STATEMENT OF THE AMERICAN TEXTILE MANUFACTURERS INSTITUTE This statement is submitted by the American Textile Manufacturers Institute, Inc. (ATMI) on behalf of Its member firms operating 1n the textile mill products Industry (SIC 22). ATMI member firms account for more than eighty five percent of the domestic output of textile mill products. ATMI wishes to register its opposition to H.R. 3211. This Bill would amend the Tariff Schedule of the United States by repealing TSUSA item 807.00. TSUSA item 807.00 provides for duty free re-entry of U.S.-made components, thereby assuring that all U.S. products have equitable access to the our own market. It Is also a stimulus to exports and thus provides employment for U.S. workers. If 807.00 were repealed, many of these garments would be manufactured wholly overseas and U.S. jobs would be lost. The importance of 807.00 to export trade can be seen by the fact that off-shore assembly accounts for about three-fourths of total U.S. apparel exports. ATMI has had the opportunity on several occasions in the past year to comment, sometimes critically, on the impact of 807 trade on the domestic textile Industry. We have criticized the U.S. Customs Service,s decision allowing foreign-made fabric to be cut In the U.S. and thereby qualify for 807 benefits. Our industry feels that this is contrary to the intent of 807 to promote the use of U.S. semimanufactures. Also, the fact that 807 imports for some product groups is consistently higher than recorded U.S. exports begs the issue of the existence of fraud. While we support the use of Item 807.00, we also believe that Imports of all apparel products, however entered, should be subject to restraint when these imports disrupt domestic markets. ATMI is concerned about the administration of this program, but TSUS item 807.00 should not be repealed. We agree with its intent to promote U.S. exports and save American jobs. Therefore, ATMI stands in opposition to H.R. 3211. 4545 W Brown Deer Road, PO. Box 23099 JmLI Milwaukee, Wl 53223-0099(414)355-0400 President and Chief Executive Officer Mr. Robert J. Leonard November 30, 1987 Chief Counsel Committee on Ways and Means U.S. House of Representatives Room 1102 Longworth House Office Building Washington, D.C. 20515 Dear Mr. Leonard: It is our understanding that there has been a recent proposal by Representative John La Face of New York to repeal tariff item 807.00. Our firm strongly opposes any such action and fears such a move could place our Company at a competitive disadvantage with both loss of revenue and jobs. Badger Meter is a leading marketer and manufacturer of products using flow measurement technology. Our firm has operated under item 807 since the early 1970's. The intent was to hold rapidly rising costs at the competitive level of both foreign and domestic manufacturers. In the late 1970's. the Company undertook a move to increase its domestic production capacity. To take advantage of the item 807 benefits, a new injection molding facility was constructed in Rio Rico, Arizona. This facility combined with a twin plant in Nogales Sonora has enabled our Company to keep its costs at about the same level as our major competitors. The Company has been able to retain its market share at about the same level over the lfist 20 years. " The Company currently employes approximately 750 workers in the U.S. The greatest numbers are concentrated.in Wisconsin (home office), Oklahoma and Arizona. The product cost is composed of approximately 50Z purchased material and 50% conversion cost. Almost all purchased components are of U.S. origin. Major components are brass castings, raw plastics, and many specialty parts. Suppliers are concentrated in Wisconsin and Oklahoma but components come from almost every part of the U.S. The benefits provided to 807 workers are those mandated by Mexican law. Some additional fringe benefits such as a subsidized cafeteria, Christmas party, and other incidental benefits that are provided at a nominal cost to the Company. » It is very difficult to estimate the impact the repeal of tariff item 807.00 might have on our Company. Our principal competition has greater production integration, primarily foundries, which are too expensive for a smaller firm to operate. This situation puts our firm at a cost disadvantage. The utilization of tariff item 807 has enabled our firm to remain cost effective. In excess of 50% of our business is into an Inelastic market. There is excess production capacity and price is the major factor in selecting the vendor. Repeal of item 807 would result in increased product cost with little hope of recovery through selling price increases. It Is most probable that staff reductions of U.S. workers would result. Our firm believes that tariff item 807 is a significant benefit to the U.S. economy. We oppose repeal of this tariff item. Sincerely, BADGER METER, INC. / 1/ James L. Forbes BECKMAN INDUSTRIAL CORPORATION UNITED STATES INTERNATIONAL TRADE COMMISSION Mr. Chairman and Members of the Commission: Thank you for the opportunity to communicate our experience Beckman Industrial Corporation is a high-tech company, with From the outset, our production facilities have been aligned For ten years, we have used TSUS Item 807.00. Our U.S.-Mexico border plant is located 200 miles from Fullerton. We do assembly work on standard products for trimming potentiometers and precision component product lines. The plant was opened about five years ago, after the unfortunate deterioration of the business environment in El Salvador. Parts in the assembly line are 95 percent U.S. origin, with most manufacturing and engineering support coming from the Fullerton plant. Only labor classified at the lower end of technical complexity is performed by foreign workers. The relatively high productivity and labor cost enable us to maintain reasonable margins and market share on standard products. TSUS Item 807.00 has complemented the factor advantage by protecting American-made parts in our own market and simultaneously enhancing the!- r ~--r-. competitiveness of our products in the world markets. Repeal of Item 807.00 would have a deleterious impact on Beckman Industrial Corporation, as an American multinational TO: House Commit too on Utayo and Moans FROM: Citizens Commit too for Border Labor (El Paso, Texas) Statement in Support of H. R. 32ii The Citizens Committee for Border Labor is a voluntary aroup of El Pasoans who support the labor, civil and human rights of working people in this city as well as in our sister city, Juarez, (Chihuahua) Mexico. While we are concerned about the effects of TSUS Item 807.00-assisted offshore production on workers throughout the U.S. and the world, we are limiti ng our comments in support of HR 3211 to describing the negative effects of the Border Industrialization Program to our metropolitan community. With 300,000 workers currently employed in l,0O0 maquiladoras, Mexico has become the largest assembler of U.S. components processed abroad and re-exported to the U. S. Mexico far outdistances Singapore, Korea and Taiwan in the use of TSUS Item 807.00, and Mexico's Colegio de la Frontera estimates that by the year 2000, the maquiladoras will employ between one and three million employees, with value added of about S10 billion annually. About two—thirds of maquiladoras are totally or majority U.S. owned; and those dominated by U.S. capital account for 80 percent of employment and 85 percent of domestic value added for reexport. This is the bright side of the picture that the maquiladora boosters and the border media' s business pages push, but there is an ugly side to the industry, a side which disturbs us and which is magnified here in El Paso; and in Juarez, where more people work in the maquiladoras than in any other Mexican city. The biggest stain on the maquiladora industry is created by why the typical U.S. company chooses to go "offshore" to Mexico. While investors prefer to use the euphemism "to stay competitive", the basis of that competitiveness is of course, cheap, cheap labor. According to John H. Christman. Director of International Business Development for American Industrial Parks, Inc. in Chihuahua and former head of the American Chamber of Commerce in Mexico City, in l967 the savings to a U.S. company moving part of its operations to a maquiladora was S3,000 per employee per year. By i985, the savings per employee had climbed to $l5,000 a year. But these figures only cover the cost of hourly wages. To calculate the total savings, we can take a hypothetical company paying i00 U.S. assembly workers an hourly wage of $8.00 apiece. If that company had moved its assembly operations to Mexico in l985, then figured out its labor costs; after factoring in fringe benefits, overhead, and even the extra cost of freight and duty payments, the company would still save a total of S4l,700 per year per worker, or more than S4 million per year. Even compared with the benefits of the Third World in general, Mexico is particularly attractive to U.S. businesses because it is one of the few offshore locations where assembly wages as a percentage of U.S. wages have actually declined during the past decade. In addition to low wages, Mexico offers other inducements, like tax breaks, special treatment to American owners and outright subsidies. State taxes vary and tend to be very low, since each state on the border competes with the others. Sonora, for example, offers exemption of i00 percent for the first l0 yars and 50 percent for the next i0. And any attempts by the Mexican government to boost corporate taxes have been met with organized resistance of the U.S maquiladoras through pressure groups such |