the People's Republic of China. If such a bill would pass, East Germany would obtain through the back door the same privileges as for most-favored nations. Such a result cannot be in the interest of Americans and their western partners.

We respectfully submit that our position is in line and supportive of administration policy in this matter as expressed by the administration officials who appeared before you yesterday morning.

This completes my presentation in support of the statement. I am grateful to you for the opportunity to give you our views, observations, and concerns. I shall be present and try to answer any questions you may have regarding our position, namely, the committee should deny the passage of the bill H.R. 4788.

[The prepared statement follows:]

STATEMENT OF NAT BRODY, EXECUTIVE VICE PRESIDENT, MAYER TEXTILE MACHINE

CORP.

Mr. Chairman and members of the subcommittee, I thank you for providing me this opportunity to appear in behalf of Mayer Textile Machine Corp. to present its views on bill H.R. 4788.

Mayer Textile Machine Corp. was incorporated in the State of New Jersey in 1956, and is also registered to do business in the State of North Carolina. Since its existence, the corporation has been importing Tricot and Raschel warp knitting machines from the Federal Republic of Germany (hereinafter called West Germany) to the United States.

1. It is our understanding that West Germany, our Western trading partner, employs approximately 4,000 people in the Tricot and Raschel warp knitting machine building industry. Approximately 1,000 of these people are involved in the production of machines exported to the United States. Their employment status would be adversely affected if H.R. 4788 became law, as would that of the employees of the Mayer Textile Machine Corp. in Clifton, N.J., and Greensboro, N.C., where the company's personnel have been importing, selling, servicing and assembling such knitting machines in the United States since 1956. In these two locations Mayer employs well over 100 people with an annual payroll in excess of One Million Dollars. These two plants are located in high unemployment areas in the United States. The machines in question are received in the United States in a semi-finished state and the plants in Clifton and Greensboro assemble and complete these machines, using American-made parts. The American-made parts and labor added to these machines in the United States are as follows:

Our purchase of American-made parts on an annualized basis in connection with such machinery amounts to over One Million Dollars. In addition, we export many parts made in the United States to West Germany and Japan, which are used in the final assembly of textile machines there before they are exported to the final assembly of textile machines there before they are exported to the United States or other countries.

2. As you probably know, these machines fall under a “basket" provision of the Tariff Schedules of the United States, TSUS NO. 670.20, “Knitting machines other than circular knitting machines-Others", with a Column 1 Duty rate of 7 percent ad valorem and a Column 2 Duty rate of 40 percent ad valorem. Accordingly, it is practically impossible to break out the imports from such "basket" provision the importations of the Raschel and Tricot warp knitting machines and make them the single subject of the proposed amendment to TSUS NO. 670.20 in the proposed Bill H.R. 4788.

3. According to the best information available to us, these machines are manufactured by one company in the United States, two companies in West Germany, one company in East Germany, one in Japan, and one or more in the U.S.S.R.

and the People's Republic of China. At the present time-we believe-imports are only coming in from the two companies in West Germany and the one company in East Germany.

4. If the proposed Bill were to become law, it would allow us and our Western competitors to reduce the machine prices by the amount of the 7 percent duty rate, but at the same time it would enable the Column 2 rate countries, the so called "Communist Bloc Countries", to reduce their prices by 40 percent. Such a significant reduction in tariff rates for just one type of product would be unprecedented, and in violation of Congressional policy and procedure as established in the Trading Act of 1974, 19 U.S.C. 2101, and would result not only in a market disruption in the United States which would seriously damage ourselves and the domestic producer, but at the same time would obviously harm our trade relations with our Western trading partners.

5. In the case on hand, we understand that the proposed Bill is submitted on interests of an importer of Tricot and Raschel warp knitting machines from East Germany. There is no impelling need for such special treatment. Manufacturer in the U.S. and Western trading partners have been able to supply and satisfy the demand for such machines on the American market. Hence, the Bill submitted can only be interpreted as being a special interest Bill in favor of "Communist Bloc Countries", hereto wit, East Germany. It is safe to say that once the door is open to one of the Communist countries, other Communist countries may follow suit.

6. The proposed Bill also appears as indicated above, to violate the Congressional policy established in Sections 404 and 405 of the Trade Act of 1974, which deals with nondiscriminatory treatment of "Communist Bloc Countries". According to these procedures, the President may extend such treatment if and when the foreign country has entered into a bilateral agreement with the United States, provided these countries have met certain conditions as set forth in Section 405. These conditions, in essence, assure certain reciprocal rights for United States Nationals in the foreign country and at the same time provide safeguards in the United States market. While the President by Proclamation has granted such nondiscriminatory treatment to Rumania, after Rumania had met the aforementioned condition, no bilateral agreement has been entered into with East Germany or the U.S.S.R., or the Peoples Republic of China, the Column 2 rate countries in which these machines are produced. In view of these facts, we can not imagine that the Committee will deviate from a long established Congressional policy by recommending passage of a special interest bill for a singled out product favoring a "Communist Bloc Country".

7. In support of our contentions that such a Bill, if passed, would cause severe disruptions in the United States market and in our trade relations with our Western trading partners, we wish to point out that the United States and West Germany are free markets believing in the principle of private enterprise and competition. Such countries can not afford to have the industry sell their products at or below cost. It is our knowledge that the "Communist Bloc Countries" and their trading policies are not governed by the principle of private industry and enterprise, but by considerations other than commercial, such as political considerations or problems of foreign and hard currencies. What benefits East Germany today many benefit tomorrow the other two countries producing these machines. Namely, the U.S.S.R. and the People's Republic of China. We are sure it was for good reason that the Trade Act provided among other things: (a) that any such agreement be limited to three years (the proponent of H.R. 4788 must have been aware of this safeguard by limiting his request for special treatment to approximately three years-to June 30, 1980). (b) that it be subject to termination or suspension at any time for National Security reasons, and, (c) that import restrictions may be imposed to prevent market disruption. All of these safeguards and conditions would be jeopardized and sacrificed if Bill H.R. 4788 became law.

8. We trust that the above outline indicates that our protest against the proposed Bill is not merely motivated by our personal interests in this matter, but at the same time by our concern for the consequences such a Bill must have on the American market as such and on our trade relations with our Western partners. Our concern further is that this Bill shall try to create a special privilege used as a tool by "Communist Bloc Countries," to enter a situation through the back door if the front door would have been closed to them under the principle heretofore applied. We respectfully submit that our position is in line

94-239 O-77 - 18

with and supportive of Administration policy on this matter as expressed by the Administration officials who appeared before you yesterday morning.

For the above reasons, we request that the Committee not permit Bill H.R. 4788 to become law.

Mr. JENKINS. Thank you, Mr. Brody.

You indicated that one company in the United States is now manufacturing. Is it importing all of the component parts and assembling them?

Mr. BRODY. No; this company actually manufactures machines from American parts and components. The name of the company is Adega Machine Corp., located in New Jersey.

Mr. JENKINS. How long has it been in operation?

Mr. BRODY. Forty or fifty years.

Mr. JENKINS. Do you know their manufacturing output at the present time?

Mr. BRODY. I haven't any idea.

Mr. JENKINS. Are they currently operating?

Mr. BRODY. So far as I know, yes.

Mr. JENKINS. Mr. Steiger?

Mr. STEIGER. There is one alternate way to handle this problem. The point you make in your statement, Mr. Brody, is that the bill would allow you to reduce your prices by the 7-percent rate if that were the rule, but would give a substantial reduction to the East Germans if it were 40 percent?

Mr. BRODY. That is correct.

Mr. STEIGER. You could, if you wanted to, equalize that at 7 percent each?

Mr. BRODY. Perfectly willing to accept that.

Mr. STEIGER. Thank you very much.

Mr. JENKINS. Mr. Holland?

Mr. HOLLAND. No questions.

Mr. JENKINS. Thank you for your appearance before the committee today.

Mr. BRODY. Thank you.

[The following was subsequently received for the record:]

Mr. JOHN M. MARTIN, Jr.,

MAYER TEXTILE MACHINE CORP.,

Chief Counsel, House Committee on Ways and Means,
Washington, D.C.

Clifton, N.J., May 6, 1977.

DEAR MR. MARTIN: In my testimony on behalf of my Company, Mayer Textile Machine Corporation, on Bill H.R. 4788 before your Committee during the question and answer period Congressman Steiger suggested that instead of reducing Column 1 duty rates by 7% and Column 2 duty rates by 40%, a solution might be to reduce Column 1 and Column 2 duty rates by 7% each. This would mean that Column 1 would go from 7% duty to 0% and Column 2 from 40% to 33%. He then asked if I had any objections to that solution. I indicated no objection.

However, I did not intend that such willingness to compete on our part should in any way detract from the principles on which our overall argument was based and which we still consider the basis, as does The Administration, for rejection of H.R. 4788, namely:

1. That approving H.R. 4788 for one single product from East Germany would be unprecedented;

2. That approving it in the face of Congressional policies and procedures to the contrary established in Sections 404 and 405 of The Trade Act of 1974 would

not only circumvent those policies and procedures but would give something for nothing. This, we understand, is the strongest argument of The Administration against H.R. 4788.

I would very much appreciate your adding this letter to the official record after my testimony and, once again, thank you for the opportunity given to me to be heard on this matter.

'

Sincerely,

Nat BRODY, Vice President.

Mr. JENKINS. Is Congressman Quie present?

I am delighted to have you with us today.

Mr. STEIGER. Given the length of your statement, I hope you will summarize. [Laughter.]

STATEMENT OF HON. ALBERT H. QUIE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA

Mr. QUIE. May I proceed?

Mr. JENKINS. Proceed.

Mr. QUIE. Thank you, Mr. Chairman, members of the subcommittee. I appreciate the opportunity to appear in support of H.R. 3946, a bill I introduced with the cosponsorship of my distinguished colleague from Minnesota, Bill Frenzel. This legislation would temporarily suspend the import duties on wool coarser than 46s. The need for this bill was brought to my attention by a constituent of mine, Robert Klemer, president of Faribault Wool Mill Co. The fact as I see them are briefly: These coarser wools are not produced domestically in any significant quantity, and they are needed in the manufacture of blankets, carpets, and upholstery fabrics.

I am not aware of any opposition to the bill. I hope the subcommittee can give it prompt approval. Also I see that Mr. Klemer has been scheduled to speak on this bill later this afternoon. He is a resident of Minnesota's First Congressional District and can respond to any of the detailed questions you might have on this bill.

Mr. Chairman, if I may go into the statement on the other bill that I am interested in?

Mr. JENKINS. Fine.

Mr. QUIE. Mr. John Roper of Koch Industries is going to be testifying right after me on this bill, H.R. 5858.

I believe that the subcommittee is aware of the fact that certain crude oil refineries in the upper Midwest have been dependent upon Canadian crude oil since they were built.

The Canadian exports of crude oil will be phased out by the end of 1980 or shortly thereafter. Several alternatives to Canadian crude are under active consideration by the refineries that will otherwise be casualties of the phaseout.

Plans are underway to build pipelines which will bring oil to the upper Midwest from the west coasts of either Canada or the United States. Another planned pipeline would bring oil northward from the Gulf States. Under two of the plans new legs of pipeline would join existing lines. However, the projected time for completion of the pipeline from Illinois to Minnesota is late 1978, and in the case of the northern links, it will be late 1979 or possibly 1980 before oil could flow to northern tier refineries.

Short-term alternatives, therefore, are needed. One being actively encouraged by the Federal Energy Administration is exchange of Canadian oil for domestic U.S. oil, or duty-paid foreign oil which can be shipped via pipeline to eastern Canadian refineres. One inhibiting factor in the exchange arrangement is the present duty on imports, paid at the rate of 5.25 cents to 10.5 cents per barrel of Canadian crude oil, depending on its gravity, even though the exact amount of similar oil is shipped into Canada.

The Canadian oil then, under these circumstances, should not be treated on a par with other imports, because it is replaced in Canada, barrel for barrel, and is not counted in the allocation program which was established to distribute Canadian crude oil among two categories of priority users in the United States.

I would ask the committee's early favorable consideration for this bill which would permit the exchanged oil to enter duty free. What we are saying is since the imported oil is actually exchanged for domestic oil foreign oil on which they have already paid the duty, they shouldn't have to pay duty on the Canadian oil. There is no reason why they should have to pay it twice.

Koch Industries of Wichita, Kans., operates a refinery at Pine Bend, Minn., supplying a large percentage of Minnesota's petroleum needs, particularly fuel oil. I would like to introduce to the subcommittee Mr. John Dee Roper, vice president of Koch Industries, whose company is deeply affected by the Canadian crude oil export policy.

Mr. Chairman, I understand right after Mr. Roper, Mr. Klemer will be able to testify on the wool bill.

Mr. JENKINS. Very good. We will proceed with Mr. Roper. Will you remain or do you have to leave?

Mr. QUIE. I will stay a while.
Thank you, Congressman.

Mr. JENKINS. State your name for the record. You may summarize your statement if you will.

STATEMENT OF JOHN DEE ROPER, VICE PRESIDENT, KOCH

REFINING CO.

Mr. ROPER. I am John Dee Roper. I am vice president of Koch Refining Co. My residence is in Wichita, Kans. Koch Industries is a parent company for Koch Refining Co.

I appreciate, Mr. Chairman, the opportunity to present Koch's views on H.R. 5858 introduced by Congressman Quie, providing for the elimination of tariff duties on imports of Canadian crude oil made pursuant to crude oil exchange agreements.

Many refineries located along the northern Tier of the United States are heavily dependent upon Canadian imports. My own company, Koch Refining Co., with a capacity of 127,000 barrels per day, relies on Canadian for more than 80 percent of its crude oil supplies. We and other Canadian-dependent refineries are unable to obtain sufficient volumes of crude from other sources since there are not existing crude pipelines from the South.

Barging up the Mississippi River, which does flow from Minnesota, is a poor alternative, but even barging is impossible when the river freezes during the winter. At times we are able to use product pipelines,