can firms which want to do business there. These small businesses suffer even more for they do not have the time and money that is often needed to break into the Japanese market-to break through those barriers. Our witnesses today are Abraham Katz, Assistant Secretary for International Trade Policy, Department of Commerce; Steven Myers, of Amway Corp. and former assistant director of the American Chamber of Commerce in Japan; Don Lehrman of DataComm Corp.; Michael Kowalsky of the American Cigar Association; and Julian Morris of the Automotive Parts and Accessories Association. Ambassador Askew or his deputy, Robert Hormats, will testify at a second day of hearings. At this point in the record we shall insert the opening statements of Senator Nelson, our chairman, and Senator Hatch. [The prepared statements of Senators Nelson and Hatch follow:] STATEMENT OF HON. GAYLORD NELSON, A U.S. SENATOR FROM THE STATE OF WISCONSIN, AND CHAIRMAN, SENATE SMALL BUSINESS COMMITTEE Mr. Chairman, I want to thank you for recommending, and agreeing to chair, this important hearing on the impact of non-tariff barriers on the ability of small business to export to Japan. With the Japanese election just concluded, the President just returning from the seven Nation economic summit meeting in Geneva, and the domestic effect of imported Japanese auto products evident in the U.S. unemployment offices, I believe it is entirely appropriate to focus our attention on our trade relations with Japan. In my eighteen years in the Senate, I have consistently supported the principles of free trade. However, while we maintain an open market to the Japanese, Japan has established an array of non-tariff barriers to cut down on the number of American vehicles and other products we can sell there, and on our ability to compete freely on a wide-range of products. Japan has long had in place a comprehensive system of import regulations which effectively prevent significant foreign market penetration in a broad range of commodities. These non-tariff barriers, be they taxes, testing and inspection requirements, or licensing, unfairly burden the sale of American products sold to Japan. Our trade deficit with Japan is $9 billion in automobiles alone. It is wrong in principle to tolerate non-tariff barriers on automobiles, or any other commodity by any nation. And it is wrong for the U.S. to tolerate non-tariff barriers at a time when this Committee, in particular, and the Congress generally, have been diligent in seeking to expand the number of small businesses which are already capable of exporting, but for a variety of reasons do not export. This Committee's report on S. 2620, the Small Business Export Exapansion Act of 1980, cites testimony before the Committee by Peter Gould, Deputy Assistant Secretary of Commerce for Export Development. He said: "The only viable course for returning our international payments to balance, in my view, is to expand substantially the volume of U.S. exports. To do so, more American firms, and in particular more small businesses, must discover export markets in the years ahead." Mr. Chairman, the witnesses today will no doubt provide vivid illustrations of the non-tariff barriers which we in the Congress have come to recognize as standard operating procedures by the Japanese. We need to focus our attention on these barriers, because it is imperative that we insure American industry flexibility to meet that export challenge. However, in my judgment, the Carter administration has not been tough enough on the Japanese. We must take strong measures to reverse the adverse trends in the United States-Japanese trade. The time has come for action. I would like to take the opportunity today to again urge the Administration to insist that the Japanese do away with their discriminatory non-tariff barriers against American products and, in particular, autos. I hope we will see some favorable results from our Government on these major problems which affect American business' ability to export to Japan. STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE OF UTAH Mr. Chairman, as small businesses in the U.S. become more aggressive exporters, I think we are going to find a heightened interested in the international economic structure. I commend the Chairman for his foresight in conducting these hearings. Last year, the Senate passed by a wide margin, the negotiated results of the Tokyo Round of the General Agreements on Tariffs and Trade (GATT). This GATT round of negotiations claimed to have resulted in the largest cut of tariff rates in history, thus allegedly promoting the objectives of free trade. At the same time, however, imaginative governments, whose industries may have been threatened by lower tariffs, subtly offset tariff reductions thru the use of non-tariff barriers (NTB). Although GÁTT specifically prohibits many NTBs, the inventory of NTBs numbers into the thousands, with new measures concocted to replace outdated or discredited measures. Frankly, one basic problem with GATT is that it permits measures overtly designed to address domestic policy objectives, but which clearly act as NTBS of drastically protectionist proportions. This flaw is increasingly exploited as nations find their domestic industries can gain a superior posture in deteriorating world economic conditions. Such actions clearly undermine the intent and value of GATT, and, unless checked, may presage a dark age of deep protectionism. Mr. Chairman, I think we need to clarify that we are not here to condemn Japanese NTB practices. Rather, we are here to examine what impact these NTBs have on our small business-persons wishing to export to Japan. The Japanese are ingenious businessmen; we today recognize that their ingenuity extends to the forefront of innovative implementation of NTBs. And although many of the Japanese initiatives have legitimate domestic policy objectives, realistically they act to discriminate against imported goods. Again, I commend the Chairman for initiating these hearings and I look forward to the testimony of the business community on their frustrations and successes in confronting the maze of doing business with the Japanese. Senator LEVIN. Would those at the witness table identify themselves and then we will proceed in the order I have indicated. STATEMENT OF ABRAHAM KATZ, ASSISTANT SECRETARY OF COMMERCE FOR INTERNATIONAL ECONOMIC POLICY, DEPARTMENT OF COMMERCE, ACCOMPANIED BY NORMAN GLICK, CHIEF, TRADE FACILITATION COMMITTEE STAFF, JAPAN DIVISION; CHADWICK JOHNSON, DIRECTOR, JAPAN DIVISION, STEVEN FALKEN, OFFICE OF U.S. TRADE REPRESENTATIVE-ON DETAIL TO COMMERCE; AND JUDY DAVIS, TRADE ADVISORY COMMITTEE, OFFICE OF TRADE POLICY Mr. KATZ. I am Abraham Katz, Assistant Secretary of Commerce. Let me introduce the people with me, if I may. To my extreme left Chadwick Johnson, officer in charge of Japan affairs; to my immediate left, Norman Glick, head of the Trade Facilitation Committee staff. I will be talking about the joint United States-Japan Trade Facilitation Committee as a means of dealing with some of the problems. To my immediate right is Judy Davis, who is in charge of section 301 actions, which, as you know, are aimed at unfair and unreasonable trade practices; to her right, Steve Falken, on detail to us from the Office of the U.S. Trade Representative. Steve is in charge of our Office of International Sectoral Policy and has been working on automobile problems. I brought enough people to answer most of your questions. Senator LEVIN. We welcome all of you. Mr. Katz, we shall insert your full statement and you may proceed to summarize it. [The prepared statement of Mr. Katz follows:] STATEMENT OF ABRAHAM KATZ, ASSISTANT SECRETARY OF COMMERCE FOR COMMITTEE ON SMALL BUSINESS, JUNE 25, 1980 I AM PLEASED TO HAVE THIS OPPORTUNITY TO APPEAR BEFORE THE SMALL BUSINESS COMMITTEE TO DISCUSS JAPANESE NON-TARIFF BARRIERS (NTBS) WHICH IMPACT ON THE ABILITY OF U.S. SMALL BUSINESS TO EXPORT TO JAPAN. WITH THE LOWERING OF JAPAN'S TARIFF LEVELS (AN AVERAGE OF 4.0% ON DUTIABLE INDUSTRIAL PRODUCTS BY 1988) TO ROUGHLY THE SAME AS THOSE OF THE OTHER MAJOR INDUSTRIALIZED COUNTRIES, ATTENTION HAS INCREASINGLY FOCUSED ON JAPAN'S NTBS OR IMPEDIMENTS TO IMPORTS. CONCERN WITH THESE NTBS HAS BEEN ACCENTUATED BY THE HUGE BILATERAL TRADE DEFICITS THE UNITED STATES HAS RECORDED WITH JAPAN OVER THE PAST SEVERAL YEARS. IN 1978, THIS DEFICIT REACHED A RECORD $11.6 BILLION. LAST YEAR IT DECLINED TO $8.7 BILLION, BUT STILL ACCOUNTED FOR OVER ONE-THIRD OF OUR GLOBAL TRADE DEFICIT OF $24.7 BILLION AND WAS THE LARGEST SINGLE DEFICIT WE HAD WITH ANY ONE COUNTRY. SO FAR THIS YEAR OUR GLOBAL DEFICIT IS MORE THAN THAT FOR THE SAME PERIOD LAST YEAR, AND OUR DEFICIT WITH JAPAN IS OBVIOUSLY WE DO NOT BELIEVE THAT OUR BILATERAL TRADE WITH JAPAN, GLOBAL TRADE BALANCE INTO EXCESSIVE DEFICIT AND THREATENS 1. DISRUPTION IN IMPORTANT INDIVIDUAL INDUSTRIAL SECTORS, THEN THERE IS REAL CAUSE FOR CONCERN. 2. WE BELIEVE THAT THE U.S. TRADE DEFICIT WITH JAPAN WOULD BE SIGNIFICANTLY LESS WERE IT NOT FOR THE EXISTENCE OF VARIOUS NTBS WHICH ACT TO RESTRICT IMPORTS INTO JAPAN. THE NTBS THAT I WILL BE TALKING ABOUT IN SOME DETAIL ARE THOSE THAT MAY REASONABLY BE ATTRIBUTED TO ACTION OR NON-ACTION OF THE JAPANESE GOVERNMENT. THESE NTBS, THEREFORE, ARE EXCLUSIVE OF THE VERY REAL PRIVATE SECTOR NTBS-PREFERENCE FOR GOODS MADE IN JAPAN. ESSENTIALLY JAPANESE BUYER THIS PREFERENCE IS BASED TO A LARGE DEGREE ON TRADITIONAL BUYER SUPPLIER RELATIONSHIPS WHICH MAY INVOLVE EQUITY OR OTHER FINANCIAL THAN THEY DO. A MAIN REASON UNDOUBTEDLY HAS BEEN THE INADEQUACY OF BUT WE CONTEND THAT THE EXISTENCE OF JAPAN'S NTBS HELPS SUSTAIN THE U.S. BUSINESS COMMUNITY'S CONTINUING PERCEPTION THAT THE JAPANESE MARKET IS NOT NEARLY AS OPEN AS THE U.S. MARKET, AND IN MANY CASES THIS PERCEPTION IS ENOUGH TO DETER U.S. EXPORTERS FROM MAKING THE NECESSARY EFFORTS TO PENETRATE THE JAPANESE MARKET. I INTEND TO DISCUSS TODAY THE NTBS FACED BY FOUR U.S. INDUSTRY SECTORS IN THEIR ATTEMPTS TO SELL THEIR PRODUCTS IN JAPAN. THE PROBLEMS FACED BY MEMBERS OF THESE INDUSTRY SECTORS ARE REPRESENTATIVE OF THOS FACING OTHER U.S. INDUSTRIES AS WELL. I 3. HAVE CHOSEN THESE FOUR INDUSTRIES BECAUSE THE PROBLEMS FACED BY THEM HAVE BEEN DOCUMENTED THROUGH CASE WORK DONE BY THE JOINT U.S.-JAPAN TRADE FACILITATION COMMITTEE IN RESPONSE TO COMPLAINTS BROUGHT TO THE COMMITTEE BY U.S. COMPANIES--INCLUDING A NUMBER OF SMALL-SIZED FIRMS--AND INDUSTRY GROUPS. I WILL USE SPECIFIC EXAMPLES OF PROBLEMS ENCOUNTERED BY U.S. COMPANIES AS REPRESEN TATIVE OF THE TYPE OF PROBLEM FACED BY OTHER POTENTIAL EXPORTERS. I SHOULD POINT OUT THAT THE PROBLEMS I AM ABOUT TO DISCUSS ARE TO EXPORT THEIR PRODUCTS TO JAPAN. TYPES OF NTBS LET ME BEGIN WITH A BRIEF OVERVIEW OF THE TYPES OR CATEGORIES OF IS UNDER VERY HEAVY DOMESTIC PRESSURE TO RETAIN. NEVERTHELESS, THE U.S. GOVERNMENT HAS SUCCEEDED OVER THE PAST TWO YEARS IN OBTAINING |