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H.R. 7802, (Mr. Downey and others). To amend the tariff schedules of the United States with respect to the rates of duty on ephedrine, racephedrine, and their salts.

The hearing will be held at 10 a.m. in the main Committee on Ways and Means hearing room, 1100 Longworth House Office Building.

Officials from interested executive branch agencies will testify first, followed by testimony from the interested public. Given the limited time available and in order to maximize time for questioning and discussions, witnesses will be asked to summarize their statements. The full statement will be included in the printed record. Also, in lieu of a personal appearance, any interested person or organization may file a written statement for inclusion in the printed record.

Requests to be heard must be received by the committee by noon Monday, August 25. The request should be addressed to John M. Martin, Jr., chief counsel, Committee on Ways and Means, U.S. House of Representatives, room 1102 Longworth House Office Building, Washington, D.C. 20515; telephone (202) 225-3625. Notification to those scheduled to appear and testify will be made by telephone as soon as possible.

In this instance, it is requested that persons scheduled to appear and testify submit 30 copies of their prepared statements to the committee office, room 1102, Longworth House Office Building, by the close of business, Monday, August 25.

Persons submitting a written statement in lieu of a personal appearance should submit at least three copies of their statement by the close of business, Friday, August 29, 1980. If those filing statements for the record of the printed hearing wish to have their statements distributed to the press and the interested public, they may submit 50 additional copies for this purpose if provided to the committee during the course of the public hearing.

Each statement to be presented to the subcommittee or any written statement submitted for the record must contain the following information:

1. The name, full address, and capacity in which the witness will appear;

2. The list of persons or organizations the witness represents, and in the case of associations and organizations, their address or addresses, their total membership, and where possible, a membership list;

3. The bill or bills on which the witness will be testifying and whether the testimony will be in support of or opposition to it; and

4. A topical outline or summary of the comments and recommendations in the full statement.

Mr. VANIK. The subcommittee will be in order.

The first bill before the subcommittee today is House Concurrent Resolution 376, relating to United States-Japan bilateral trade relations. This resolution has been sponsored by 80 Members of the House, including 15 members of the subcommittee and 21 members of the full committee.

We will hear first from our colleague, Mr. Brodhead, and then from Congressman Don Pease of Ohio and a panel of administration witnesses.

We have asked the panel not to read statements but to be prepared to respond to questions concerning the current range of U.S.Japan bilateral trade problems.

At about 11:15 or so we will receive testimony on House Concurrent Resolution 383, a resolution disapproving the President's decision not to provide import relief to the leather wearing apparel industry. Testimony on that resolution may take an 142 to 2 hours.

We will then receive testimony on four tariff bills listed in the press release.

Following all of the testimony, it is my hope that if a quorum is present we will mark up the United States-Japan resolution and the new MTN Agreement, the Customs Valuation Protocol, H.R. 7942. Time permitting, we will also mark up the noncontroversial tariff bills.

House Concurrent Resolution 376 is a sense-of-the-Congress resolution calling for additional efforts by Japan, with the United States, to narrow the unacceptable trade imbalance between our two nations. For the past 2 years, and this year, our deficit with Japan has averaged $10 billion annually. The administration has predicted an increase in the deficit for the next year of about $1 to $2 billion, while some private analysts have predicted a $15 to $16 billion imbalance.

Actions to reduce the deficits could include Japanese investments in this country, particularly in the automotive field, in auto parts manufacture and for the auto replacement parts market. Also, while Japan has made progress in liberalizing its markets, there are a number of areas in which the United States is highly competitive, yet the Japanese block our products. Japan's remaining trade barriers reduce our exports by at least several billion dollars a year. These barriers are totally inexcusable in light of our enormous, long-standing trade deficits with that country. New efforts must be made to dismantle those barriers.

In April, Congressmen Jones and Frenzel and I visited Japan. We have prepared a detailed report on that visit. The report discusses at length our various trade problems; it raises some ideas for the long-range solutions to our cycle of trade disputes; and it stresses the urgent necessity for changes in policies and attitude in this country so that American goods will become more competitive in Japan and in world markets. That report will be completed and released next week.

Today, however, we are not discussing the internal steps the United States needs to take or long-range trade issues. We are interested in receiving testimony on the current areas of dispute and controversy.

During the current economic downturn more and more Americans have turned away from support of trade and have been questioning the merit of continuing our half-century policy of open trade. The sight of Japan's remaining trade barriers and the extraordinary one-sided nature of our bilateral trade has been the single biggest cause for the erosion of good will and support of trade in the United States.

We do not care how Japan helps narrow the trade imbalance, as long as something is done.

This resolution is only a sense of the Congress; it does not change any laws. But I believe that it should be viewed seriously, as a last appeal to Japan before the American public begins demanding legislation to narrow the trade imbalance, particularly in the automobile sector.

I expect that this resolution, if adopted, will spur new efforts by both Governments to find solutions to the unacceptable imbalances. It is meant to be a clear signal to the Japanese of America's deep concern about these continuing, unacceptable balance-of-trade deficits.

In the past, one of our problems in dealing with the Japanese has been the fact that we have been giving them mixed signals on how to deal with specific commodity problems. These mixed signals have created confusion in Japan. But on the issue of the size of the deficit and the need to do something about it, there is no mixed signal or divided concern in the Congress.

This resolution is a clear statement to the Government of Japan, which requires some reaction and response from them on specific ways in which the trade imbalance can be narrowed.

Before I proceed, I would like, first of all, to call on our colleague on the Ways and Means Committee, Mr. Brodhead, who wants to make a brief statement. Mr. Brodhead, we will be glad to hear your statement.


I commend you for your interest in this problem and your continuing concern and your leadership in trying to find solutions.

I thank you for the opportunity to appear before the subcommittee to express my views.

It seems to me, Mr. Chairman, that many of us in Congressand, I think, in the Administration-do not understand the full extent of the problem with respect to automobiles. The difficulty we are in arose primarily because of the whole change in the American automobile market which occurred in March 1979 with the cutoff of Iranian oil. At that point the American market in which vans, and big cars were selling very strongly, and small cars, foreign and domestic, were moving very slowly, overnight shifted to the point where it has been very hard to give away a new or used full-sized car. It became a situation where the demand for small cars is greater than the American companies can meet and where the Japanese companies, which were there with good quality small cars, have been racking up record numbers of sales.

The American industry is struggling to catch up with new programs to try to meet the competition, but in the meantime America is suffering great damage as a result of this situation, as a result of the acceleration in the sales of the imports.

First of all, of course, it was estimated this morning by Douglas Fraser, the president of the United Auto Workers, that there are 1 million Americans in the auto industry out of work right now. He says about 250,000 directly working for the Big Four automobile companies and another 750,000 in parts and supplier industries.

So we are talking about 1 million Americans out of work. In a social welfare state such as we have, we know these people who are out of work are being supported one way or the other. There is a huge cost to supporting 1 million families in this country who are doing no productive work.

Second, the loss of revenues to our Federal, State, and local governments is very, very substantial.

Third, what we are finding is large numbers of these people exhausting the benefits that they have either under contract with their employers or their unemployment compensation benefits and becoming a social welfare client.

More importantly, I think, Mr. Chairman, something that we are neglecting to understand here, is that there is going to be a permanent loss to our industrial capacity. That is, we are losing capacity in steel, in steel fabrication, in electronics, in rubber, in glass, in textiles and all the things that go into American cars.

The sales in these areas are down drastically; plants are closing; money is not being invested in these industries. I feel that this represents a long-term threat not only to the economic security of our people but also actually to the military security of our country. We are losing industrial capacity and major portions of that loss is not going to come back.

I think that the administration has been extremely slow to recognize this problem.

I commend you and the members of this committee for taking an interest in it.

What the administration line has been saying up to this point, or up until just recently, is that it is not desirable that we do anything about this problem—that the imports are a good thing. Now that I think they are beginning to understand the depth of the problem, they are beginning to say that there are a lot of procedural reasons or legal reasons why we can't do anything about it. The fact remains that if the United States of America wants to express its will toward Japan through its governmental entities, through the President and through the Congress, Japan can and will respond. It must respond.

This is a solvable problem. What is necessary is to understand the problem, understand the depths and dimension of the problem, and develop a will to do something about it. You have exercised leadership in this. I commend you for it and I thank you for the opportunity to express my views on the matter.

Mr. VANIK. Thank you very much, Mr. Brodhead.
Are there any questions by members of the committee?
Thank you very much for your statement.

Do you want unanimous consent to extend your full statement in the record?

Mr. BRODHEAD. Yes, Mr. Chairman.

Mr. VANIK. Without objection, it is so ordered. Thank you very much.

Our next witness is my distinguished colleague from the State of Ohio, Mr. Don Pease.

Mr. Pease, we will be very happy to have your statement.

Your entire statement will be entered into the record as submitted, and you may read from it or excerpt from it, whatever you choose.



I am pleased to have the opportunity to appear before the subcommittee. I do want to commend the subcommittee for addressing this important issue.

As one of over 70 co-sponsors of House Concurrent Resolution 376, I requested permission to testify because I want to underscore the extreme seriousness of the Japan-U.S. trade situation.

My Ohio district is affected in at least two ways by the situation: Some of the industries rely on the export market for sales. On the other hand, such major employers as the Big Three auto manufacturers, U.S. Steel, and American Shipbuilding Co. are directly affected by the importation of automobiles, steel and ships.

This divergence in my own district between exporters and those who are affected by imports makes me very much aware of the problems that the committee is addressing today and makes me aware that those problems and any hopeful solution are not a simple matter.

Often what you can do to help one industry simultaneously can harm another industry. What aids a specific company in one industry may work to the disadvantage of another company. Because both the symptoms we see now and the solutions to the problems are complex, the committee must be sure that its examination of the situation is thorough and complete, and I know you will; but I hope the committee can, after its hearings and deliberation, make some positive recommendations to both Japan and the United States.

The 13th Congressional District of Ohio, bordering Lake Erie for 70 miles west of Cleveland, has the highest unemployment rate in the State of Ohio. While the U.S. unemployment rate is admittedly too high, at 7.8 percent, Ohio's rate is 9.7 percent. Three counties that are included in my district have unemployment rates of 17.8 percent, 17.6 percent and 14.8 percent, all related rather directly to the auto industry. In all three counties, thousands of my constituents who work at assembly and component parts plants of Ford, Chrysler and GM have been laid off indefinitely or had their working hours cut back drastically.

Many of my constituents have exhausted all of their unemployment compensation benefits and many more are at the brink.

The severity of the auto industry slump is also borne out in statistics for the State of Ohio and for region 5 in the Midwest regarding trade assistance. In just the first three-quarters of this fiscal year, $63 million was paid out in TRA benefits in Ohio alone, with more than $300 million spent on TRA benefits for all of region 5. Requests for TRA assistance soared to 57,800 in Ohio and to 320,000 for all of region 5 for the first three-quarters of this

fiscal year.

The Department of Labor has been deluged with a 2,200-percent increase in requests for assistance in the third quarter of this fiscal year in comparison with the third quarter of fiscal. year 1979.

Mr. Chairman, with Congress bailout of the ailing Chrysler Corp., I believe that company, especially with the initially favorable reactions to the new à cars, stands a better chance of recovery. General Motors, both because of its early downsizing of cars and its predominance in the marketplace, is also in a relatively good position, although obviously it, too, has been affected by imports.

Ford Motor Co. is of special concern to me, for several reasons. While Ford is certainly nowhere near the Chrysler stage yet, I regard it as unlikely that Congress would approve another Chrysler-style bailout. Consequently, it seems to me Ford must make it on its own.

Although the new Ford Escort and Mercury Lynx seem to be coming along well, with good sales prospects, if import penetration continues or increases and new sales do not pan out, Ford could be in big trouble.

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