Mr. HARR. In most cases. I think they may be in some doubt as to their discretion in some areas. I think they may be in doubt as to whether or not they are entitled to set credit terms at less than prevailing commercial levels, for instance.

Senator LAUSCHE. That is their interpretation, that they must apply the guarantee on the basis of present general commercial level? Mr. HARR. I believe so.

Senator LAUSCHE. I call to your attention this language on page 11:

The terms on which any guarantee, insurance or other financial assistance is provided under this subsection shall be determined by the Board of Directors of the Bank having due regard to the purposes of this subsection and may be set at less than the prevailing commercial levels.

Now, you don't think there is any doubt or any ambiguity in the language of the present statute, but they have not given it an interpretation such as you would like to have them give it?

Mr. HARR. I don't think there is any ambiguity in the language which states their banking powers, Senator Lausche. I think there is ambiguity, perhaps by omission, as to the criteria involved.

Senator LAUSCHE. Now then, I am not thoroughly familiar with what this bill will do, but does this set up a separate fund of $500 million that will be administered apart from the regular capitalization that it now is; that is correct?

Mr. HARR. I believe it does.

Senator LAUSCHE. Why are we doing that? Why are we setting up a separate fund?

Mr. HARR. I don't know.

Senator LAUSCHE. Why are we going to have two funds, one the present capital, and now the new one of $500 million? How are they going to be administered differently?

Mr. HARR. Sir, I am not involved in any way with the construction of this part at ali.

Senator LAUSCHE. Does it mean that this fund shall be administered more liberally than the other fund?

Mr. HARR. I think it is just an additional availability of funds, sir. Senator LAUSCHE. Let's take a look at this from another angle. We are talking about the aircraft industry. It is really the banks that are also involved, aren't they?

Mr. HARR. Potentially.

Senator LAUSCHE. Because when one of our aircraft companies sells a plane to Argentina, it gets a note, payable in 7 years, and it goes to the bank and says to the bank, I want you to buy this note, discount it for me, and the bank says, we will not do it unless you get the ExportImport Bank to guarantee that if Argentina doesn't pay the debt, the bank will.

Is that the procedure?

Mr. HARR. That is a possible procedure.

Senator LAUSCHE. Are the banks wanting this; that is, they don't want to assume the liability, but they want the taxpayers to do it?

Mr. HARR. I don't believe so, sir. I think that a credit guarantee function of the Export-Import Bank is probably the most useful way for it to participate, but I think, along the lines of Senator Hartke's discussion a few moments ago, that it is a function for which the Export-Import Bank was designed and a commercial bank is not designed.

Senator LAUSCHE. Last week, a banker of New York, representing the general banking industry, wanted us to liberalize the ExportImport Bank language to allow the Bank to guarantee debts incurred by Communist countries and one Senator on the Foreign Relations Committee asked, "Why you don't make the loan?"

His answer was, "We will not make it because we could not determine the fiscal position of the Communist country. We could not see what Russia has. They won't divulge it."

But you want the law amended so that the government will guarantee the obligation, which you don't want to incur. Now, except for the Communist aspect of this problem, don't we have the same situation here today in your request that we pass this bill?

Mr. HARR. I don't believe so, sir. I don't believe so. I think the distinctive feature is an agreement which will determine congressional intent as to the exact function of the Export-Import Bank; whether it is distinguishable from that of commercial banks; whether or not it was set up for that purpose.

We do not suggest, nor do we believe, this bill would, in any way, dilute the soundness of bank policies. It might affect the selection of loan and credit opportunities.

Senator LAUSCHE. On that score, didn't the Export-Import Bank says that we don't want this change with respect to our present general operations and if the change is going to be made, it has to be made only with respect to how this $500 million will be guaranteed? Mr. HARR. I don't know the answer to that.

Senator LAUSCHE. That is a fact, isn't it? The Bank says we refuse to consent to a change. We are operating the Bank soundly now, but if you are going to make a change, it will have to be with regard to this $500 million alone. That is correct, isn't it?

Mr. PERTSCHUK. Yes.

Senator LAUSCHE. That is all I have.

Senator HARTKE. Let's come on back for one moment again to the situation as to who is doing what. As far as the $500 million is concerned, the way it is set up in the bill, it is set up in a special fund and set up for a special fund to go into areas which basically are not presently covered, and the bankers agree they are interested in that. But, if we stop worshiping the $100 million profit every year, maybe it wouldn't have been necessary for the Congress to have provided such an avenue and we could have been making these loans to these countries, which, frankly, when it comes to the balance sheet, they probably show a situation which is very, very questionable as to the probable outcome.

Isn't that right?

In other words, these underdeveloped countries don't have the same financial stability and repayment items that an ordinary commercial bank would require for this type of loan to an exporter from the United States.

Isn't that true?

Mr. HARR. In some cases, it certainly is.

Senator HARTKE. Otherwise they wouldn't be underdeveloped nations, and we can do one of two things, we can either throw that trade away, forget about it, or we can try to make it possible for the Export-Import Bank to move into this field and make it possible for them to do it on a sound basis and still make it possible for us to do

something about increasing the business for our commercial interests of the United States upon which they will make a profit, and at the same time, make it possible for us, under normal circumstances, and considering the soundness, to help our balance of trade, which in turn will help relieve our balance-of-payments problem.

Mr. HARR. That is correct, that is our position.

Senator HARTKE. So we are not looking for unsoundness, all we are trying to do is facilitate an increase in our export business and although you are at the present time doing a good business, you see a threat to it, as I see it?

Mr. HARR. And a great potential.

Senator HARTKE. And you feel the competition is of such severity that unless you have credit arrangements which are at least more liberal than they are at the present time, that you are going to continue to lose this export business?

Mr. HARR. We will fail to realize a potential; I believe that is the way we would put it.

Senator HARTKE. I believe that is a better term. In other words, that is a potential for increased consumption of all of these goods and we can either share in it or we can fail to share in it.

Mr. HARR. Yes.

Senator HARTKE. As I understand it, this is the thrust of your whole program, that you are not critical of what is going on, but that there are instances in which other countries have been able to move in and obtain the business and provide the credit guarantees and credit terms. under which, as in Argentina, we lose the business.

Let me ask you one other thing. If you once lose the business of the original sale, how are the chances of follow-up sales for parts and things of that nature?

Mr. HARR. Of course, it is difficult in any business, Senator Hartke, and very difficult in ours, if you are talking about large aircraft, particularly. An entire system is built around it. When one type of equipment is put into a particular fleet, the maintenance and logistical substructures are built up around that equipment, and capital investment with the initial supplier is substantial.

The utilization of equipment from the initial supplier can be expected. The equipment lasts a long time, an increasing length of time, so that the degree to which one evaluates the potential of a given transaction, in a substantial fleet inventory turnover, one must look beyond the immediate, here, abroad, everywhere.

Senator HARTKE. And the overall effect of it is not just the one-shot sale, but it is a continuing effect, as you have indicated, of the whole fleet, the replacement parts, and the whole operation. You are locked out instead of being locked in?

Mr. HARR. To a substantial degree. There have been many instances where that has been broken, of course.

Senator HARTKE. Any other questions?

Senator DOMINICK. Mr. Chairman, I just want to make one thing clear for the record. Now the acting chairman has referred several times to the Argentina situation as an example of where the credit terms were the reason for the loss of the sale.

I wo like to know whether Mr. Harr and Mr. Bradley are so testifyi

Mr. HARR. I don't think we can prove that, sir. We just believe it.
Senator DOMINICK. Thank you.

Senator HARTKE. But this is an inference you have drawn?
Mr. HARR. Yes, sir.

The CHAIRMAN. For the record, Mr. Harr, who belongs to the Aerospace Industry, namewise? Would it be Boeing, Lockheed, North American?

Mr. HARR. Yes, sir, it would be all of the

The CHAIRMAN. Airframe manufacturers?

Mr. HARR. All of the major primary frame manufacturers, engine manufacturers, component manufacturers, and it would include the traditional airframe manufacturers, some of which you named. It would include the major component manufacturers, major engine manufacturers, guidance manufacturers, as well as light and utility aircraft, and helicopters.

The CHAIRMAN. Thank you.

Senator HARTKE. That is all, sir.

We have John W. Porter, member, Committee on Foreign Trade of the Railway Progress Institute and president of the GRS International.

Good morning, gentlemen. You may proceed in any way you see fit. We are glad to have you with us.

STATEMENT OF JOHN W. PORTER, MEMBER, COMMITTEE ON FOREIGN TRADE, RAILWAY PROGRESS INSTITUTE, AND PRESIDENT, GRS INTERNATIONAL; ACCOMPANIED BY WILLIAM F. HUGGINS, VICE PRESIDENT, WESTINGHOUSE AIR BRAKE DIVISION, WILMERDING, PA.; AND RODNEY A. HARRIS, MANAGER OF SERVICES, RAILWAY PROGRESS INSTITUTE, CHICAGO, ILL. Mr. PORTER. Mr. Chairman, I am accompanied this morning by Mr. William Huggins, on my right, who is vice president of overseas operations, of the Air Brake Division of the Westinghouse Air Brake Corp.; and by Mr. R. A. Harris, of the staff of the Railway Progress Institute.

I am appearing here representing the committee on foreign trade, dealing with railway equipment and supplying industry, a multimillion-dollar segment of our national economy.

And I also have the honor of serving as a member of the governing board of that association.

Mr. Chairman, for the record, I have filed a list of the members of the Railway Progress Institute as of March 10, 1965, the personnel of the institute's governing board and executive committee, and the membership of its committee on foreign trade.

Perhaps I should explain that the industry I am privileged to represent here today is responsible for the manufacture and sale of railway equipment and supplies which range from $2 to $3 billion a year. This, I am sure you will agree, is a sizable segment of our national economy.

Our industry is truly national, with plants and service facilities in 468 cities located in 45 States. Employment in our industry totals more than a quarter million workers.

This industry has been historically characterized by wide fluctuations of production. Every company in our industry has and is

taking carefully planned steps to correct or offset such feast or famine cycles. Certainly increasing our participation in export trade expansion is one very important element in carrying out such planning. Therefore, we are vitally interested in the forward-looking provisions of S. 558 as needed assistance to make it possible for us to bring our business to more stable levels of production and employment.

May I also explain the export part of our industry's business averaged $142.7 million in the decade 1951-60, with a peak of $240 million

in 1958.

About 40 percent of the export volume in the 1950's was represented by the diesel-electric locomotive industry which is geared to high-volume production and whose technical capabilities have been accepted throughout the world. However this segment of our industry now has strong competition from manufacturers in Western Europe, the United Kingdom, and Japan.

About 21 percent of the export volume was represented by railroad passenger and freight cars, much of which business has been financed by the Export-Import Bank. The present volume of such exports is practically nil.

The balance of about 39 percent export volume was in the supply of signal and communication equipment and axles, rail and track equipment, and other specialty items. However, the volume of railway equipment exports in 1963-the last year for which complete figures are available totaled about $170 million of which more than $100 million, or about 60 percent of the total, were locomotives with freight and passenger cars accounting for $9 million, or only 5 percent of the total.

The 1964 figures, while incomplete, indicate that locomotive exports amounted to approximately $88 million, including an estimated $15 million for locomotives partly manufactured or assembled in foreign countries. Freight and passenger cars were down to 2 orders, totaling less than a mere 300 cars or about $3 million.

While it can generally be concluded that exports in 1963-64 of some product lines including locomotives, signaling and communications equipment, and so forth, held their own over the 1951-60 averages, it is doubtful this can be said for their share of the world market.

Furthermore, there was a positive decline in 1963-64 exports in the case of freight and passenger cars, airbrakes, rail, and track equipment, wheels and axles, and so forth, which indicates an overall industry decline in the U.S. share of the world market.

It is essential, I think, to keep in mind that when we talk about freight cars, for instance, we are not talking exclusively about the business of a few large car builders; we are also talking about a large number of smaller manufacturers who produce the many component parts of a freight car. And this is true of almost all railway equipment and other facilities.

Here, Mr. Chairman, I would like to repeat a statement which I made to then Under Secretary of Commerce Edward Gudeman and some of his associates in 1962 when I was serving as chairman of the RPI Committee on Foreign Trade.

Approximately 100 overseas countries provide the export potential for the U.S. railway supply industry. In each of these countries, almost without exception, the railways are government owned and operated. Equipment purchases by these railways, while made on a highly competitive basis, are frequently af