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producer against the independent manufacture of copies by any other book manufacturer including all American book manufacturers. Normally, only a single mannfacturer is chosen to manufacture all of the copies for the national market,

Accordingly, to discuss the manufacturing clause of our copyright law as a restriction upon international free trade is anomalous. Trade in books that are subject to a copyright monopoly cannot be free trade in any real sense, either domestic or international. All stages of the production and sale of such books are (ivered by the copyright umbrella. The manufacturing clause is, in reality, a limitation on copyright that simply requires that the benefits of this monopoly not be utilized in such a way as to give foreign concerns and foreign workers a monopoly to the exclusion of American book manufacturing firms and graphic artisans. This limitation derives major economic significance from the fact that not foreign concerns, enjoying production costs far below the costs experienced h their American counterparts, have a very distinct competitive advantage. However, it is not the competitive advantage in and of itself which gives rise to the need for the manufacturing clause, it is the copyright monopoly.

The Congress long ago decided that a limitation, i.e. the manufacturing clause, prohibiting, under certain circumstances, the extension of the copyright monopoly to foreign book manufacturers is a reasonable limitation upon copyright. This linitation has been steadily narrowed through the amendment process, and the bill that is before the Senate today would apply the manufacturing require. ment only to copies above 2,000 of copyright works that are non-dramatic literary works in the English language. The new clause would not apply to works written by foreign or expatriate American authors; nor would it apply to musical works, dramatic works, works in a language or languages other than English, or works tbat were not copyrighted or are no longer protected by copyright. Neither would it apply to works printed in small (i.e., under 2,000 copies) quantities. In short, all types of works with respect to which American printers cannot legitimately claim the right, and need, to be brought under the copyright umbrella, are ex. cluded from the clause. It is submitted that this limitation is eminently reasonable and is essential to prevent great harm to American book manufacturing by producers in a large number of low wage foreign countries.

It is precisely because no such injury would result from extension of the copy. right monopoly to Canadian book manufacturers that all segments of the American industry have been willing to support the exclusion of Canada from the provisions of the manufacturing clause. The wages of Canadian graphic artisans and the overall costs experienced by the Canadian book manufacturers are on a par with those of American book manufacturing concerns. It must be recognized that there is an enormous imbalance in the trade in printed matter between the United States and Canada and that the United States and Canada in reality constitute a single market for literary materials. Accordingly, the objective seems to us to be crystal clear and unquestionably desirable. The only remaining question is whether the United States can accomplish this purpose without violating its other international obligations. In our view, the Department's letter itself impliedly admits that this goal can be accomplished.

The State Department's opposition, as indicated in its September 19 letter, is ha sed upon an adherence to the most-fa vored-nation ideal that is so rigid and slavish that it poses a challenge to the leadership of the Senate in the field of foreign policy. The Department asserts that the exclusion of Canada from the manufacturing clause would violate the "spirit" of the most-favored-nation requirement found in Article I of the GATT. We read this assertion as a clear admission by the Department that exclusion of Canada from the requirements of the manufacturing clause would not constitute a violation of the actual requirements of the most-favored-nation article. One is moved to inquire why the Department would oppose a move that has the backing of all affected interests on both sides of the border and that does not violate the letter of this country's GATT obligations.

It is perhaps understandable that the Department of State has focused its attention on one narrow segment of one issue involved in this problem, i.e., its possible bearing on our international trade policies. The Committee's consideration must obviously be far broader as we have attempted to point out. Vital in. terests of American book manufacturers, graphic arts workers, our own commerce and trade, economic relations between the United States and Canada and common fairness to all involved interests must be weighed in the balance. In onr view, the strength of these factors far outweighs the limited and dubious technical views expressed by the Department in its letter.

In conclusion, all parties on both sides of the Canada United States border are in favor of excluding Canada from the provisions of the manufacturing clause. To do so would be of substantial benefit to Canada and would in no way impose any new or additional restrictions on U.S. trade with any other country. Moreover, since the clause is a unique copyright provision, the United States' existing international obligations respecting free trade are inapplicable. It has specifically been demonstrated, and not refuted by the Department of State, that the proposed action would not constitute a violation of Article I, the most-favored-nation provision, of GATT. Accordingly, it is quite plain that there is no real impediment to excluding Canada from the manufacturing clause, and we urge that this be done.

In the preparation of these views, I have consulted with all immediately affected American interests and they concur in all views expressed. Very truly yours,

JAMES H, FRENCH.

TECHNICAL MEMORANDUM ON EFFECT OF EXISTING U.S. INTERNATIONAL AGREEMENTS ON PROPOSED EXCEPTION OF CANADA FROM THE MANUFACTURING CLAUSE OF THE COPYRIGHT LAW

(In response to a letter from the Department of State to the Senate Subcommittee on Patents, Trademarks, and Copyrights, dated September 19, 1967)

1. Paragraphs 2 and 5 of the State Department's letter state that an exception for Canada would violate many of our bilateral commercial treaties, e.g., our Friendship, Commerce and Navigation Treaties with Germany and Japan. The State Department citations to various paragraphs in the two treaties omit reference to Article XXIV, paragraph 4, in the German Treaty and Article XXI, paragraph 4, in the Japanese treaty which provide as follows: "The provisions of the present Treaty relating to the treatment of goods shall not preclude action by either Party which is required or permitted by the General Agreement on Tariffs and Trade during such time as such Party is a contracting party to the General Agreement. Similarly, the most-favored-nations provisions of the present Treaty shall not apply to special advantages accorded by virtue of the aforesaid Agreement." Thus, the commercial treaties are not a separate reason for opposing a Canadian exception. Rather, the question turns on whether or not such an exception would be precluded by the GATT.

2. We are pleased to note that paragraph 3 of the Department's letter concedes that, as claimed by Mr. French in his testimony, Article XI of the GATT would not apply because of the Protocol of Provisional Application.

3. It is stated in paragraph 3 that a special exception for Canada "would create a conflict with the spirit of the most-favored-nation requirement in Article I." This vague language seems to be a confession that after more than five months the Department of State cannot find any specific provision in the GATT which clearly bars an exception for Canada. The GATT is a highly technical document. We do not advocate action by the Congress contrary to the specific provisions of the GATT. But we do not believe that the will of Congress-if it he such-to take account of the special relationship between Canada and the United States in the exchange of printed matter by making a special exception for Canada should be frustrated by vague reference to the "spirit of the mostfavored-nations requirement."

Richard C. Snyder's book “The Most Favored-Nations Clause" (Columbia University, 1918) is authority for a strict interpretation of complex most-favorednations clauses such as Article I of the GATT. Snyder says at page 58:

"By 'complex is meant, therefore, clauses which define most-favored-nations treatment in clear detail. This does not necessarily mean, however, that complex clauses are wider in scope than simple clauses; ordinarily the reverse is true."

(Incidentally, at page 71 Snyder gives as an example of his detailed, complex most-favorel-nations clause Article XI of the old U.S.-Finland treaty which refers, as does the GATT, to "all rules and formalities in connection with importition or exportation.")

4. Paragraph 3 also states that an exception for Canada would "In all likeli. hood" conflict with the words of Article I calling for most-favored-nation treat. ment "With respect to all rules and formalities in connection with importation and exportation". It is hard to take this argument seriously. The State Department apparently was unable to fit an exception for Canada into any of the four categories listed in Article I, especially since no customs duties or charges of any kind are involved. There is no definition of "rules and formalities" in the GATT, but the entire context seems to be that they refer to uniform requirements for customs administration in connection with importation and exportation.

On March 24, 1948, the State Department issued “A Guide to the Study of the Havana (harter for an International Trade Organization" (Commercial Policy Series 114). Article 16 of the Havana Charter is the same as Article I of the GATT. In referring to Article 16 of the Havana Charter, the State Department explained at page 3:

In this article each member agrees to apply, in its import and export trade with every other member, the same customs duties and the same laws and regulations concerning customhouse procedures generally."

In exception for Canada as part of a general revision of the Copyright Law (S. 507) cannot be considered a rule or formality in connection with importation Oreportation.

5. The State Department also claims that an exemption for Canada would create a new contlict with the non-discrimination requirement in Article XIII, fragraph 1. However, this paragraph refers only to non-discriminatory administration of quotas or other restrictions which come within one of the three ex(option Article XI, paragraph 2, Article XII, and Article XVIII, Section B. It is not a blanket prohibition against any restrictions which are not equally ape plicable to all countries. Strong support for our position comes from a number of sources :

A. The State Department prepared a document entitled "General Agreement on Tariffs and Trade, Present Rules and Proposed Revisions." This is contained in the hearings of the House Ways and Means Committee on H.R. 5550, March 1:56. The following summary of the purpose of Article XIII is contained at page

*This Article requires a contracting party imposing quantitative restrictions on imports under one of the exceptions to apply them in a non-discriminatory manner."

B. The State Department, in the Guide to the Study of the Havana Charter, referred to above, stated at page 5:

"Article 22 (the same as GATT Article XIII), as indicated by its title, likewise deals with the same general subject as does Article 16 (GATT Article I). Under certain circumstances, a member may be permitted to use quantitative restrictions. However, this Article insures that such restrictions as are permitted will be applied equitably to give fair treatment to exporters situated in all other member countries. It prescribes a general rule to this effect and sets forth a number of requirements to give the rule precision and enable it to be enforced."

('. In the State Department publication "Preliminary Proposals for an International Trade Organization" (Commercial Policy Series 99), the following is stated at page 9 with respect to administration of quantitative restrictions :

*One of the provisions agreed to by the (preparatory] Committee is a general rule for non-discriminatory administration of such restrictions as are permitted under the exceptions described above."

D. William Adams Brown, Jr., at page 257 of "The United States and the Restoration of World Trade" similarly refers, under the heading “Quantitative Restrictions," to "The non-discriminatory application of permitted restrictions."

It follows that since the manufacturing clause is not a restriction authorized by any of the three exceptions, Article XIII does not apply to it. This is actually the position taken by Mr. French in his testimony to the Senate Subcommittee. with the exception that he did not specifically mention the possibility of the other two exceptions. The result is the same.

In addition, it should be noted that the manufacturing clause is not listed among the all-inclusive “Quantitative Restrictions and Tariff Quotas on U.S. Imports in Force on November 10, 1965" published by the L.S. Tariff Commission. Alv), the whole context of Article XIII, which refers to allocation of quotas a inong supplying countries, makes it clear that the situation dealt with has no relationship at all to administration of the manufacturing clause of the copyright lats,

6. It is stated in paragraph 8 of the State Department's letter that it would not be "feasible" to secure a waiver, although it is "in theory" possible for the U.S. to seek one. We cannot see why this should be so. If there really is a strong concern that the GATT may be applicable, the logical alternatives would appear to be either consult with the Secretariat and/or other countries, or seek a waiver such as for the Canadian auto parts agreement. In the latter case, a waiver was granted even where it was entirely clear that the provisions of GATT applied, since there were substantial duties on auto parts and discriminatory production quotas.

As of February, 1966, 14 waivers had been granted under paragraph 5 of irti. cle XXV of the GATT, including two to the United States.

The sole substantive reason given by the Department for its position in the present case is that to seek a waiver would conflict with the U.S. goal of maximizing international trade through application of the most-favored-nation principle. It is submitted that this reasoning is based upon a misconception of the role of the manufacturing clause as a limitation upon extension of the copyright monopoly to foreign printers. The Department has incorrectly viewed the Manufacturing Clause as a restriction on free trade, not as what it really is, a limitation on copyright.

THE PUBLISHERS ASSOCIATION,

London, January 3, 1968. Manufacturing Clause Mr. R. W. FRASE, American Book Publishers Council, Inc., Washington, D.O.

DEAR BOB: It seems very unlikely that I shall be able to come to Canada this month, but I have consulted the Officers of my Association and also Sir Stanley Unwin, and we are all agreed that we should not wish to raise any objection to the exemption of Canada from the U.S. Manufacturing provisions. I hope this is official enough for you. Yours ever,

Rox. R. E. BARKER, Secretary.

THE PUBLISHERS ASSOCIATION,

London, May 6, 1975. Manufacturing Provisions Mr. ROBERT W. FRASE, Washington, D.C.

DEAR BOB: This is to confirm that my Association has and would not have any objection to book importations from Canada being exempted from the manufacturing provisions currently contained in Section 16 of the present U.S. Copyright Law, due to be confirmed by Section 601 of the Copyright Revision Bill now before Congress.

While I have not been able to find my copy of the letter I know I wrote to you about this sometime early in 1968, when you were with the American Book Publishers Council, our view now, as it was then, is that the manufacturing provisions of U.S. copyright legislation are out of date, providing a form of protection which has long ceased to be necessary (if it ever was), and that, in consequence, anyone who can be exempted from these provisions should be. Because of the intimate relation between printers in the USA and in Canada, there seems to us every reason for making an exception in respect of Canada, until such time as the manufacturing provisions can be done away with altogether. In the meantime, some of our own members might benefit from this exception because, of course, many of them are, like many C.S. publishers, Canadian publishers in their own right.

To give you the assurance I think you want : we should certainly not object to any exemption made in Canada's favour in this respect. Yours ever,

(Dictated but not signed by) Mr. RONALD E. BARKER.

TESTIMONY OF GERARD VAN ARKEL, GENERAL COUNSEL,

INTERNATIONAL TYPOGRAPHICAL UNION

Mr. VAN ARKEL. Thank you, Mr. Chairman. I want to say it was with considerable surprise that I learned that it was over 10 years ago

that I last appeared before this committee on this same topic; namely, lip fretention of the manufacturing clause. Vr. Strackinin has stated Le patients of all of the printing trade unions on this issue. I read ! , trimony and statement before the committee 10 years ago. I foi no reason to make any significant changes or additions. There

". I have taken the liberty of resubmitting my testimony as my mat'1° pent for the committee here.

Llere was one matter that was not before the subcommittee when lintammared, and that is the exemption for Canada from the man

clause. We favor this exemption, but since it was not formuously before the committee. I have taken the liberty to submit a supplemental statement covering the reasons why we think this promption from the clause is a desirable change in the law. T!.

ak yon, Jr. (hairman. Mr. KASTESIFIER. Thank you very much. Our next witness is Jack Saniler, representing Book Janufacturers Institute.

TESTIMONY OF JACK A. SANDLER, REPRESENTING THE BOOK MANUFACTURERS INSTITUTE, ACCOMPANIED BY STEPHEN F. OWEN, JR., COUNSEL FOR THE BOOK MANUFACTURERS INSTI. TCTE, AND DOUGLAS E HORNER, VICE PRESIDENT OF THE INSTITUTE

Mr. Owen, Låt me introduce myself. I am Stephen (wen, counce/ for the Book Janufaturers Institute, and this is Douglas E. llorner,

in t.ex Tfutile vie president of the institute, and our water is J. A Sandler,

Mr. S ur. It looks like I am the new member to testify here, 'rillis is my first appearance.

Ms name is Jack Sandler, and I am group vice president of sales Irlap bwk dinsion of W. A. Krueger ('o., New Berlin, Ilin. Today I a' paring on behalf of the Book Janufactun'r Institute

bil, lowate in Ridgeld. ('onn. I am prouently serving asahaman .(tipo proterant rodations committee of BMI,

1. PMI is a trade a contion representing approximately N) per13?tt all colupanies in the l'nited States engaged in the manufuture so kwwok te which includes the preprene preparation, puntiring and

lof boks Tumand like to thank the committee for allowing me to test fi here lum, a on all of the member of BMI.

l' !'p 0n! -**. I wish to emphasize the general support of the VI !, IIR :"air the need for a won and modernization of the 15! at law in the limited States With the n) mind, let uw onder an important prosinjon of the buil

hte BMI Nrongly supports and which has great importance to 1... pronome future of the book manufuturing industry in this ur..try. N on , the manufacturing claus:

Por 11. As a rule of legatise compromise, there has lwen a *.arufnitunng clause" in some form under our copright law, 'Iha

nt manufaturing claim is contained in motion 16 of titlo li of tiu I nited States Cowle and is supplemented bs sportion 107.

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