glass for sheet glass--a substitution which has continued to exert marked competitive pressure on the domestic sheet glass industry.

In addition, the substantial price increases instituted by the domestic producers of sheet glass made the U.S. market especially attractive to foreign sellers, and encouraged efforts by foreign producers to sell window glass and other sheet glass in the United States.

In 1968 and the first half of 1969, the demand for sheet glass in the United States rebounded. U.S. residential construction in 1968 rose 15 percent, and motor vehicle output jumped by nearly 20 percent. U.S. U.S. consumption of sheet glass in 1968 almost reached the record level of 1964; consumption, moreover, was 10 percent larger in the first half of 1969 than in the corresponding period of 1968. The recovery in demand stimulated domestic output, and profits in the sheet glass industry improved. U.S. production increased--slowly in 1968 and sharply in the first half of 1969. Prices were increased markedly, the BLS price index for window glass was 138 in mid-1969, compared with 120 in 1967. The number of man-hours worked in the production of sheet glass declined slightly in 1968, as average annual output per man-hour in the industry jumped by nearly 10 percent. Aggregate operating profits in 1968 were double those in 1967.

New technological developments in the drawing of sheet glass recently announced by one of the major producers may greatly enhance the competitiveness of sheet glass in flat glass markets. If the

claims for the new process are borne out in the market place, sheet glass would successfully encroach on markets for high-quality glass of one-eighth inch and thinner now supplied largely by plate and float glass. A significant expansion of domestic sheet glass output could follow.

Under current conditions, then, the effect of the reduction in the import duties on window glass would appear to be slight. The duty reduction by itself is not large enough to cause any adjustment in the pricing policies of domestic producers, other things being equal. The domestic sheet glass industry should thus adjust with little difficulty to the slightly greater competitive pressures that would result from the duty change.

**

The requirements of the statute are technically satisfied by an examination based on a ceteris paribus assumption, such as the foregoing, of the effect on the industry of a termination of increased rates of duty. In the usual case the assumption that everything else remains constant is essential to reasoned analysis as well as to satisfaction of the statute, which is concerned solely with the economic effect of a duty change and not with the effects of any other probable developments occurring simultaneously but independently.

Although the ceteris paribus assumption is a methodological necessity imposed by the statute, there are presently imminent certain developments which, if sustained, will affect directly the sheet glass industry and which I believe should be made explicit in order that the probable economic effects of the duty reduction by itself may be considered in the context of the emerging economic scene. These imminent developments are especially relevant because, like the duty reduction (should it occur), they flow from public policy undertaken in the national interest despite the fact that their effect will fall most heavily on certain individual sectors of the economy.

Specifically, fiscal and monetary measures undertaken to counter inflationary price increases are falling most heavily on the construc1/

tion industry and especially on residential housing. The emerging decline in housing starts is likely to continue as long as antiinflationary policies keep mortgage money scarce. In addition, high taxes and interest rates appear to be depressing purchases of auto2/

mobiles.

Declining demand from the housing and automobile industries

for sheet glass would cause competition among domestic producers to become more intense. By itself, and assuming that the degree and

For the 6-month period ending in October 1969, home construction was 1 percent below the rate for the previous 6 months and 4 percent below the average for the comparable period in 1968.

2/ Production schedules for the fourth quarter of 1969 reflect a 12 percent drop below that of the similar period in 1968.

duration of the decline in demand are moderate, it would be likely to result in a smaller volume of sales, with no depressing effect on prices. If at the same time import duties on window glass were to be reduced by 8 percent of export value, a further intensification of competitive pressures from imports could exert a downward pressure on prices. Because the demand for window glass is price inelastic, lower prices would be likely to result in a further reduction of revenues from sales of window glass. I would note that such a price decline, even if relatively small, would aid anti-inflationary measures, would also be primarily a result of such measures, but would cause hardship to certain producers in the sheet glass industry.

Statement of Commissioner Leonard,
Concurred in by Commissioners
Clubb and Newsom

In this investigation conducted under Section 351(d)(3) of the Trade Expansion Act of 1962, the Tariff Commission is to advise the President of its judgment as to the probable economic effect on the domestic sheet glass industry of the termination on December 31, 1969, of the modified escape-action rates of duty on certain window glass.

1/76 Stat. 900, P.L. 87-794.

Window glass is one of three categories of sheet glass manufactured in the United States on common production facilities in plants devoted almost wholly to the manufacture of sheet glass. Although

the modified escape-action rates apply only to certain window

1/

glass, the impact of their removal must necessarily be judged by

the effect on the sheet glass industry.

Sheet glass is produced in the United States by 6 firms at 13 establishments.

Twelve of the establishments are engaged exclusively, or almost so, in the manufacture of sheet glass, and window glass is produced at each. Indeed, window glass accounted in 1968 for threefourths or more of the output of sheet glass in 8 of the 12 estabThe effect of the removal of the modified escape-action

lishments.

rates will bear primarily on these 8 establishments.

Since the statute calls for a judgment as to what is likely to occur in the future, it may be helpful to observe what occurred in the past in the sheet glass industry, particularly with reference

to window glass.

Effects of the 1967 actions

The January 11, 1967 removal of the escape-action rates on heavy sheet glass reduced the duties applicable to such glass by

1/ For the purpose of this statement, glass weighing over 16 ounces but not over 28 ounces per square foot is referred to as window glass. The modified escape-action rates of duty are applicable to window glass measuring not over 100 united inches. Separate data on the domestic production of window glass measuring over 100 united inches are not available; however, such glass represents a small part of the domestic output of window glass. In 1968 imports of window glass measuring over 100 united inches amounted to 7 percent of the total window glass imported in that year.