RECIPROCAL TRADE AGREEMENTS PROGRAM SATURDAY, APRIL 19, 1947 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D. C. The committee met at 10 a. m., pursuant to adjournment, in the hearing room of the Committee on Ways and Means, New House Office Building, Hon. Daniel A. Reed presiding. Mr. REED. The committee will be in order. Our first witness is Mr. Bement. Mr. Bement, will you give your full name, your official position, and whom you represent? STATEMENT OF LEWIS D. BEMENT, REPRESENTING THE ASSOCIATED CUTLERY INDUSTRIES OF AMERICA AND THE SHEARS, SCISSORS, AND MANICURE IMPLEMENT MANUFACTURERS ASSOCIATION, NEW YORK CITY Mr. BEMENT. My name is Lewis D. Bement, and I am the secretary of the Associated Cutlery Industries of America. Mr. REED. I believe that you are also representing Mr. O'Connor? Mr. BEMENT. I am also speaking for Mr. O'Connor, so as to save the time of the committee. Mr. O'Connor represents the Shears, Scissors, and Manicure Implement Manufacturers Association, of Newark, N. J. Mr. REED. All right, you may proceed, Mr. Bement. Mr. BEMENT. I feel somewhat humble this morning, after the very enlightening discourse that you gentlemen listened to on economics yesterday. I am afraid my testimony comes as an anticlimax of that. However, I am speaking for the cutlery industry and for Mr. O'Connor and the rest of the industry. While the term "cutlery" is used to cover a wide variety of handoperated cutting implements, the cutlery industry is, in reality, comprised of three industries, that is, pocketknife manufacturing; shears, scissors and manicure implement manufacturing, and table, kitchen, professional and industrial knife manufacturing. This latter group is usually referred to as flat cutlery. These three component parts of the cutlery industry have filed separate briefs with the Committee for Reciprocity Information as they are covered by three separate paragraphs in the Tariff Act of 1930. Two of these briefs have set forth valid reasons why a reduction in the present rates should not be made at this time. The flat cutlery brief has requested that these products be deleted from the list of commodities, which the State Department has stated it was willing to negotiate for tariff concessions, because a reduction of about 40 percent has already been made in the 1939 United Kingdom agreement, the impact from which has not yet been felt because of the war. Just what the Committee has recommended we have no way of knowing. We are advised that the final list has been made available to the 18 negotiating countries, but as yet, is not ready for domestic distribution. Few laymen, especially in the Government departments, seem to realize the importance of cutlery in our domestic economy. Its comparatively small size, amounting to slightly less than $50,000,000 done by some 60 manufacturers and employing about 14,000 people, is not a yardstick for gaging its importance. A more significant picture can be had from the fact that, outside the heavy industries, such as steel, metals, and machinery, there are very few consumers durable goods manufactured that do not require some form of cutlery in the manufacturing process and the food production industry could not function without many of the patterns of knives made for this purpose. Such important industries as the shoe, textile, clothing, rubber, automotive, shipbuilding, furniture, and electrical, to name a few, could not function without cutlery in varying quantities and the meat packing, fruit canning, fruit raising, sugar production, animal husbandry and fishing industries need cutlery in large quantities to operate. It may be of interest to this committee to know that one of the greatest concerns of the War Production Board was that of seeing that the food-production industries and those industries that were making war materials were supplied with their essential needs in cutlery. In addition this industry produced over $60,000,000 worth of all types of cutlery for the armed services. In addition, many of our manufacturers were of untold service to the Surgeon General in producing surgical instruments, although we had never produced them before, because we had the skills and knowhow to grind, harden, and temper high-grade steels. Practically 100 percent of the pocket knives manufactured from 1943 to 1945 went to the Army Engineers, Navy, Air, and Marine Corps. To fulfill this demand the industry was able, in spite of many handicaps, to step up its production in excess of its peacetime production. Had the industry been weakened by heavy importations in the years preceding the war, it would never have been able to meet these essential requirements. The fabrication of cutlery unfortunately does not lend itself to mechanization. Over 60 percent of the cost is hand labor, much of it is highly skilled. Hourly labor rates have increased about 75 percent since 1939. Much, if not all this increase, widens the gap between our rates and those of foreign countries which existed when the present tariff act was put into effect. As you are aware, neither the Department of Commerce nor the Tariff Commission have any up-to-date information on present labor rates in the countries who are parties in the present negotiations so that the State Department has no yardstick by which to judge what concessions can be given without completely disrupting an industry. Within the past 2 years, one of our manufacturers has opened a factory in South America and equipped it with the same equipment they use here. A grinding-machine operator in his local factory is paid from 85 cents to $1 an hour. The identical machine producing the same number of pieces is being operated for 20 cents an hour in his South American factory. From reliable sources, we are told that wages being paid today in Solingen, which is the German cutlery center and is in the British occupation zone, run from 1 mark, which is 10 cents at the present exchange rate, to 2 marks 10 pfennigs, or 25 cents. These rates compare with ours from 70 cents to $1.50 an hour. With a continuance of this disparity in rates, it is not too difficult to imagine what a reduction in tariff rates will do for our industry. America has never been and never can be an exporter of cutlery. European manufacturers have dominated the export market. To exist we must be able to retain our domestic market. We have no place else to go. Most of our plants are located in small communities where they are a major factor in the local economy. Any curtailment in the operations of these plants directly affects more people than are employed in the industry. Mr. REED. I just wanted to say that I have some very fine cutlery establishments in my district. I represent western New York, and there are some cutlery concerns that mean a great deal to the district. If you took the pay roll out of those small communities that have been long established in those cities, they would be ghost. towns. Mr. BEMENT. In your section, take the little town of Springville there, and Little Valley, Olean, Perry, and Franklinville. Cutlery establishments in those are the main industries there. Then, in eastern New York, you may know of Walden and Ellenville, which are two very small communities. Mr. REED. I know them very well. We thank you for your testimony. There is one thing that you emphasized there, and I think it ought to be emphasized again, that you do not know the cost of production of the competing firms in foreign countries, do you? Mr. BEMENT. I have not the slightest idea, excepting those rates that I gave you there of the difference between 20 cents and 80 cents. Mr. REED. We were really astonished to have the testimony here from the State Department and from other agencies that none of them knew the cost of production of the things on which the Department is going to trade in Geneva. It is very difficult for some of us to see how you could logically deal with those propositions without knowing something of the cost of production of the competing goods from foreign countries. Mr. BEMENT. I think, as Professor Northrop brought out yesterday, the whole purpose of this thing is to equalize. Well now, if we do not know what we are going to equalize, how are we going to do it? Mr. REED. That is really the answer. Mr. COOPER. I have no questions. Mr. REED. We thank you very much. Mr. BEMENT. Thank you very much for allowing me to appear. Mr. REED. Have you any exhibits you wish to put in the record? Mr. BEMENT. No; I have no exhibits. Mr. REED. The next witness is Mrs. Zelia P. Ruebhausen, of the League of Women Voters. Will you please give your full name to the reporter? STATEMENT OF MRS. ZELIA P. RUEBHAUSEN, REPRESENTING THE LEAGUE OF WOMEN VOTERS, WASHINGTON, D. C. Mrs. RUEBHAUSEN. Mrs. Zelia P. Ruebhausen is my name. Mr. REED. What is your business, and whom do you represent? Give us that information so that the record will show the details. Mrs. RUEBHAUSEN. I represent the League of Women Voters of the United States. My occupation is that of housewife. Mr. REED. You are in no way connected with the Government? Mrs. RUEBHAUSEN. No; I am not, Mr. Reed. Mr. REED. All right. Mrs. RUEBHAUSEN. The League of Women Voters of the United States, made up of 545 local leagues in 33 States, wishes to express its support for the reciprocal-trade agreements program which has been in operation since 1934. The delegates to the last convention of the League of Women Voters, held in Kansas City in May of 1946, also supported an International Trade Organization as a necessary part of the broad program of expanding world trade and employment. This is not a new position for the league. Our members took up the study of the tariff in 1924, considering it both from the standpoint of the consumer, in its effect on the cost of living, and from the standpoint of citizens interested in international peace. As a result of this study, the league decided that a downward revision of tariffs would be helpful to the consuming public, to the American economy as a whole, and to the elimination of international friction. When the Trade Agreements Act was passed in 1934, the league studied it. In 1936 the league's biennial convention voted to support the downward revision of tariffs through the reciprocal trade agreements. This support has been repeated by each convention and thus the league has supported trade agreements each time the program has come up for renewal. Today, the league reiterates its support, believing that reciprocal trade agreements are more important than ever. We believe that the country is faced with a grave international economic situation. The prewar world is dead, and the world in which we must now plan our economic foreign policy presents more difficult problems than we have previously experienced. In these circumstances, league members are of the opinion that our long-standing support for trade agreements has become one of the most important items on our program. Two major facts stand out: One, trade relations between nations are complicated by endless restrictions and discriminations, which reduce the volume of trade and hinder world economic recovery; two, the Government of the United States represents the most powerful economic force in the world. It can lead the way toward more orderly, less restricted trade relations if it is willing not only to offer leadership but also to reduce its own trade barriers on a reciprocal basis. The international conference now going on in Geneva is a critical moment in our world economic leadership. The fate not only of the proposed trade organization but also of the whole structure of economic cooperation rests upon what the United States does there, and what the Congress does here at home. The United States stands to gain a great deal if a multilateral treaty for the reduction of trade barriers is negotiated and a charter for an International Trade Organization is adopted. The United States is one of the few remaining major trading countries which still operate on a system of free enterprise. We are finding it increasingly difficult to trade with the rest of the world when so many nations are moving toward both internal and external economic controls. If we are to build a sound and profitable foreign trade with such nations, there must be a mechanism for preventing discrimination and establishing rules of the game. The essence of the program we are presenting at Geneva is that it offers ways and means by which countries differing in economic structure and political practice may trade. Indeed, it cannot be said too often that if such ways and means are not found, the alternative is isolation and suspicion festering into war. The fact that such an organization would help rather than hinder American business is indicated by the widespread support for an ITO charter among business groups. The United States Chamber of Commerce has expressed its support for the general purposes of such an organization. The National Foreign Trade Council has done likewise. Fortune, a leading business magazine, warns in its February issue that if a start is not made now in liberalizing trade practices, the American free enterpriser will find himself bogged down in oppressive restrictions. It believes the International Trade Organization will provide a beginning for such liberalization. The Wall Street Journal, which is a paper of and for business, said editorially last November: It is a basic economic fact that in the long run-and it is not so long either— this or any nation can export only in the amounts it is willing to import; otherwise exports won't be paid for *. It is a basic political fact that the very nations that most want to export will act to bar imports. * * Eric Johnston, past president of the Chamber of Commerce, and a business leader, said in Rochester not long ago: I believe that a return to the outmoded high tariff policy would be disastrous for the country. I believe that such a policy, adopted now, would repay a whirlwind of economic disasters a few years from now. The theory of economic isolation is simply unthinkable for the greatest creditor nation in the world. When the State Department held public hearings on the proposed ITO charter, 243 organizations and persons expressed their views on it orally or in writing. Of these, 207 endorsed the principles and objectives of the proposed charter. One hundred and fifty endorsed the charter without qualification. Only 16 witnesses took a position in general opposition to the charter. The alternative to a successful program of better trade relations, including the gradual reduction of United States tariffs, is one which will serve neither the interests of American business nor those of the American consumer. If the United States, with half the industrial capacity of the world, should discourage imports, it would become necessary for other countries to engage in economic warfare. The alternative to selling goods to us, so that they can have dollars to buy our goods, will be bilateral trade agreements, quotas, exchange controls and all the devices of economic control which will make it difficult for us to trade anywhere. The only practical way in which other countries can get dollars is to sell to us. Without dollars, they cannot buy our goods. If we are to increase our trade, we must be willing to reduce tariffs in cases where we can, by so doing, gain concessions from other countries. |