fish processors in Boston derive a year-round average of 25% of the fish which they process from Canada. Several of the Boston processors stated that they would have gone out of business had it not been for the steady supply of Canadian fish which came into the United States during the decline of the New England fishing industry. Neither the United States nor any foreign country could supply an appreciable portion of the groundfish imported from Canada at the present time. As stated earlier, U.S. production of the fish covered by the investigation has not been great and the U.S. industry is burdened by severe legal and practical limitations on its catch. Foreign sources of supply are also limited and are unlikely to increase markedly in the next several years. For the above reasons, ASDA urges no action on the resolution to override the Treasury decision. Yet we do recognize that the domestic producer experiences severe problems due to market fluctuation. Certainly the system of quotas imposed for conservation reasons is creating a situation almost impossible to live with. We urge the administration to work more closely with the region council to develop a better means of conservation without complete stifling the ability of fishermen to earn a living. On a broader scale, we believe there is room for cooperative activity on a joint industry-Government basis between the United States and Canada in the marketing area. Some way must exist to avoid the periodic gluts in the fresh market. Like wise cooperation in mutually developing the European and African markets for presently underutilized species should be possible. We would suggest that Government address this matter since industry cannot do it alone. There is a need for additional processing facilities in New England. We understand that on certain days capacity to handle the fish may not be present. We have been told that environmental considerations have stalled efforts to construct new plants in Gloucester, but that now this hurdle seems to have been overcome and that as many as four new operations may be ready within a year. Finally, we wish to point out the need for continuous consumer education to maintain a strong demand for fish. Currently, the only major continuous consumer education for groundfish is that which is sponsored and paid for by the nations who sell fish into the United States. This program benefits the domestic as well as the overseas producers. In summary, Mr. Chairman, ASDA believes that Treasury decision to waive countervail was the correct one and should be upheld. We ask the committee to drop its consideration of the subject resolution. Senator HATHAWAY. Our final witnesses this morning are Mr. Norman Olsen, executive director of the Maine Fisherman's Cooperative, and Mr. Dieter W. Schnauck, comptroller of Stinson Canning Co. Mr. SCHNAUCK. Mr. Chairman, Mr. Olsen granted me the right to start first. Senator HATHAWAY. All right. STATEMENT OF DIETER W. SCHNAUCK, COMPTROLLER, STINSON CANNING CO. Mr. SCHNAUCK. I appreciate very much that we as a processor in the State of Maine have an opportunity to address you. I have prepared a statement which you have for the record. Senator HATHAWAY. Your entire statement will be placed in the record, and if you can summarize, it would be helpful. Mr. SCHNAUCK. There are a few points I think I would just like to bring up. Mr. Berger just made a point that I have heard many times before. I think that we want to look at something that addresses itself to the consumer prices. To talk about Mrs. Housewife, how far is she going to go and how much is she willing to pay for fish, it is not the imported prices that are regulating in the marketplace, it is the domestic prices that regulates the price. And if the imported goods coming into the United States are, in fact, smaller, Mrs. Housewife is not going to benefit, and that is just a matter of fact. The other thing about the vessel subsidy program, we have looked at it recently in a statement that I previously made, and also in this statement I am outlining, that our firm has committed itself to building a large offshore vessel which will be somewhat available in 1979, probably the latter part of 1979, and it turned out that to go into the capital market directly rather than through a Federal subsidy program turned out cheaper for us. For us that may not be true for everyone. So, I think as far as grants and subsidies are concerned, that the Canadians give, and then we will try to measure it against that program under which the vessel construction can take place, they do not even measure up in any form at all, as far as I understand it. A couple of other points that I have made in my outline is that I am also concerned about the indirect subsidies. It is not the direct subsidies that concern me a great deal, because when we look as a company into going and establishing ourselves in Canada, one for the resources that were more available than in the State of Maine-although we never did ultimately do that we discovered that the indirect subsidy provides a substantial amount of money for us and I have outlined in my statement that you have that this subsidy is substantial. It lasts for a long time, and it is quite beneficial and it gives you the edge on the marketplace. I know how to compete in the marketplace, because I am not afraid of it, but I do like to have an even fight. That is really what I am saying, because we are probably the single largest fish-producing company now in the State of Maine, the second largest in the North American area in so far as herring is concerned, and I think we are very much concerned about maintaining those jobs and employment and we are very much in favor of Senate Resolution 483 and support it wholeheartedly. Senator HATHAWAY. As I understand it from reading your entire testimony, you have some arguments to the effect that the Treasury's calculations of the subsidy, and I would suggest that you, along with the other witnesses, as I suggested earlier, meet with the Treasury and go over these item for item in the near future. I do not know whether you can stay down here today and do it, or whether you have a Washington representative who can do it for you, or we would be glad to have somebody from our staff do it for you if you have to go back to Maine, and if this is all the data you have, that would be fine; if you have additional data, I would be glad to get it, because I think it is important to resolve these differences because there are obviously quite a few. Mr. SCHNAUCK. I would be perfectly willing to do whatever is best, most suitable. Senator HATHAWAY. Thank you very much. Could you just point out to us some of the other problems that the fishermen have? Mr. SCHNAUCK. Some of the problems that we have run into—now, primarily we are in the canning industry and the groundfish industry 34-705 - 78 - 6 is sort of an outgrowth of the small availability of herring, and it seems to be more and more so, because we have not had basically any processing going on for a period between March 15 and June 15 because of a lack of suitable weather and suitable resource, and it starts again now that we have it, so we went into the ground fisheries, and there are substantial quotas. These quotas have been filled and are now being exceeded by a grant of the National Marine and Fisheries Service granting fishermen an opportunity to go and fish beyond, so we have a zero, or even a worse rebuild situation, so I do not know what will happen. But, in any event, the fisherman should have the opportunity in this country to compete evenly in the marketplace and not have to then on top of it have to worry about having to fight an uneven price that the Canadians-that appear to show-this is not maybe in direct response to Mr. Mundheim's statement, but when you look at the statements that were made in respect to the Canadian boundary negotiations, I mean, it does appear to a person on the outside that all of that importance that is measured to the 1 cent does not seem to be all that great. So whether or not we have that countervailing duty in fact right now is not going to make us any worse a friend than we are at this point. Senator HATHAWAY. You mean we hate each other already and we cannot hate each other Mr. SCHNAUCK. No, I did not say that, Mr. Chairman. Senator HATHAWAY. I know you did not. I am being facetious. I know the tensions are kind of great at the present time, but we are certainly still friends. [The prepared statement of Mr. Schnauck follows:] PREPARED STATEMENT OF DIETER W. SCHNAUCK, STINSON CANNING CO. Mr. Chairman, my name is Dieter W. Schnauck, an officer of Stinson Canning Company of Prospect Harbor, Maine. Before I address myself to the subject of countervailing duties and their effect on the U.S. Proscessor, I would liketo take a minute to inform the Committee who Stinson Canning Company is. We are in the 51st year of operation. We have five factories along the North Atlantic Maine Coast in Bath, Belfast, Prospect Harbor, Rockland and Southwest Harbor, with a total employment of 850, representing North America's second largest Herring producing company with revenues of approximately 20 million annually. The Company cans Sardines and Fish Steaks, Frozen Herring Fillets for the export market, and since 1978, processes a large variety of Groundfish. Stinson Canning Company is vertically integrated. It has the capacity to harvest its raw material with its two steel and seven wood-hulled vessels, to process the Herring and Groundfish. Stinson Canning Company produces its own cans and covers and transports its products to its own strategic warehouses from which common carriers distribute goods around the 50 states or exports its products in refrigerated ocean vessels in bulk to Western Europe. Presently, the Company has a multi-purpose 120-foot steel-hulled vessel on the drawing board for completion by the summer of 1979, with a harvesting capacity of approximately 450,000 pounds per trip. The total investment into the Company by its stockholders is approximately 10 million in 1977, enough to be concerned about its investment as well as the employment provided in communities where Stinson is one of the major employers. We oppose the action taken by the Treasury permitting Canadian goods to be imported into the United States without the consideration of countervailing duties and support Senate Resolution 483, June 13, 1978, a resolution to disap prove waiver of the countervailing duty on certain items of Government subsidized fish imported from Canada. Our Company, Mr. Chairman, has been since 1927, in the herring business and only in 1978, entered the field of groundfish and only in the last two months has really become involved in the marketing of product throughout the United States. We have encountered situations where not competition, but uneven price difference between our and the Canadian products, could not be overcome by increased efficiency or reduction of cost on our part, but only if we were to be subsidized by someone else, namely the U.S. Government or any one of its subdivisions or agencies. In 1975, Stinson Canning Company, through my initiative, went to Canada, communicated with legal and accounting people to determine whether or not it was feasible for us to establish a subsidiary, that could manufacture herring or other fish products and determine the extent of grants available from the Canadian Federal, as well as the Provincial Government. At that time, we were told that a primary development incentive of up to 20% of approved capital costs were offered to applicants establishing in a designated area through the Department of Regional Economic Expansion (DREE). In our case, this designated area was Nova Scotia. A secondary development incentive was offered with a maximum of (A) 5% of approved capital cost plus $5,000 for each job determined by the Minister to be created directly in the operation. The maximum primary development incentive available for any one project was $6,000,000. In our case, the combined total incentive grant was not to exceed the lesser of $30,000 for each job created or 1⁄2 the capital employed in the operation. Aside from these specifically mentioned, there are numerous programs that would come into play to help to provide the support that makes it possible for a Canadian manufacturer to be more advantageous in the program for the Advancement of Industrial Technology. The Enterprise Development Program will assume up to 50% of expenditures on approved development projects. In our case, it would have been for the development of dry-cooking Sardines before retorting. Secondly, under the Canadian Employee Training-On-The-Job Program, there are two existing possibilities of reimbursement. (1) 75% of eligible wages of trainees or : (2) 160% of approved wage costs for tax purposes These and other programs help to increase benefits provided by the Canadian Government and tip the scales toward unequal competition. Beyond the ones that I have addressed myself to, which specifically refer to Federal Grants and Programs, there are Provincial and Communal programs in our case, providing Real Estate, logistic support, road access to the facilities to be built and deferment of taxes for some 10 years. This requires personal negotiations as the Provinces are currently Tax Collector. Specifically-Mr. Chairman-We are looking at an area that has had high unemployment and it is only fair that these areas are supporting the industry; however, that makes for an uneven fight in the market. We are not advocating fear of competition, but equal opportunity to sell our goods in the market under equal conditions. I refer to a recent promise that appeared in the news that the Canadians have stopped, and will further stop, subsidizing of fishing boats by October, 1978, which really amounts only to a drop in a bucket because, by the Treasury's own statement, we are looking only at an impact of 1% or so. If we built our factory in 1976, which would have have been completed in 1977, and let me state of my own knowledge, that there have been factories established since then by U.S. owned, as well as Canadian owned interests in that Provincial area of New Brunswick, Nova Scotia. The benefits derived through not having to write off plant and equipment over long periods of time because of capital grants and favorable loans presents in itself a single largest benefit to any Corporation. To illustrate briefly how these figures impact a product price, I submit the following detail: (A) Factory for the production of Herring products as well as the processing of Groundfish with an overall construction cost of $4,000,000, compromises, in this case, 96% of capital investment in buildings, machinery and equipment and 4% in land improvements and certain other start-up expenses: Following the example, and assuming a total grant value not to exceed 70%, which is conservative, we would have been ahead by $251,300 per year. This does not consider any faster method of depreciation permitted under any of the classes according to the Income Tax Act of Canada. Taking the example one step further, we will find that an average capacity of 200,000 pounds of Groundfish per week for 30 weeks per year, aside from Herring, amounts to 6.000,000 pounds in the round, of which again an average of 1,830,000 pounds finished products would be produced. The subsidy then amounts to 13.7 cents per pound. It would, however, be totally incorrect to credit the whole amount against Groundfish, and I, therefore, submit, in fairness, that 10 cents represents at least an indirect subsidy. Again to only use the example, we are talking about a 10% subsidy. That, Mr. Chairman, is the point. We really are looking at an original subsidy situation, however, in the magnitude of a 13% rather than the 1% as suggested by the Treasury Department because other addtional subsidies not specifically mentioned (transportation, etc.) will raise the percentage. A promise, then, to end subsidies at any point during 1978, still is generating benefits as outlined above, for many years to come. I submit copy of the Fisheries Council of Canada Bulletin dated June, 1978, which speaks for itself on the same matter. In conclusion then, Mr. Chairman, I hope that these comments will help your decision to recommend to the full senate reinstatement of the countervailing duty in the better interest of the United States economy and to create a better socioeconomic environment for the fishermen and processors that provide the labor dollars and taxes that keep our people employed in an industry historically second rated over agriculture and other factions of the economic cycle. THE STRANGE CASE OF THE U.S. COUNTERVAILING DUTY ON CANADIAN No one really thought the United States countervail legislation was meant to apply to Canadian fishery products. After all Canada is and has been for generations one of the chief suppliers of frozen fish products to the huge U.S. market. But not the only one by any means-our products compete with those from the Scandinavian countries, Europe, South America, Japan, Korea and many others. Canada is also one of the biggest, if not the biggest, market for U.S. fishery exports-last year $101 million-shrimp, tuna, lobster but also ground fish-the subject of the countervail. Our tariffs are generally lower than U.S. ones on fish products. How could it happen? The U.S. has maintained legislation which permits anyone to file a petition to U.S. Treasury if they believe a bounty or grant (subsidy) is being paid to producers of a product which is exported to the U.S. In the case of products which have an important tariff (like groundfish fillets) it |