Mr. GAUNT. Well, they say we need a few vitamins and therefore that the 2 percent should be a good stimulus to the woolen industry. Someone has made that point. Yes; but we don't need a drop of poison; and as you know a drop of ink in a glass of water can foul the whole glass of water. That is what these imports are doing to us. The CHAIRMAN. In 1923 the domestic production was about $700,000,000, and declined regularly until in 1931 it was a little over half as large as 1923, and has risen to $459,011,000 in 1937. That is a pretty good increase, isn't it?

Mr. GAUNT. We are a long way ahead of 1932, but we don't want a kick in the teeth now.

Senator DAVIS. Of the two ways, which would you rather have-to go back to the old way or making the Smoot-Hawley tariff, as Senator Clark says, or would you rather continued making them through the State Department in these reciprocal trade treaties?

Mr. GAUNT. Of the two evils, Senator, I should say that the protective tariff is much better for this country than in giving away our markets to foreigners. All right, if one says it is too high-lets assume that for a moment that it was. Supposing they built a dike in Holland 10 feet too high-they have thrown away 10 feet of earth work, but they are still keeping out the sea.

Senator DAVIS. And the same people that built the high dike can reduce it?

Mr. GAUNT. Yes.

Senator DAVIS. And those that made the Smoot-Hawley tariff could repeal that part of it which was not satisfactory to the great majority of the people in the country?

Mr. GAUNT. That is correct. Especially if it is kept in the hands of our elected representatives.

World tendencies are toward big companies becoming bigger, and small companies becoming subject to more red tape and discipline. This is particularly true under present conditions abroad, where in Britain, for instance, which has been a stronghold for small and medium-sized companies, war has placed each of the major industries under the control of a small board whose personnel is drawn almost exclusively from the big units. We had a taste of it here in America under National Recovery Administration, of ill-omened memory. These big units now have complete access to the trade secrete of the small independents, names of customers, former volume of business, amount of raw materials on hand, and so forth. The small firm is in a particularly difficult position in regard to any complaints he wishes to make, as he naturally is at the mercy of the control board.

Senator DAVIS. Did you appear before this committee on Reciprocity Information of the State Department?

Mr. GAUNT. This is my first appearance before any committee. Senator DAVIS. You feel more at home coming before a committee like this than that State Department Committee of three or four men who were absolutely unknown to you?

Mr. GAUNT. You bet.

Far more important than the promotion or destruction of any particular industry is the interest of the whole Nation, which in its fight for the preservation of democratic methods should condemn any

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such totalitarian or dictatorial program as the bureaucratic handling of this so-called reciprocity, and any such discrimination against smaller business.

The fate of so many should not be left in the hands of a few appointees; but rather in accord with our institutions and traditionsin the hands of our elected representatives.

If smaller business were to express its opinion, I believe it would be: (a) That the treaties be allowed to expire; or failing that, (b) if the present authority is to be continued, it should be subject to Congressional Approval of any pact before it becomes operative.

Senator, you were asking about shoddy, and qualities. A lot of people think that imported goods are better than American goods. We have just as good labor and just as high ingenuity as any place in the world, and it is a shame to cast aspersions of that sort on American goods. They used to say that we could not make dyestuffs. A foreign car was supposed to be superior, and a foreign suit. It is all the bunk. You can get better and finer goods made right here in America than any made any place on the face of the earth. It is too bad that many merchants promote the sale of foreign products to the detriment of our American industry.

Senator CLARK. Before Mr. Gaunt leaves the stand, and with reference to what he said about the unimportance of foreign trade, I want to read into the record one paragraph of the testimony of R. W. Gifford, of Detroit Chamber of Commerce, which seems to me to be very pertinent on this point. It is at page 1557 of the House hearings:

Let me remind you of what happened 150 years ago. Every clipper ship that left this country went out loaded with material, and she never came back to the American shores until she brought a cargo with her. They were reciprocal traders, and then we got out of that business, and likewise our ships disappeared off the seas during that period, and gradually as we became more of a manufacturing country, that started to come back, and then we started to yell about export sales, and you must bear this in mind, that the importance of the export business, if 7 or 8 percent of your business means nothing, you might as well stop selling in Kansas or California. If that is so, let us cut out all of it, and we will not have to work at all. However, we have to keep after that and keep after it constantly, or the first thing you know you are out of it.

Mr. GAUNT. Well, Senator, don't you think that we ought to pull in their rubber and their tin that don't hurt us instead of pulling in their textiles? There is the right kind of reciprocity.

Senator CLARK. I do not think, as President McKinley said, that the United States can forever continue to sell everything and buy nothing.

Mr. GAUNT. Right you are, but what you and I both want is a balanced economy. We don't want it one-sided.

Senator HERRING. I want to direct your attention to the fact in the beginning of your statement you say that it would seem as though the woolen industry had been especially singled out for sacrifice. I want to direct your attention to the statement I put in the record the other day by the president of the American Woolen Manufacturers, saying that production activity of woolen textile mills in 1939 as indicated by the first 11 months was approximately 40 percent greater

than in 1938, was higher than in 1936 and higher than in 1937. Also that employment in textile mills was much better during the first 11 months of 1939 than in 1938, and that mills producing more than 50 percent of woolen goods of the country announce wage increases of 7%1⁄2 to 10 percent effective February 1, 1940.

Mr. GAUNT. That is right.

Senator HERRING. So it does not seem that they were singled out for sacrifice.

Mr. GAUNT. I just came from Lawrence last night. We are about two-thirds shut down up there. There has been an increase in recent months in textiles, as there has been an increase in all business. But textiles are not back to normal; far from it, and they cannot be if we continue importing from abroad.

Do you think, Senator, that it is these pacts that caused the recent increase?

Senator HERRING. At least they are an increase while they are in effect.

Mr. GAUNT. I think if the country is generally better off, it is not because of the pacts.

Senator HERRING. That is a matter of opinion.

Mr. GAUNT. It is a rebound from that terrible depression of 1932. It has rebounded on its own momentum.

The CHAIRMAN. Under the reciprocal trade agreements, the lowest ad valorem rate is what?

Mr. GAUNT. You are talking about woolens?

The CHAIRMAN. Yes.

Mr. GAUNT. My memory, of course, does not serve me except on the highlights. There is a 34-cent protection on wool itself in a scoured state. The rest I cannot quote from memory.

The CHAIRMAN. I am told that, under this classification of which you speak, it is 55 percent at the very lowest and runs up to 101 percent.

Mr. GAUNT. You have the figures there, sir.

The CHAIRMAN. That is a pretty good protection.

Mr. GAUNT. It seems awfully high, but stop and think, Senator, that the labor content of a piece of goods is almost 100 percent You start off and you have a whale of a lot of labor in there, and if you are paying double the wages, you have to have that protection unless you want to sacrifice your industry. Goodness knows we are not a profitable industry. Your records will show that we have all sorts of competition within our own borders here. That keeps the prices down.

The CHAIRMAN. Thank you very much.

Mr. GAUNT. I should like to have the tables which are attached to my statement made a part of the record. The CHAIRMAN. That may be done. (The same are as follows:)

APPENDIX A

The size of establishments and firms in the United States primarily weaving cloths wholly or in part of yarns spun on the woolen and worsted systems

1. About 94 percent of the firms own less than 200 broad looms.

2. About 11⁄2 of the broad looms are owned by firms with less than 200 broad looms.

3. 99 percent of the firms and 75 percent of the equipment is in the small- and medium-scale category. 4. As a group the small- and medium-sized concerns furnish employment for 50,000 persons.

APPENDIX B

Index of quantity of merchandise exports and imports for consumption

Note that in 1937 the volume of imports equaled that for the boom year 1929. Yet Mr. Hull wants to make further reductions in tariff rates. We cannot accept imports in greater volume than 1929 without damage to domestic producers, and especially small units which are not so situated as to stand price cuts needed to meet competition successfully.

Source: Bureau of Foreign and Domestic Commerce, United States Department of Commerce.

APPENDIX C.-Imports, woven piece goods, wholly or in chief value of wool and

The above figures give the total imports of woven piece goods in pounds from 1930 through 1939. It will be observed that the imports for 1939 are higher than any year since 1930. England is making every effort to increase her exports of woolens in 1940.

APPENDIX D

(From letter of James W. Young, Director, Bureau of Foreign and Domestic Commerce, Department of Commerce, to Congressman George J. Bates, under date of March 1, 1940.)

Another measure that is sometimes used is the relation of exports to the total national income. The latter includes, of course, the value of all services produced as well as the value of goods produced. The following table shows these data for the years 1938 and 1939:

A comparison of imports of wool products first 8 months of 1838 and 1939

Every bit of the manufactured items of necessity deprived American industry and workmen ready and anxious to work of just that much employment. Note also big increases in wastes and rags.

STATEMENT OF ALAN GOLDSMITH, NEW YORK CITY, REPRESENTING THE MEAD CORPORATION AND AMERICAN PAPER AND PULP ASSOCIATION

Mr. GOLDSMITH. I am vice president of the Mead Corporation, and vice president of the National Paper Board Association. I represent the National Paper Board Association as well as the American Paper & Pulp Association.

I did not wish, gentlemen, to get into a discussion on the economic factors in the reciprocal trade treaties as against the former method of treaty making, but I would like to have permission to give you some facts as to the effect on our particular industry of this change in tariff making policy.

We must say to begin with that the time has not been sufficient to get the economic effect of any such changes. In past history, it has taken some time for any move of this kind which has underlying economic effects, to make itself felt.

The paper and pulp industry of this country is in a rather peculiar position. The mechanization of our industry occurred 100 years ago. At that time, more advance was made in the pulp and paper industry