. In those days nobody wanted European motorcycles. Everybody in this country wanted an American motorcycle, and the British motorcycles couldn't be sold. The United States Government then made a so-called reciprocal trade agreement with England whereby the duty into the United States on motorcycles was bound at 10 percent, but nothing whatsoever was done about the 3313 percent on motorcycles into England. Even the binding of the rate didn't make any difference until after the war when the demand for motorcycles in this country far exceeded our ability to supply and European motorcycles gained a foothold in the American market because American riders bought European motorcycles when there weren't enough American motorcycles to go around.

The British motorcycle industry has an organization known as the British Cycle and Motorcycle Manufacturers and Traders Union, Ltd., of which Maj. H. R. Watling was the director. Just before one of these big international meetings at which the United States Government was supposed to give away a lot of tariff concessions, I believe it was before the Geneva meeting in 1947, Major Watling wrote us and asked us what our reaction would be to a suggestion by the British Motorcycle Manufacturers to the British Government to reduce the duty into Great Britain to 10 percent. At first glance, that looked like a magnanimous gesture on the part of the British motorcycle manufacturers, and we wrote Major Watling and told him that we were heartily in favor of this reduction if the British Government would, at the same time, bind itself to issue import permits covering American motorcycles into Great Britain. We also told Major Watling that the mere reduction in duty was an idle gesture and apparently was intended to lull us to sleep so that we would raise no objection to the continuance of the 10-percent duty into the United States. The difference was that the British were able to ship motorcycles into the United States on the 10-percent rate of duty while without import permits the 10-percent rate of duty into Great Britain would be absolutely valueless to American manufacturers. What actually happened was that the duty into England was reduced to 2212 percent; and, as we had surmised, that also was a very hollow gesture, a very poor example of reciprocity, because since that time no import permits into England have been granted. England might just as well remove the duty on motorcycles and agree to give us a 10-pound note every time we shipped a motorcycle into the country and they would be perfectly safe so long as they didn't issue import permits. We always were under the impression that reciprocity was a two-way line, but apparently that isn't the case. England talks about trade being a two-way lane, but apparently that doesn't cover reciprocity.

In addition to losing our export market in the British Empire, we are practically excluded from all countries in the sterling bloc because the dollars created by the sterling bloc are controlled by England, and England doesn't spend dollars for American motorcycles.

Many countries outside the sterling bloc are short of dollars, which makes our export sales very difficult.

In our written statement to this committee, we have explained how low-wage rates, the low standard of living, and the use of devaluated currencies has made it possible for European motorcycle manufacturers to undersell us in our home market by 25 to 30 percent on comparable models. This is possible even after the payment of 10percent duty on the imported motorcycle. It is, therefore, self-evident that if European motorcycle manufacturers can undersell us by 25 percent or 30 percent in Columbus, Ohio, let us say, even after paying duty, they are equally able to undersell us pricewise in practically every overseas market in the world. We, therefore, are in the unfortunate position of being barred from the British Empire, practically barred from the countries in the sterling bloc and running into very keen price competition in all the other countries of the world. Is it any wonder that we are keenly interested in protecting our home market, the only market we have left?

We might also give you another interesting piece of information about price competition. We sell our motorcycles for less than they cost us, and we sell directly to the retail dealers in this country and give them a discount of 25 percent off the retail or list prices. That is the only discount that is included in our prices, and still we lose money due to high manufacturing costs. The British motorcycle manufacturers ship to distributors in the United States, and we understand that these distributors are given a wide margin of profit ranging from 17 to 20 percent. First of all, we understand that the British motorcycle manufacturers make money when they sell motorcycles. Then the distributors are given 20 percent in round figures, and then the distributors give their retail dealers 25 percent. Here, on the one hand, we lose money when we give our dealers a 25-percent discount. The British manufacturers make money; give their distributors roughly 20 percent and give their dealers 25 percent, and still pay 10percent duty; and, after that, they undersell us by 25 to 30 percent. That is due to the fact that the British manufacturers pay about 58 cents an hour in wages, and they pay less to women and youths. Their workweek is about 45 hours. They use water transportation to this country, which is low. They only pay 10 percent duty. They use a currency that has been devaluated by 3012 percent. On the other hand, we pay our men in the neighborhood of $2.18 an hour with fringe benefits; pay high prices for our materials, which are based on the high wage scales of our sources of supply; and, on top of all of it, we lose money.

I should like to add one thought: The best way-or, at least, one of the best ways to reduce costs in order to meet price competition is to constantly buy new and improved manufacturing equipment. Machine tools are constantly being improved to reduce costs. Due to the fact that we are operating without profit, we cannot afford to constantly buy new equipment, and it will be a matter of only a short time when our equipment will begin to become obsolete, our costs will be high, and we will be less able even than now to meet European competition pricewise in our home market. While in the immediate postwar years we spent in the neghborhood of $4 million for a new plant and equipment, our expenditures for equipment now are practically nothing.

Another way to stay in the market is to bring out new models. We have new models on our drawing board right now that we don't dare to bring out on account of the high American manufacturing costs. These motocycles would immediately cost us 25 to 30 percent more than comparable European makes, and we would merely be repeating our experience of the last 4 years since devaluation. We would have to sell new models at a loss to meet European price competition, just as we hav been obliged to sell our present models without profit.

The old Trade Agreements Act has definitely worked to our disadvantage. We favor the Simpson bill (H. R. 4294) because, for the first time, it has provisions that will give adequate relief to American industries that have been hurt by excessive imports of their commodities.

The CHAIRMAN. Does that complete your statement?

Mr. GUMPERT. Outside of the written statement that I have submitted.

The CHAIRMAN. Very well. Would you like to insert your written statement in the record?

Mr. GUMPERT. Yes.

(The statement referred to is as follows:)

Subject: Simpson bill (H. R. 4294).

Hon. DANIEL A. REED,

Chairman, Ways and Means Committee,
New House Office Building,

Washington, D. C.

HARLEY-DAVIDSON MOTOR CO.,
Milwaukee, Wis., April 21, 1953.

DEAR SIR: We are 100 percent in favor of the Simpson bill (H. R. 4294), because it is realistically designed to safeguard the American economy and only a strong American economy can maintain the equilibrium of the free world.

Recently there has been considerable propaganda-“Trade, not aid"-to the effect that free trade will cure the ills of the world. In the case of certain big exporters and American manufacturers having overseas plants, this propaganda is based entirely on their own interests and in the case of theorists is based on utter lack of knowledge of the manufacturing problems of those American industries which have been seriously hurt by excessive imports. In both instances the irreparable injury that will be done to hundreds of small-and medum-sized industries and to American labor is ruthlessly brushed aside as of no consequence. Small- and medium-sized industries represent an important sector of the American economy. It has been proven that many of these industries, due to the nature of their product and their volume, are particularly vulnerable to price competition from low wage-rate, low standard-of-living countries using devaluated currencies. This important sector of the American economy cannot be sacrified without seriously affecting the financial strength of this country and our ability to keep the rest of the free world strong.

Further reduction in tariffs leading finally to free trade would play into the hands of the Communists by cracking the American economy wide open. The Simpson bill is a realistic safeguard against this danger.

Harley-Davidson Motor Co.-50 years old: Sole remaining manufacturer of conventional American motorcycles

The Harley-Davidson Motor Co. is typical of medium-sized business in this country, and we are citing our case not because it represents our company but because it is an excellent example of how relatively small semi-mass-production industries in this country are being seriously harmed by excessive imports of their commodities. Our company produces only motorcycles. We started on a shoestring in 1903 and, through efficient management, good engineering, capable manufacturing skill, and sound sales policies, have been the undisputed leaders in our industry since shortly after the inception of this company. All other motorcycle manufacturers in this country have fallen by the wayside, mostly for financial reasons. We are now the only American manufacturer left in the continuous production of conventional motorcycles.

We mention our success in our line merely to stress the point that even efficient manufacturers in many fields in this country can no longer successfully meet foreign cost and price competition in their home market.

Inability to meet competition pricewise from low wage-rate, low standard-ofliving countries using devaluated currencies does not automatically brand a previously successful American manufacturer as inefficient. Anyone claiming this does not know the facts or is just distorting the facts.

Before devaluation: Harley-Davidson fully able to meet European price competition despite European low wage rates

Before World War II imports of European motorcycles were just about nonexistent-2 percent of our production for domestic sale in 1937, 1.9 percent in 1938, and 3.1 percent in 1939. At that time we were in the tail end of the depression. American motorcycle production could more than fill the demand of the home market, and no one even thought of buying imported motorcycles. They were not wanted.

Our

From the end of 1941 to late 1945 we made no motorcycles for civilians. entire production was taken up with military orders for the American and Allied Armies. During that time we produced in the neighborhood of 90,000 complete military motorcycles and enough spare parts to make an additional 30,000 machines. We emphasize the fact that those were all military motorcycles and that we are now the sole remaining manufacturer of conventional American motorcycles in continuous production. Other consumer goods were in similar short supply during the war years. Wages were high, savings mounted, and when the war ended everybody wanted to buy.

The pentup demand for motorcycles was tremendous, far exceeding domestic production capacity. European motorcycles, especially British, began to sell in ever-increasing volume even though the imported motorcycles were smaller, lower in horsepower, and generally higher in price than ours. There were more motorcycle buyers than there were Harley-Davidson motorcycles, and as a direct result of this shortage total imports of motorcycles in 1946 amounted to 77.7 percent of our production for domestic sale, and imports of British motorcycles were equivalent to 74.1 percent of this production.

In 1947 total imports were 92.7 percent and imports of British motorcycles 71.8 percent of our domestic production. The United States demand still exceeded our capacity.

By 1948 our production was back in full swing. We had bought an entire new plant in 1947 at a cost of a million and a half dollars, and total motorcycle imports in 1948 dropped to 46.1 percent and British imports to 31.7 percent of our domestic production.

It should be definitely borne in mind that during those years European motorcycles comparable to ours in performance cost as much or more than our models but in those days price cut no figure. People bought what they could get and bought European motorcycles at higher prices when Harley-Davidsons were not available in sufficient quantities.

On the basis of our price advantage and the definite preference of American buyers for American motorcycles, our total investment of approximately $4 million during the immediate postwar years for our new plant and up-to-date machine tools and equipment was warranted. We were fully able to more than hold our own against the competition of foreign motorcycles as is evidenced by the fact that imports rapidly declined as our production facilities increased.

In 1949 imports declined further. Total imports were only 22.9 percent and British imports only 18.9 percent of our production for domestic sale. In other words, we were giving our European competitors a run for their money and were coming out on top. Our motorcycles were right, our prices were right and our production facilities were fully capable of taking care of the demand. Our sales results were showing that our expenditure of approximately $4 million for additional plant and equipment had been well merited. We were at the head of the parade so far as motorcycle sales in the American market were concerned. Devaluation of European currencies utterly destroys our competitive position pricewise: Automatically gives European manufacturers 30 percent price advantage in American market

What happened? Like a clap of thunder, England and most of the European countries devaluated their currencies by 30% percent on September 18, 1949. British motorcycles which previously had sold at higher prices than ours immediately could be sold at prices 25 percent to 30 percent below our motorcycles of

comparable performance. While previous to devaluation, our efficiency and our hold on the American market had enabled us to beat our European competition pricewise in spite of tremendous differences in wages and production costs, the devaluation was more than we could offset. Prices of European motorcycles have remained approximately 25 percent below ours up to this point. It has been utterly impossible for us to overcome this price competition with the result that our overall profit has steadily shrunk to the point where we are now just barely breaking even and may even find that we are actually operating at a loss. By 1950, when the full impact of the devaluation had become effective, total imports bounced back up to 59.1 percent and British imports to 48.1 percent of our production. Putting it in another way, British imports increased from 1949 to 1950 by just about the same amount as our production decreased in the same period. We have been unable to overcome the devaluation.

In the 1951 calendar year, total imports were 9,750 motorcycles, 79.3 percent of our domestic production while imports of British motorcycles were 8,604, 69.9 percent of our production.

In 1952 total imports were 15,692 compared to our domestic production of 12,299 or 116.9 percent. British imports were 7,174, 53.4 percent of our domestic production.

In order to more clearly show how imports decreased prior to devaluation when we were able to meet European competition pricewise and how imports immediately increased after devaluation when we could no longer compete pricewise, we are reproducing the figures given above in chart form.

About 15 months ago we brought out a new model, known as the Harley-Davidson K, incorporating the best features of foreign-type motorcycles and also including additional improvements in keeping with the desires of American motorcycle riders. This new model is equal in performance to the best of the popular. European makes. It was hoped that the addition of this model would increase our production and put it on a profitable basis. Our high labor and production costs compared to low European wages, the 30-percent devaluation and a mere 10 percent in duty mean that this model sells at about $150 more than the highest priced imported motorcycles of comparable performance and even then we take a substantial loss every time we sell a K model.

Since the end of World War II it has been our policy to price our motorcycles as low as possible, actually below cost, and to rely on the sales of accessories, spare parts, oil, tools, etc., for our overall profit. We have had a motorcycle profit in only 1 year, 1948.

Imports of European motorcycles have not hurt us to the point where they have taken away all our motorcycle sales but due to their lower prices they have taken away the profitable top layer of sales. As our motorcycle sales decrease, sales of accessories, parts, oil, etc., have dropped off and they represented the profitable portion of our business. Now the profit on accessories, parts, oil, etc., is no longer sufficient to offset our losses on motorcycle sales and that is why we are now running along on a barely breakeven basis.

With the present setup, price competition, low rate of duty, the present Trade Agreements Act, the present policies of the Tariff Commission and our own high production costs, there is not a chance in the world of our situation improving. No manufacturing concern can continue to operate without an adequate profit. The situation must change if we are to remain in the motorcycle business or even in business. The Simpson bill gives the relief to which we and many other American manufacturers are entitled.