ments; it applied only to shipments which were actually made directly to the United States. Those shipments amounted to approximately 7.75 million units, a number which has generally been accepted as the quota referred to in the Swiss undertaking. "3. For the purpose of limiting direct shipments in conformity with its undertaking, Switzerland issued export licenses in 1946 covering shipments to the United States of 645,540 units per month, which corresponds to 7,746,480 per year (an amount just under the basic quota of 7.75 million units). "4. Swiss official statistics reported that direct shipments of watches and watch movements to the United States in 1946 totaled 7,980,000, which amount included 574,000 units shipped to post exchanges and ships stores outside the United States. The total shipments actually made directly to the United States therefore amounted to 7,046,000 units, or about 350,000 less than the number provided for by the quota. "5. United States statistics of imports ordinarily do not distinguish between direct and indirect importations. All imports are credited to the country of origin when known. There are no official United States statistics showing separately the direct and indirect importations of Swiss watches and watch movements in 1945, the base year to which the quota applied. In 1946, however, a special compilation was made showing direct and indirect importations of Swiss watches and watch movements. "6. Imports of Swiss watches and watch movements into the United States in 1946 totaled 9,655,000, of which 1,200,000 were imported through third countries. The imports received directly from Switzerland therefore totaled 8,455,000 units. However, this number, which exceeds the reported direct Swiss exports to the United States in 1946 by about 1,000,000 units, included many movements which the Swiss classify as clock movements rather than watch movements. "7. Foreign countries reported exports of any item to the United States in any given year seldom coincide precisely with United States reported imports of that item in that same year. Disparities in the statistics arise from three principal causes: (1) The speeding up or slowing down in the rate of shipments, particularly at year ends; (2) variations from one year end to another in the imported goods in bonded warehouses in the United States; and (3) differences between the classifications used by the exporting country and the United States. The disparity between Swiss and United States statistics on watch shipments appears to arise principally from (3), i. e., differences in classifications. "8. United States statistics distinguish between watches and clocks on the basis of width of pillar plate. Any movement whose pillar plate is less than 1.77 inches is classified as a watch movement; and any whose width is 1.77 inches or more is classified as a clock movement. Many imported movements which are classified by the United States customs as watch movements actually appear on the United States market as clocks. The Domestic Clock Manufacturers Association, in its brief before the Committee for Reciprocity Information, estimated that over 1,000,000 of the watch movements which entered the United States in 1946 were in that category. The association based its estimate on the number of watch movements with pillar plates in excess of 1.50 inches which were imported in 1946. Few imported movements with pillar plates that size are in fact used in watches sold on the American market. If the foregoing estimate of the American Clock Manufacturers is correct, then United States imports of watch movements in 1946 overstated by about 1,000,000 units the number which actually entered into watches, that is to say, only about 7.45 million of the watch movements imported into the United States in 1946 were for use in watches. This figure corresponds very closely with Switzerland's reported exports of watches and watch movements to the United States. "9. Switzerland classifies as clocks and clock movements many of the articles which the United States customs classifies as watches and watch movements. Small-size alarm clocks, for example, are classified as clocks by the Swiss but as watches by the United States. The principal evidence that this is so is that Switzerland's reported export of clocks and clock movements to the United States in 1946 were valued at the equivalent of $930,000 (the number of units is not reported), whereas United States reported imports of Swiss clocks and clock movements in the same period (both direct and indirect shipments) were valued at $121,000 for 7,075 units. "10. Switzerland appears to have limited its direct shipments of watches and watch movements to the United States in 1946 to a number not exceeding the quota stipulated in its undertaking of April 22, 1946. Swiss exports of watches and watch movements to the United States amounted to 535,292 units in January 1947 and 577,671 in February. Data are not yet available for March. Unless shipments in March exceeded 824,500 movements, it would not appear that Switzerland made shipments in excess of its quota during the first quarter of 1947. United States direct imports for consumption of Swiss watches and watch movements were 574,199 in January 1947 and 640,991 in February. Corresponding data are not available for March, but the general imports from Switzerland in that month totaled 586,712 units. United States direct imports for consumption of Swiss watches and watch movements during the first quarter of 1947 would therefore not appear to be in excess of the amount provided for in the Swiss undertaking." On page 783 Mr. Cenerazzo asserts "In the Tariff Commission's report on watches, it is interesting to note that the Tariff Commission made no mention of the competitive cost of production between the United States and Switzerland." That statement is untrue. On page 33 of its report (War Changes in Industry Series, Report No. 20, U. S. Tariff Commission, 1946), the Tariff Commission not only discusses the subject of comparative costs, but gives an entirely satisfactory reason for not conducting an exhaustive analysis of comparative costs. Such a study, moreover, could not have been made in the short period available to the Commission to complete its report. In any event, how significant would comparative costs be under the conditions which have prevailed in the domestic industry during its reconversion period and in the Swiss industry which now faces conditions quite different from those which prevailed either before the war or during the war? For the record, let me say it was only the appearance of a witness before this committee purporting to represent, but actually misrepresenting, an American industry and giving a false picture of the effects upon that industry of the reciprocal trade program in his effort to stifle that program that leads me to take the unusual action of personally refuting the above mistakes. The necessity for international economic cooperation and the expansion of world trade is understood and supported by the great masses of the American people, including outstanding Republicans and the majority of the rank and file of the Republicans, as well as Democrats. It is important that the misstatements of representatives of selfish pressure groups should not be permitted to divert us from the facts. This is my warning and my answer to this and all other industry spokesmen appearing before this committee. (The following letter and resolution were submitted by Hon. Noah M. Mason, a Representative from Illinois:) Hon. WILLIAM G. STRATTON, House Office Building, Washington, D. C. EXCHANGE CLUB OF ELGIN, DEAR SIR: I attach herewith an original copy of a resolution passed by the unanimous vote of the Exchange Club of Elgin, Elgin, Ill. The subject of the importation of Swiss watches is understandably a subject close to the hearts of the members of this club and the community in which they reside and engage in business. The continued prosperity of the jeweled watch industry of this country is, of course, dependent upon the restriction to some degree of the importation of Swiss watch movements. The continued unrestricted importation of such products will unquestionably result in the death of this industry in this country. A more far reaching result is, of course, the driving of all persons engaged in this industry into some other industry and the total elimination of all types of workers necessary to carry on the production of precision timepieces and movements. This may in the future have a far-reaching effect upon the security of this Nation and is certainly little thanks for the immeasurable effort of this industry and its workers for their very fine and efficient work during the last world conflict. You will earn the undying gratitude of the members of this industry and the people of this community if you will use your utmost efforts as their Representative in Congress to do everything within your power to achieve the protection which this industry needs and which it has earned by its faithful performance on behalf of its Government. Very truly yours, THE EXCHANGE CLUB OF ELGIN, RESOLUTION Whereas the Exchange Club of Elgin, Ill., is desirous of protecting the high wages and high standard of living enjoyed by the American workmen and Whereas the Exchange Club of Elgin, Ill., desires to encourage and protect the industries which are essential to the adequate defense to our country and Whereas the present tariff laws and regulations of the United States of America concerning the importing of Swiss watches to this country are inadequate to protect the high standard of wages and high standard of living enjoyed by the American workmen and to protect and encourage the jeweled-watch industry which is vital to the national defense: Now, therefore, be it Resolved, That the officers and members of the Exchange Club of Elgin, Ill., resolve to give their unanimous support to the necessary legislation to protect the American_jeweled watch industry from watches imported from Switzerland, and that the Exchange Club of Elgin, Ill., recommends that the importing of jeweled Swiss watches be limited in entry to American markets on a basis of not more than 30 percent of the domestic production of jeweled watches; be it further Resolved, That this resolution be spread upon the minutes of this club and that a copy of this resolution be forwarded to Senator C. Wayland Brooks, Senator Scott W. Lucas, Congressman William G. Stratton, and Congressman Chauncey W. Reed. Respectfully submitted. FRANKLIN KUNNS, The foregoing resolution was unanimously adopted at a regular meeting of the Exchange Club of Elgin, Ill., on March 26, 1947. GORDON C. ADAMS, President. Mr. EBERHARTER. Mr. Chairman, can I make an insertion in the record? The CHAIRMAN. Yes. Mr. EBERHARTER. I would like to insert in the record a clipping from the Journal of Commerce dated April 16, 1947. The CHAIRMAN. It will be inserted at this point. (The clipping is as follows:) [Journal of Commerce, New York City, April 16, 1947] RETAILERS URGED TO PUSH IMPORTS-BATT SAYS ADVERTISING SHOULD STRESS NEED OF TWO-WAY TRADE Current advertising by the Nation's retail stores to explain to the American consumer why two-way world trade is essential to world peace was urged yesterday by William L. Batt, president of SKF Industries, Inc., of Philadelphia. The industrialist, who served as wartime Vice Chairman of the War Production Board, spoke before the Fashion Group, Inc., at the Hotel Biltmore, in support of the trade program regarding which Congress is now conducting hearings. "The International Trade Organization is recognized everywhere as an American project," Mr. Batt declared. "We have brought the rest of the world along on it step by step." HAILS ITO PRINCIPLE "We prepared and published the original proposals for the expansion of world trade and employment, and obtained the full agreement of British, French, and other governments to the important points in these proposals," he continued. "We issued the original invitations to negotiate for the reduction of trade barriers. We introduced the resolution that was adopted by the United Nations Organization which authorized the formation of an International Trade Organization, and it was our charter that the preparatory committee adopted as the basis for its work in London last fall." Mr. Batt warned that if the isolationists and a few shortsighted men should force abandonment of the program for freer world trade, it would be tantamount to abdication of our dominant position in the world. "If we should abandon it now as we abandoned the League of Nations a generation ago, there is small chance the world would seriously consider another program proposed by the United States for a long time to come," he declared. LEADERSHIP OF UNITED STATES Batt asserted that "what the world wants from us is leadership and guidance in the reestablishment of a healthy world, and I think it would be misleading not to recognize that some dollar credits might be substantial." He warned, however, that merely furnishing financial help abroad is not enought What is fundamentally needed abroad is technical, professional and management skill which the United States has to a degree not remotely matched abroad. He urged retailers to focus attention on foreign products as a means of "driving home the fact that we cannot hope to sell abroad and get paid for it unless we buy abroad in economic balance." "Our productive capacity has achieved such levels that almost inevitably we will soon be capable of producing more goods of many kinds than we can hope to consume at home," he said, stressing the need for foreign markets in the immediate future. DEPARTMENT OF STATE, The Honorable HAROLD Knutson, Chairman, Committee on Ways and Means, House of Representatives. MY DEAR MR. KNUTSON: The matter of watches came up before the Committee on Ways and Means on March 28 and 29, 1947, and I should like to submit a supplemental statement for the record. Sincerely yours, W. L. CLAYTON, Under Secretary for Economic Affairs. STATEMENT OF THE UNDER SECRETARY OF STATE FOR ECONOMIC AFFAIRS CONCERNING THE AMERICAN JEWELED-WATCH INDUSTRY REVIEW OF THE INDUSTRY, 1930-41 I should like to begin this statement with a review of the situation of the domestic jeweled-watch industry from 1930, the year when the Smoot-Hawley tariff became effective, to the outbreak of war in 1941. The rates of duty on watches under the 1930 Tariff Act were specific; the average ad valorem equivalent of these specific rates of duty for the years 1931-35 was 82.5 percent. In 1936 a reciprocal trade agreement was concluded with Switzerland, in which the tariff structure on watches was retained in the same form but which reduced the rates of duty so that the average ad valorem equivalent for the years 1936-40 was 63.5 percent, or approximately 20 percent below the rates provided in the 1930 Tariff Act. As a result of the reduction in duties provided in the Swiss trade agreement, the domestic jeweled-watch industry has claimed that it needed for survival either a return to the 1930 rates of duty or a quantitative (quota) limitation upon the imports of Swiss watches and movements into this country. The jeweledwatch industry has contended, in other words, that it has suffered material damage as a result of the reduction in rates of duty provided in the United States-Swiss reciprocal trade agreement. What actually happened to the domestic jeweled-watch industry during the period 1930-41? During the period that the 1930 tariff rates were in effect total output of the industry during the best years was 1,263,000 units, while in the worst year it was only 534,000 units. On the other hand, subsequent to 1936 there was an almost uninterrupted increase in output, and by 1941 production reached a total of 2,656,000 units. This figure was the largest outupt in the entire history of the industry. The industry, while agreeing that the above figures are substantially correct, has claimed that during the period 1936-41 imports of Swiss watches increased, as did domestic production, but that imports increased at a much greater rate and that, as a result, the domestic industry's percentage share of United States consumption was seriously reduced. The facts do not seem to support this contention. During the years 1931-35 the average share in total domestic consumption supplied by the American jeweled-watch industry was 23.1 percent. For the period 1936-41, that share increased to 24.8 per cent. I should like at this point to mention briefly one point which is frequently used to show the "disastrous" effect on the domestic watch industry of our trade agreement with Switzerland. It has been contended that not so many years ago there were some 20 domestic manufacturers of jeweled watches in this country, while the number has by now been reduced to 4. It is claimed that this is the result of the Swiss trade agreement. I would simply like to point out that it is perfectly true that not long ago there were some 20 or more domestic manufacturers and that there are now only 4 but that this reduction in number took place before the trade agreement with Switzerland was concluded. THE PERIOD 1931 TO THE PRESENT Shortly after our entry into the war, the domestic jeweled-watch industry virtually ceased production for the civilian market and devoted its efforts almost solely to items required by the armed services. Not until early last year was the industry able to commence its reconversion to civilian production and to produce watches for its normal customers. During the war years domestic civilian demand was supplied, insofar as it was supplied, almost entirely by watches and watch movements imported from Switzerland. As a result of this fact, coupled with the enlarged civilian demand due to increased purchasing power, imports of Swiss watches through 1946 reached an all-time high. The American watch industry, alarmed at the unusually large quantity of imported watches entering the domestic market, requested the Department of State to reach an agreement with the Swiss, limiting Swiss exports to this country during the domestic industry's period of reconversion to civilian production. The Department, recognizing the somewhat unique position of the watch industry, and feeling that their request had considerable justification, concluded an agreement with the Swiss in April 1946, whereby the Swiss Government undertook to limit the direct exportation of watches to this country to a figure not to exceed like exports in 1945 and also agreed to take whatever measures were available to it to prevent indirect shipments to this country. (Indirect shipments are watches reaching the United States by way of third countries.) Switzerland fulfilled the terms of this agreement, so that direct Swiss watch exports to the United States were about 300,000 units less in 1946 than in 1945, while indirect imports, which had reached 220,000 units during the month of April 1946, had by January of this year fallen to about 15,000. This agreement with the Swiss to limit exports expired on the 31st of March of this year. In view of the present condition of the domestic jeweled-watch industry, it has appeared unnecessary to renew it. The agreement was, in any event, designed only to cover the domestic industry's period of reconversion to civilian production. Reconversion has now been substantially completed, and by the first part of this year the industry was producing watches at an annual rate approximating an all-time high. Moreover, at least one of the domestic manufacturers has stated that orders on its books were so large that they could not be filled until 1948. Furthermore, in spite of the difficulties of reconversion, at least three of the domestic jeweled-watch manufacturers, according to their financial reports for 1946, turned in a profit for that year which compares favorably with profits for any of their prewar years. Net profit after taxes for the three companies amounted to, respectively, $1,430,763; $930,245; and $3,486,956. THE QUESTION OF LABOR AND LABOR COSTS Our country is proud, and justly so, of the fact that workers in the United States, and this includes American watch workers, receive higher wages, by and large, than in any other country in the world. Because of this undeniable fact, however, it is often contended that domestic watch manufacturers are unable to compete with watches produced by the low-paid labor of Switzerland. Let us look into this point a little more closely. It has often been stated that Swiss watches are produced in the homes of Swiss workers receiving little better than sweatshop wages. The only trouble with this argument is that it is not correct. The manufacture of watch movements in the homes of Swiss workers accounts for an infinitesimal proportion of the output of the Swiss industry. Even this small proportion does not reach the United States to compete with our product, largely because it consists of watches of poorer quality which are not marketed in this country. The Swiss watch worker is normally employed in plants which are modern and well equipped, although small by our standards. The worker is one of the best paid in Switzerland, which has one of the highest standards of living of any country in the world, with corresponding high rates of wages. The average level of wages in Switzerland has risen 63 percent since 1939. In addition to his regular |