ZC ZC 31 COATESVILLE PA 3/26/33

PMS PRESIDENT JIMMY CARTER

THE WHITE HOUSE

WASHINGTON, D.C.

BT

DEAR MR. PRESIDENT:

STEELWORKERS HERE IN

WE ARE CONCERNED AND ANGRY.
COATESVILLE, PA., LIKE THOSE IN HUNDREDS OF OTHER
COMMUNITIES, NEED JOBS NOW. OUR PLANT LACKS MUCH-NEEDED
ORDERS FOR HEAVY-GAUGE PLATE STEELS OF THE KIND USED TO
MANUF AC TURE PRESSURE VESSELS. LUKENS' MAJOR FABRICATION
CUSTOMERS REPORT ENTIRE PLANTS I DLED, OR BARELY LIMPING
ALONG, BECAUSE THEY DO NOT HAVE PRESSURE VESSEL ORDERS.

YET, UNLESS YOU ACT PROMPTLY, GASIFIERS FOR THE NATION'S FIRST COMMERCIAL PLANT TO PRODUCE SYNTHETIC GAS FROM COAL WILL BE BUILT BY JAPANESE FABRICATORS USING JAPANESE STEEL PLATE.

THE AMERICAN NATURAL RESOURCES PROJECT AT BEULAH, N.D., WILL BE BUILT WITH DEPARTMENT OF ENERGY SUPPORT THROUGH GUARANTEED LOANS UNDER YOUR REC EN TLY -S I GNED SYNTHETIC FUELS ACT. THE GASIFIER DESIGNERS, AMERICAN LURGI, SOUGHT WORLD BIDDING ON THIS PROJECT DESPITE INTEREST ON A NUMBER OF AVAILABLE, WELL-QUALIFIED U.S. FABRICATORS. OF

IN ANNOUNCING THE ANR PROJECT, YOU POINTED OUT THAT
IT WAS THE FIRST TO BENEFIT FROM FUNDS THE GOVERNMENT WILL
BANK FROM THE WINDFALL OIL PROFITS TAX. WE CERTAINLY DIDN'T
EXPECT THAT THOSE TAXES FROM AMERICAN OIL COMPANIES WOULD BE
USED TO SUPPORT JAPANESE STEEL AND FABRICATION INDUSTRY JOBS
AT THE EXPENSE OF AMERICAN LABOR, PARTICULARLY DURING A
PERIOD OF HIGH UNEMPLOYMENT AND UNDER-UTILIZATION IN THE
INDUSTRI ES CONCERNED.

CHICAGO BRIDGE AND IRON, WHICH IS A VALUED LUKENS
CUSTOMER WAS THE LOWEST AMERICAN BIDDER FOR THE PRESSURE
VESSEL EQUIPMENT AT THE BEULAH PLANT. UNFORTUNATELY, EV EN
AFTER BI DDING WORK AT LESS THAN COST, CB&I LOST THE BID TO A
JAPANESE COMPETITOR. WE UNDERSTAND THAT A LETTER OF INTENT
HAS BEEN ISSUED FOR THE PURCHASE OF 14 GASIFIER VESSELS FROM
HITACHI LTD., IN JAPAN. WE BELIEVE THE SAVINGS REALIZED BY
THE FOREIGN PURCHASE WILL BE MORE THAN WIPED OUT BY THE NET
COST TO THE ECONOMY OF GOING OFFSHORE WITH THE JOB. IN AN
ANALYSIS OF THE BUY AMERICAN ACT (S.2313) BY THE LIBRARY OF
CONGRESS CONGRESSIONAL RES EARCH SERVICE, DATED FEBRUARY 23,
1973, AND ADDRESSED TO PENNSYLVANIA'S SENATOR JOHN H. HEINZ
III, IT WAS DEMONSTRATED THAT UNLESS THE FOREIGN PRICE IS AT
LEAST 50 PERCENT LESS THAN THE DOMESTIC PRICE, THERE IS, IN
FACT, A COST TO THE ECONOMY IN TERMS OF LOST CORPORATE
FEDERAL AND STATE TAXES, PURCHASING POWER WAGES AND
SALARI ES, INDIVIDUAL FEDERAL, STATE, LOCAL AND SALES TAXES,
AND SOCIAL SECURITY TAXES.

WE URGE THAT YOU DIRECT THE DOE TO INSIST UPON AN IMMEDIATE RECONSIDERATION OF THE PROPOSED FOREIGN VESSEL PURCHASE FOR THE BEULAH PLANT, AND FURTHER, TO REQUIRE THAT MAJOR CAPITAL EQUIPMENT FOR ALL FUTURE PROJECTS BUILT WI TH SYNFUEL PROGRAM LOAN GUARANTEES BE PURCHASED FROM AMERICAN SUPPLIERS.

RESPECTFULLY,

CHARLES A. CARLSON, JR.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER LUKENS STEEL CO. 335491 LUKENS COAT

Hon. CHARLES A. VANIK,

NATIONAL CATTLEMEN'S ASSOCIATION,
Denver, Colo., September 18, 1980.

Chairman, Subcommittee on Trade, Committee on Ways and Means, U.S. House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I am writing in regard to hearings before the Trade Subcommittee of the Committee on Ways and Means, September 18, 1980, which deal with trade between the United States and Japan.

You and your subcommittee are to be commended for conducting these hearings and for your continual review of the United States-Japanese trade situation.

The National Cattlemen's Association is constantly monitoring the beef trade with Japan. We also work very close with and are supportive of the U.S. Meat Export Federation. The U.S. Meat Export Federation has an office in Tokyo and is working diligently to promote high quality U.S. beef in Japan.

Recent trade negotiations on beef with Japan including the Strauss-Ushiba and "Tokyo Round" of the MTN agreements have been beneficial to the U.S. cattle industry. They are limited in their degree of access, but they have opened the door to new trade which was not before realized.

The NCA firmly believes that the potential for trade of high quality U.S. beef to Japan is tremendous and could contribute significantly to our balance of trade. The Japanese have honored their commitment to the United States on the agreed amount of access negotiated in the MTN up to this time.

Certain problems continue to exist in our efforts to export beef to Japan. The NCA and U.S. Meat Export Federation along with other interests are attempting to resolve these problems. Examples are: Plant certification requirements, purchase specifications from the Japanese, and product distribution in Japan.

The NCA will continue to work toward more access to the Japanese market for beef as well as seek solutions to better facilitate the movement of the product. We will continue to keep the Trade Subcommittee members and staff apprised of our efforts and will inform you of major difficulties we might encounter.

The United States-Japan Trade Report of September 5, 1980, does a good job of spelling out the basic problems with Japan in the agricultural area.

If the NCA can be of any assistance to the Trade Subcommittee or the Japanese trade issue, please feel free to call on us. Sincerely,

Congressman CHARLES A. Vanik,

SAM WASHBURN,

Chairman, Foreign Trade Committee.

TANNERS' COUNCIL OF AMERICA, INC.,
New York, N. Y., August 27, 1980.

Ways and Means Committee, Cannon House Office Building,
Washington, D.C.

DEAR CONGRESSMAN VANIK: Following is a statement I would like to submit, on behalf of the Tanners' Council of America, in support of H. Con. Res. 376, relative to Japan-U.S. trade.

There is probably no other sector of trade between the United States and Japan that is more influenced by Japanese Government policy than the trade in hides, leather, and leather products. Since the end of World War II, the Japanese have followed a policy of buying U.S. cattlehides and then isolating their tanning and some of their leather products industries from international competition by means of quotas and high tariffs.

According to the latest information we have, the Government of Japan continues to maintain quotas on six industrialized products. Five of these are on leather and leather products. The Tanners' Council, therefore, appreciates the concern expressed in the resolution for agricultural areas, specifically mentioning leather, "where Japanese trade barriers and business practices prevent or restrict the importation or sale of American goods."

The effects of the Japanese policy of importing only raw material and severely resisting imports of leather and manufactured leather products, has had an enormous impact not only on the balance of trade between the two countries, but upon the economic distribution of scarce resources and on employment possibilities in the United States. In addition, Japanese firms, hiding behind a protectionist barrier, are willing to pay noneconomic prices for raw materials, thus adding to inflationary forces in the sector.

In 1979, out of a total U.S. hide production of a little over 34 million, over 7 million hides went to Japan. These 7 million hides produce between $500 to $600 million worth of leather. U.S. tanners, however, were able to ship only $5 million worth of leather into this huge market. The low level of these shipments were in contravention of the Japan-U.S. agreement on leather which was estimated to allow movement of $30 to $40 million worth of leather per year.

Early in 1979, after almost 2 years of negotiation, the U.S. was able to conclude an agreement with the Government of Japan calling for an increase in the illegal Japanese quotas for U.S. leather imports. The Japanese at that time also agreed to facilitate the utilization of these quotas. So far, the Japanese have issued licenses and have gone through the motions of living up to the agreement. However, the statistics clearly prove otherwise. The Japanese have not lived up to that portion of the agreement that involves "facilitation of the utilization of the quotas or licenses." In all the testimony regarding this issue, the Japanese industry keeps insisting that they are noncompetitive with the U.S. industry. They use this argument to defend their need and right to protection. In effect, they claim that the free market should only operate when it is to their advantage. It should not be a factor when economic considerations are such that the Japanese are disadvantaged.

I am certain that, in spite of the fact that the leather sector holds a particular significance for the Japanese, the same basic philosophy pervades a major part of their trade policy. House Concurrent Resolution 376 is therefore of vital importance because there can be no progress on the issues involved in Japan-U.S. trade unless the Japanese make a clear and specific effort to dissolve the trade barriers that inhibit access to their markets by efficient industries and agricultural interests. The leather industry is a clear example of an industry where restrictive practices have, and continue, to hamper progress. These practices cannot be allowed to continue. Yours very truly,

EUGENE L. KILIK, President.

OFFICE OF THE UNITED STATES Trade REPRESENTATIVE,
Washington, D.C., December 23, 1980.

To House Committee on Ways and Means:

Please find enclosed the response to a question [See p. 25] addressed to Ambassador Hormats by Chairman Vanik during the August 26, 1980, hearing of the Trade Subcommittee.

Sincerely,

CALMAN J. COHEN, Director, Congressional Relations.

The U.S. trade deficit with Japan improved from $11.6 billion in 1978 to $8.7 billion in 1979. The question posed relative to this improvement in the U.S. trade balance with Japan, is whether or not a depreciation in the yen's exchange value vis-a-vis the dollar during 1979 contributed to this improvement. A yen depreciation could have possibly led to short run improvement in the U.S. trade balance with Japan by reducing the dollar price of goods imported from Japan and priced in yen. In the longer run, however, because of adjustments in the volume of trade, a yen depreciation would be expected to improve Japan's trade balance with the United States. The improvement in the U.S. merchandise trade balance with Japan in 1979 took place with a simultaneous depreciation of the yen vis-a-vis the dollar. The annual average value of the yen fell from 210 to the dollar in 1978 to 219 to the dollar in 1979, or by 4 percent. During 1979, however, the devaluation of the yen was sharper from 195 to the dollar on December 31, 1978, to 240 to the dollar on December 31, 1979, or by 19 percent.

It has not been found possible to easily calculate the immediate impact of yen depreciation on the improvement in the U.S. trade balance with Japan in 1979. While it does collect data permitting the calculation of changes in U.S. trade volume overall, the U.S. Government does not currently collect data permitting the estimation of changes in U.S. bilateral trade volumes with specific countries, in this case, Japan.

Without such information on the changes in U.S. trade volumes with Japan from 1978 to 1979, estimation of the pure price effects of yen devaluation on the bilateral trade balance are not feasible. Furthermore, a great deal of Japanese export products to the United States are priced in dollars rather than yen; hence, the depreciation of the yen for such products would not necessarily lead to an immediate reduction in the dollar cost of U.S. imports of such products from Japan.' For these reasons, we have not been able to distinguish between the role of longer term volume adjustments resulting especially from the dollar depreciation vis-a-vis the yen in 1977-1978 and the role of the shorter term price effects of 1979 yen depreciation vis-a-vis the dollar in the improvement in the U.S. trade balance with Japan in 1979.

1 Japanese exporters often attempt to maintain export prices constant in dollars, at least in the short run, despite fluctuations in yen/dollar exchange rate. Variations in the yen price received by Japanese exporters resulting from this practice are reflected in fluctuations in profit margins.