JULY 14, 1961

PAGE 12560

TEXTILE IMPORTS

Mr. MUSKIE. Mr. President, on April 27, 1961, I introduced, with the cosponsorship of 10 of my colleagues, the Orderly Marketing Act of 1961, S. 1735. This proposed legislation is designed to alleviate import problems in the United States resulting from competition with low-wage countries.

One of the industries most seriously affected by low-wage imports has been the textile industry. The President has recognized this problem, and at his direction, the Department of State has initiated a series of negotiations designed to reduce pressure on the domestic cotton textile market. I have urged the President and the Department of State to consider the import quota formula proposed in S. 1735 as a possible approach to sensible and practicable trade agreements with other textile exporting and importing countries.

Under S. 1735, where low-wage imports were found to be injuring domestic industries the President could direct the Department of State to enter into negotiations with exporting countries for import quotas based on their average share of the domestic market. Quotas would be revised annually to reflect the increase in domestic consumption. Such an approach would have the advantage of stabilizing the domestic market, without playing a straitjacket on exporting countries.

One of the more encouraging results of the introduction of S. 1735 has been the healthy and intelligent discussion it has stimulated, especially within the affected industries. One of the best examples of this discussion was a recent letter I received from Mr. James R. Franklin, assistant to the president of the J. P. Stevens Co. The report which Mr. Franklin gave me offers some constructive and thoughtful suggestions which I believe will be helpful to other Members of the Senate in considering trade legislation.

I ask unanimous consent that the letter be printed at this point in the RECORD.

There being no objection, the letter was ordered to be printed in the RECORD, as follows:

Hon. EDMUND S. MUSKIE, JULY 11, 1961.

U.S. Senate,

Washington, D,C.

DEAR SENATOR MUSKIE: Since receiving your letter of May 23 regarding my letter to the Washington Post and your new bill entitled the "Orderly Marketing Act of 1961," I have conferred with many persons within our company, the textile industry and other industries adversely affected by unrestricted imports.

You asked for our thinking on your bill, S. 1735, and I am pleased to comply with your request by including a few quotes from some of the people I contacted.

A textile industry association wrote that no action regarding S. 1735 had been taken within that group because "we have been fully occupied preparing our statement for presentation to OCDM and other governmental departments mentioned in the President's seven-point program. It is not likely we will be in a position to support any legislation until we have exhausted the possibilities under the President's recommendations,"

A leading association of many industries interested in greater safeguards for American industry affected by foreign trade wrote, in part, as follows:

"The general purposes of the bill predispose me (personally) to favor it. Furthermore, its premise, set forth in section 2, and elaborated by Senator MUSKIE in the Senate on April 27, is the same as that underlying the proposals the council has been formulating to assure fair competition between foreign and domestic goods.

"The bill's distinctive feature is the provision authorizing the United States to enter into quota agreements with other countries.

These are described in the bill as 'orderly marketing agreements,' but, if effective, they would probably result in shifts in production here and abroad, inasmuch as producers of the affected goods would avoid piling up undisposable surpluses.

"The agreements envisioned in the bill would affect the U.S. domestic market only. However, multilateral negotiations of this kind are difficult to confine to one market and, in practice, would undoubtedly result in world realignment of markets. In this respect the most nearly analogous situation is probably the sugar agreement and our implementing Sugar Act which governs the foreign and domestic shares of the U.S. market, but which influences world production and marketing in some degree.

"Advantages of such arrangements are:

1. The foreign producing countries are assured of a share in the U.S. market, which they are not under tariff arrangements, and, of course, this benefit also applies to the U.S. producing organizations.

2. The arrangements are entered into on a voluntary basis which may be less disruptive of international good will than unilateral approaches. However, it must be recognized that an agreement, while freely entered into by a foreign country, would be at U.S. insistence and so is not completely voluntary.

3. The U.S. Government is expressly authorized to enter into an agreement which otherwise might violate antitrust laws as being in restraint of trade.

4. A firm agreement is less open to misunderstanding and possible recrimination than, for example, the present voluntary arrangements of Japan which are actually unilateral undertakings on her part.

"Assuming the bill is acceptable in principle, the procedures are commendable. The Tariff Commission and the executive departments are assigned their proper roles, and the preliminary and review procedures seem effective and fair.

"The standards and criteria of injury raise some questions. The essential allegation (sec. 3(a)) is a 'differential between domestic and foreign costs of production,' which the Tariff Commission has found increasingly difficult to determine in recent years. Actually the bill is so worded that the Commission does not have to find whether the allegation is proved or not by the investigation. Rather, it is actually an application for relief, and the Commission's investigatory, finding and recommendatory directives (sec. 3(b) ) are separate and cover other matters than those alleged.

"The chief problem is how the Commission interprets the language of section 3 (d) (p. 3, lines 22-25; p. 4, lines 1-7). Words requiring judgment are 'significantly,' substantial,' 'increasing,' 'decreasing,' and 'reducing.' The last three can be considered as absolutes, whereas many times injury occurs to a domestic industry from relative conditions. For example, a U.S. industry that maintains its domestic sales and employment levels while imports absorb an expanding domestic market is being injured because it is not sharing in the expansion.

"Neither 'injury' nor 'industry' is defined and, as you know, these terms are currently the crucial and bothersome ones in the commission's consideration of escape clause applications.

"On the formula for quotas and their method of application, I cannot form a valid opinion. They seem fair, but the best way of ascertaining how fair they would be in practice would be to have a number of industries report how the procedures would work in their particular cases. one effect would be to freeze the historical supplying pattern for the life of the agreement. It might be advisable to allow a small portion of the total quota to be allocated to countries that are potential, but not historic, suppliers.

"S. 1735 appears to stand on its own feet. It does not amend, or relate to, current tariff or trade agreement laws. It violates concepts of the General Agreement on Tariffs and Trade, which forbids quotas, even voluntary ones, except for balance-of-payments or industrial-development reasons. The fact that the bill runs counter to GATT is not a criticism. I raise the question only to point up that the bill will cut across present laws and commitments of the United States and I believe a decision would have to be made whether to try to accommodate it in present law or to expand it as a substitute. I would hope the latter.

"As I noted earlier the bill provides only for regulating the domestic market yet can hardly avoid affecting trade elsewhere. This situation brings up questions that are sure to concern this council. Is the inevitable result of the bill's approach the creation of international commodity agreements covering manufactured products as well as raw materials? Would pricing agreements follow with cartelization of production and marketing? Would we be entering a planned economy era on an international scale? If so, the principle of comparative advantage, to which Senator MUSKIE refers in his April 27 Senate speech, might enter again in full force.

"These questions would need to be answered before a decision on S. 1735 could be reached by our group.

In the meantime, we are most grateful to Senator MUSKIE for initiating an imaginative, fresh approach to this complicated problem."

I read in the daily press portions of the State Department letter you received in response to your request for information regarding State's reaction to S. 1735. I am interested in the final conclusions State may reach.

I appreciate the kind words you expressed in your May 23 letter regarding my letter to the editor of the Post and also I want you to know of my appreciation for your support of the June 22 congressional letter to the President which you and 38 of your Senate colleagues and 124 Members of the House signed.

With best wishes.

Sincerely yours,

JAMES R. FRANKLIN,