qualify your statement by saying in my office, I will be working with Assistant Secretary Passer, who is in charge of economic affairs, to see if we can't devise a better method of reporting than we have now. I have confidence we can do that.

Senator HARTKE. It is very difficult in my opinion to have any type of comprehensive long-range planning or even noncomprehensive shortrange planning unless you have some factual material which is worth looking at.

Mr. MCLELLAN. Yes, sir.

Senator HARTKE. Isn't it true that we have had a steadily deteriorating actual balance of trade in the United States in relation to foreign countries?

Mr. MCLELLAN. I am not sure I understand your question.

Senator HARTKE. In other words, in 1964, we had a positive balance of trade in the neighborhood of $7 billion.

Mr. MCLELLAN. Yes; that is on the merchandise account.

Senator HARTKE. That is right. I am referring to what is ordinarily considered trade. Some of this is in the commercial field and in finance operations. I am talking about the actual balance of trade on the merchandise account and there has been a steady deterioration of that

account.

Mr. MCLELLAN. Yes, sir; there was until 1968. We had the low point, the total surplus of exports over imports account did drop from $7 billion in 1964 to $1,410 million surplus in 1968. The sum of exports over imports did come up to $1,940 million in 1969. I want to emphasize that does include these Public Law 480 Senator Long talked about. Senator HARTKE. If you take those out

Mr. MCLELLAN. We would just about break even in 1968.

Senator HARTKE. Not quite.

Mr. MCLELLAN. Probably it would be slightly plus, I think, Mr. Chairman.

Senator HARTKE. I would be glad for you to submit that. In relation to Japan, the very sharp change of balance has occurred in Japan, isn't that true?

(The following information was subsequently received for the record :)

Less total Public Law 480_.

Add Public Law 480 cash sales in foreign currencies.

Total exports..

Imports

COMMENTS

$34,636

(-)573 (-)1, 178

(+)539

33, 424

33, 226

(1) There is a deficit of ($341) if all Public Law 480 shipments are excluded: however, we did receive foreign currency cash for approximately half of our shipments ($539) resulting in a favorable balance of $198.

(2) Imports are reported f.o.b. and if they were reported c.i.f. we would in all probability have suffered a small unfavorable balance.

Mr. MCLELLAN. We have a serious deficit of trade with Japan.

Senator HARTKE. And until 1965 we had a surplus with them?
Mr. MCLELLAN. That is correct.

Senator HARTKE. What this means really is

Senator LONG. Could I interrupt there for one point.

Senator HARTKE. Yes.

Senator LONG. If you are talking about balance of payments fig

ures

Senator HARTKE. We are talking about trade.

Senator LONG. Are you including the ocean freight in those figures you are quoting?

Mr. MCLELLAN. Senator Long, for historical reference here, I am referring to the published figures on balance of trade and that would be on our basis the f.o.b., so there is distortion in that.

Senator LONG. Then they are wrong by definition as I see it, because they fail to include the freight, they put the giveaways on the plus side, as though you received billions of dollars for them, and they fail to include the tourist trade.

Mr. MCLELLAN. But even on that basis, the chairman's point that we have swung from a plus to minus situation with Japan is certainly valid.

Senator LONG. I just wanted to be sure what figures we are talking about. Those are the figures that are not correct. Yes, I understand. Senator HARTKE. Can you give us any timetable as to when you think you might come up with a reporting system which at least has some basis in fact?

Mr. MCLELLAN. Mr. Chairman, all of the figures are true, but you have to understand them. Senator Long obviously does. We think we can improve the method. I wouldn't want to speculate or guarantee. Senator HARTKE. Do you have a timetable for when you think you could submit it?

Mr. MCLELLAN. No, sir, we do not.

Senator HARTKE. Could you provide for the record a timetable. within this century?

Mr. MCLELLAN. I would hope we will get a better reporting method by the end of this year. I would hope for that.

Senator LONG. If I might interject one more point, Senator Hartke, if they don't put them together that way, we will do it for them. I am talking about the Finance Committee will do it for them, because you agree that is how the figures should have been kept.

Senator HARTKE. Not only do I agree, but I believe there is a bigger problem here. The fact that the whole balance-of-payments concept is antiquated and is nothing more than simply shifting recession from one country to another.

Isn't that true?

Mr. MCLELLAN. I wouldn't say that it is true, but I am sure there is a lot of truth in what you have said.

I think the economists can argue that theory and a lot of them would make the point that exchange rate reevaluations make the differences and that these are not necessarily recession caused.

Senator HARTKE. So this really ties back not to the simple problem of definition and reporting and then trying to act upon that, but really calls for a complete reevaluation of our international system of exchange.

Mr. MCLELLAN. Well, I think, Mr. Chairman, that our first step, and the one that Senator Long is expressing himself completely on, is that as a beginner we have to be sure we are all working with the same numbers and understand what they mean.

Senator HARTKE. Let's short circuit that. The fact remains that the United States is inextricably related to every other country; if we have a surplus, and they have a deficit, they are in trouble.

Mr. MCLELLAN. You are on payments now?

Senator HARTKE. Yes, on the balance of payments. And whenever we correct our situation to make it easier for them to get out of their problems, or to avoid devaluing their currency, the net result is all we do is shift the recession and difficulty from one nation to another. That is what led to this austerity diet we are trying to fumble through at the present time, and the difficulty is it produces 412 million unemployed people here in the United States.

Mr. MCLELLAN. When I was a small boy in Nebraska, Mr. Chairman, we recognized in marble games if one kid had all of the marbles there wasn't any more game.

Senator HARTKE. That is right. But, the net result of this is that it is saying to the United States we are going to continue to have an affluent society at the expense of putting about 5 percent of our people out of work continually. That is what it amounts to.

I am not asking you to agree, but it seems the Government is saying that those who are in society are going to live better, because we are going to make some live worse. I don't ask you to comment on that. I just hope you can straighten up this reporting system, that, at least, would be some help.

What do you think can be done in regard to exports, as far as the business community is concerned? Do you believe more can be done in this field?

Mr. MCLELLAN. Yes, sir, I do, Mr. Chairman. I mentioned before we are spending relatively small amounts on, from the Government's point of view, export expansion. We think more can be done. We think more can be done to get more U.S. companies involved in export activities and we intend to continue that effort.

Senator HARTKE. Do you think we ought to have more foreign commercial officers?

Mr. MCLELLAN. I think there is a good argument for more of them. Senator HARTKE. You think that would be helpful?

Mr. MCLELLAN. Yes, sir.

Senator HARTKE. Do you believe that promotion policies with respect to these foreign commercial service officers should be changed? Mr. MCLELLAN. Are you talking about sales promotion here? Senator HARTKE. Yes.

Mr. MCLELLAN. Or career promotions?

Senator HARTKE. I am talking about career promotions as a means of improving our sales promotion efforts.

Mr. MCLELLAN. I see. Gentlemen, I do. And this again I think helps to put it into perspective for a moment. Coming out of World War II, when there was no pressure on us to go out and do our best job in selling American products, in fact it was the contrary, we had gold reserves, we had economic strength, and the governmental commercial

economic people really had no pressure on their services to go out and do much about it.

That has changed. We have come to this competitive point we talked out earlier in the hearing and there is a great need today for governmental support abroad of the American businessman trying to do more business overseas.

Senator HARTKE. Can you relate that to what other countries are doing in relation to their promotions with their officers?

Mr. MCLELLAN. Yes; I can. Britain recently published the so-called Duncan Report, a three-man commission headed by a gentleman named Duncan, to improve the character of the British Foreign Service in terms of commercial developments.

In that report they are making the point that that has to be the No. 1 call on the British Foreign Service.

Senator HARTKE. Can you supply a copy of that Duncan Report for the committee?

Mr. MCLELLAN. What I can do, Mr. Chairman, if not a copy, I can give you a summary of the report that I think would give you what you want.1

Senator HARTKE. We have a new government over there. Maybe they would be glad to share it with us.

Mr. MCLELLAN. I think they would.

Senator HARTKE. What about import quotas generally? Are you in a position where you can express an opinion on this? Are you generally in favor or opposed to them?

Mr. MCLELLAN. Mr. Chairman, I don't think you can be for or against quotas. I think you have to be for that which is in the best. interest of the United States.

Senator HARTKE. That is a safe answer.

Mr. MCLELLAN. Thank you very much.

Senator HART. Senator Hartke and I will try that out in the next couple of weeks.

Senator HARTKE. You are familiar with the 1962 Trade Act?
Mr. MCLELLAN. Yes; sir, I am.

Senator HARTKE. Trade Expansion Act.

Mr. MCLELLAN. Trade Expansion Act of 1962 is the present statute. Senator HARTKE. It offered great hope and produced nothing except propaganda victories. But it has an adjustment assistance section of which I have been very critical, and it was, generally speaking, unused. Mr. MCLELLAN. That is right.

Senator HARTKE. Are we doing anything to change that?

Mr. MCLELLAN. Yes; as a matter of fact we are, we think we are. Your reference to the historical fact is certainly correct.

You appreciate I am sure that the adjustment assistance portion of the bill provides for adjustment assistance on the one hand to labor that has been found injured by imports, and on the other hand it applies to adjustment assistance to companies that have been injured.

Until recently there had been no cases-maybe there was one case sometime back. But until recently there had been no cases, no findings of injury for adjustment assistance. In the past year there have been I think two cases of injury finding for labor-this would have been

1 The summary appears on p. 56.

in 1969 and recently there have been I think three industry findings of injury, the barber chair industry, the glass industry I think and the piano industry, as I recall.

Once the Tariff Commission finds the industry has been injured, then the companies may apply for certification of injury. It is my responsibility to certify them as having been injured: That is after the industry finding by the Tariff Commission.

We, then, through an operating unit within my area of responsibility investigate the adjustment that this company can make reasonably to adjust away from the injury that they have experienced-a new area of the business; or new methods, more efficient ways of operating, what have you. We work with them to develop that.

And then we help them find funds to help them in their efforts. They can get funds for technical assistance; they can get funds from the Economic Development Administration, if it is part of the original problem. More often they will get funds from SBA, small business loans, to help them in their adjustment process.

We have the first company case just coming through now, that has gone the full route.

Senator HARTKE. Indiana is one of the biggest steel producing States in the Union. We are getting bigger every day. But there is this question of imports of steel which have been verp sharp and rapid in proportion to domestic consumption.

The voluntary restrictions have been in effect now for a little over 2 years. What is your judgment as to what will occur with the extension of the voluntary agreement? Will it be extended? Should it be?

Mr. MCLELLAN. My own view is that it has been a very effective device, and I am sure that the industry by and large does want to extend it. I think there may be a need for some corrections in that.

As you know, while it served the overall purpose of bringing down the total tonnages there have been some problems in it where it hasn't served the purpose on high-value low-weight products

Senator HARTKE. The so-called mix.

Mr. MCLELLAN. That is right, the mix is off somewhat. But with that qualification I think the agreement has been a good one. It would seem to me a continuation of it would be in the interest of the industry and the country.

Senator HARTKE. Sometime ago there was discussion concerning the imposing of controls on exports of scrap steel. Has anything been done on that lately?

Mr. MCLELLAN. I am the person responsible for this action, so I can respond to that very readily. The steel scrap situation has become critical, going back over the last 2 years; we are exporting now at the rate of about 11 million tons of scrap a year, as against a 5-year average of 6.7 millions tons I think it is.

What happened really was that the price, the composite price on bundled scrap, had risen to a high of $46 and some cents per ton in March of this year, but has fallen off appreciably now. We are down to about $38 a ton.

So we have gotten a drop in the price which is roughly what you would have tried to get by applying controls in the first case. So as I see it at this point in time, the case for putting on controls doesn't really exist.