RECIPROCAL TRADE AGREEMENTS PROGRAM SATURDAY, APRIL 26, 1947 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met a 10 a. m., Hon. Harold Knutson (chairman) presiding. The CHAIRMAN. The committee will please come to order. The witness this morning is Mr. T. Albert Potter. Mr. Potter for the purpose of the record, give your full name and the capacity in which you appear. STATEMENT OF T. ALBERT POTTER, REPRESENTING THE AMERICAN WATCH MANUFACTURING INDUSTRY 1 Mr. POTTER. Gentlemen, my name is T. Albert Potter. I am the president of Elgin National Watch Co., of Elgin, Ill. I am appearing here on behalf of the following firms of the American watch manufacturing industry: General Time Instruments Corp., the E. Ingraham Co., United States Time Corp., Hamilton Watch Co., Waltham Watch Co., and Elgin National Watch Co. The first three are manufacturers of the less expensive clock-type of watch some of which contain jewels and some of which do not. The last three are manufacturers of the more expensive fully jeweled type of watch. The last time I appeared before this committee on behalf of the American industry, in April of 1945, two other companies were members of the group: Bulova Watch Co., which manufactures a small percentage of its jeweled movements in this country, and New Haven Clock Co., which manufactures a line of clock-type watches. After the war was over Bulova withdrew and New Haven was taken over by an importer. The industry has requested the privilege of making a statement to this committee, because it is understood that you are inquiring into the administration of the reciprocal trade agreements program. We feel that we have had an experience in that respect in which the committee will be interested. Accordingly, I shall confine my remarks to the industry's efforts to obtain relief through the trade agreements procedure. I shall say nothing about the program as an instrument of national policy. There are only two major watch-producing countries in the world— the United States and Switzerland. That was true in 1936 and is today. In that year a trade agreement was entered into with Switzerland. The principal concession granted Switzerland by the agreement was a reduction of 34 percent, on the average, in the 1930 tariff rates on watches. Speaking for the moment of jeweled watches-those con 1 Supplemental statement appears at p. 1728. taining two or more jewels, and including Bulova's American production-the American industry in 1935 sold 53 percent of the combined imports and sales of American-made watches. This was fairly representative of the share held by the American industry from 1930 on. From 1936 to 1941, the American industry lost position until in 1941 its share in the market stood at 39 percent. The principal competition faced by the clock-type watch manufacturers has been in inexpensive wrist watches. In 1935, the last full year before the trade agreement went into effect, the American manufacturers sold in the domestic market, and exported, a total of 3,000,000 wrist watches in the 0-to-7-jewel category. In the same year, 739,997 movements and watches in this category were imported from Switzerland. In 1941, the figures were 3,750,000 and 1,537,290, respectively. Thus, whereas the business of the American manufacturers had increased 25 percent, the importations from Switzerland had increased almost 114 percent. That was the picture as the United States went into the war. During the war years, the American manufacturers, both jeweled and clock type, devoted their entire time, talent, and energy to the manufacture of essential and highly precise military instruments, many of which no other industry had the know-how to produce. The war-inflated American market was now completely in the hands of the importers. Importations of all watches increased substantially year after year, as follows: People were buying watches because other things were off of the market. As early as the summer of 1943, it became apparent to us in the American industry, that after the war we would not only be faced with the task of reconverting our plants and of rebuilding our machinery, but of reestablishing ourselves in the civilian market without the advantage of the usual demand for our product, and against the opposition of a greatly strengthened importing industry. With a loss of position under the Swiss trade agreement during the prewar peacetime years, with a complete surrender of the market to our foreign competition during the war years-practically four full years-facing a currently satisfied market, and opposed by a greatly strengthened competitor, we thought we had a case, if ever there was one, for the often-assured administrative relief under the trade agreements procedure. Here is what happened: (1) The Elgin Co., filed a brief, in which Hamilton and Waltham concurred, with the Committee for Reciprocity Information in March of 1944. No action was taken thereon. (2) The entire industry filed a brief in January of 1945 with the Committee for Reciprocity Information. A hearing was held, but nothing happened. In October, at the request of one of the unions in our plants, another hearing was held by this committee. Still nothing happened. (3) In April of 1946-25 months after our first application to the trade agreements organization-we were called to Washington by the State Department and advised that they had worked out an arrangement with the Swiss whereby the Swiss would voluntarily: (a) Limit their direct exports of watches to this country, in 1946 to 7,700,000, the number which had been directly exported to this country by them in 1945, their biggest year up to that time. The difference between that quantity and the total of 9,400,000 had been imported through third countries, according to the State Department. (b) Undertake to prevent the indirect export of watches to this country. (c) Expedite the delivery of parts, including jewels and certain watchmaking machinery then on order by some of the American manufacturers who, due to the press of war work, had been unable to properly maintain their production facilities. You will notice that there were no restrictions imposed by this country that we could enforce; that the undertakings were by the Swiss, and under their control. We expressed our extreme disappointment with this arrangement. We pointed out that it represented no concessions by the Swiss. The direct export limitation was based on the biggest year's business ever done with this country. We protested that we had not been consulted before the arrangements had been completed, and that we had not been allowed to sit in on the negotiations so that we, who knew, could make clear to the negotiators the effect of the proposals they were considering. Incidentally, Mr. Clayton in May 1945, indicated to our committee and that has been confirmed by a letter from me to himthat he would use representatives of the industry as technical advisers, but he did not. A year later on April 22, 1946, the arrangement was formally concluded by an exchange of notes between the two Governments. The termination date was fixed at March 31, 1947. It was obvious from the beginning that such an agreement would be of no assistance to the American industry. It afforded us no time to expand and develop facilities to meet the progress made by the Swiss in the production of civilian watches throughout the war period when the Americans had to devote all their research, development, and engineering facilities to war work. What have been the results of the agreement? (1) Some 8,425,000 watches were directly imported into the country during 1946. This was almost three-quarters of a million more than the agreed-to export limitation. (2) Some 1,185,000 watches were indirectly imported during 1946. Together, the exact figures total 9,654,931, according to the Department of Commerce. This total exceeded the 1945 total by over a quarter of a million. (3) The ink was hardly dry on the exchange of notes before the Swiss advised the American industry that they would no longer sell it machinery, not even that then on order, but that the machinery would have to be leased, if it was to be obtained at all. Some of the provisions of the lease are even contrary to our laws. We protested this situation immediately, and the State Department undertook to do something about it. Last month, after almost a year had elapsed, by letter from Mr. Winthrop Brown, Chief of the Division of Commercial Policy, the State Department acknowledged its inability to do anything for us. By December last it was obvious that the foregoing was to be the result of the April exchange of notes. Accordingly, on December 9 we addressed a letter to the State Department asking it to consider negotiating an extension of the arrangement, but on a more realistic basis. On December 27 Mr. Clayton wrote us that the Department was not disposed to ask for an extension of any kind. The CHAIRMAN. What do you mean by that, Mr. Potter? Mr. POTTER. We had asked for a review of the treaty with the idea of getting an extension of the agreement they had last year. He refused to do that. If quotas were out as a means of assisting the industry in reestablishing itself in the market, we felt that, at the least, consideration should be given to restoration of the 1930 tariff rates by cancellation of the trade agreement. Although it was recognized that this would not necessarily limit the volume of watches imported into the country in the future, we felt that it would more nearly equalize the difference in cost of production here and abroad, and afford the American industry a more nearly equal opportunity in the domestic market. In that connection it should be remembered that the tariff on watches is a schedule of specific duties and that, as the invoice values of the Swiss importations have increased, the protection afforded the American industry has been reduced even below that which was contemplated by the trade-agreement adjustments. Therefore, on March 20 of this year, we wrote Mr. Clayton suggesting this possibility. A copy of our letter is attached to this statement. Last week we received the State Department's reply. A copy of it is attached. We have again been turned down. The gist of the reply this time is that the Swiss have lived up to the letter as well as the spirit of the April 1946 exchange of notes, except possibly with respect to the machinery provisions. And in that connection the Department feels that, in offering to lease machinery to us, the Swiss have lived up to the letter of the agreement, despite the fact that we had always previously been able to buy it. We have also attached a copy of Mr. Brown's letter of March 14 admitting the Department's inability to do anything about the machinery situation, so that you can judge the merits of that conclusion for yourselves. A brief excerpt from the Sixtieth Report of the Central Committee of the Chamber of Swiss Horology, released in June of 1936, very frankly reveals the Swiss attitude in this connection. It is as follows: Switzerland has no intention of selling horological machines. She intends to rent them under set conditions which conform to the aim of our general horological policy. She will then be able to exert a certain control over foreign watch industries. Gentlemen, please read that once again. I would like everyone to read it, because that is an expression of their attitude. Is this the expression of a reciprocal attitude? And yet, this country puts no obstacles in the way of the purchase here of machine tools with which much of the Swiss horological machinery is made. Nor do we think it should. |