In fact, I don't think the trade pacts can be considered separately from overall post-war planning. The two subjects are tied together as a building and part of its foundation. I believe authorities on post-war planning agree that any plan to be successful must be based on raising our pre-war employment level of 46,000,000 to 55,500,000 in the post-war period-an increase of about 20 percent in people gainfully employed in the United States-a stupendous undertaking. I believe the only way to do this is by lowering prices which in turn will enable us to tap a lower and larger stratum of the market pyramid not only in this country but abroad as well. This need not and should not be accomplished by lowering wages below prewar levels, but rather by increasing volume of product and thus reducing cost of overhead per unit produced. Also a contributing factor toward lowering costs can be the great increase in production efficiency brought about by the war. Thus we can maintain our traditionally high wages while pricing our products at a point where they would be hungrily consumed by a world, as well as a United States market. Now unless we are willing to be paid for this merchandise by foreign countries in other merchandise that they are better situated to produce than ourselves, the whole structure falls, and we also rob our own consumers of a wonderful opportunity to share in a more abundant life based on sound economics. As Mr. Hull says, "We must trade to be prosperous," and he means just that. Swapping merchandise. Not just trying to sell a customer who is prevented from paying in kind and who has no other means of paying. This is my reason for saying that the trade agreements are one of our natural foundation stones for the post-war structure of business. I, of course, realize there are other foundation stones that are very necessary to employ 20 percent more people than in the past, such as post-war tax credits in proportion to the increase in employment over the pre-war period provided by a given employer. The encouragement now instead of the present discouragement of the creation of post-war reserves to finance the actual building of the post-war business structure. The encouragement now instead of discouragement of the plowing back of "seed money" by small businesses. We cannot consume our "seed money" this year and have a big crop of employment next year. The more general adoption of incentive pay plans or contingent compensation, thus bringing about a great increase in personal efficiency of all classes of people. In the post-war world there will be no room for loafers of either high or low degree, as everyone must produce, regardless of personal financial circumstances. These factors, to mention only a few, plus the great improvements in production machinery, will make it possible for this country to enormously increase its production of merchandise of all kinds susceptible to the magic of quantity production and at previously unheard-of prices. Surely this inherent ability of American producers is their greatest potential asset and given a reasonable chance to function it is a much greater safeguard than a high tariff and much sounder in principle. It is basically wrong to subsidize inefficiency. Artificial protection for obsolete and inefficient methods is a delusion and a snare, and leads to no good in the end. Neither will national isolation and so-called self-sufficiency work for any length of time. A comparatively free interchange of goods subject only to the minimum tariff required to partially compensate for the present inequality of living standards of various countries is the way to soundly help to rehabilitate the world. This policy will, in time, tend to smooth out these inequalities in living standards and provide all of our people the opportunity to work. The international competitive race then becomes one based on inventiveness, business initiative, and efficiency, our long suit; so long as the private free enterprise system prevails-the system that built America. I admit if we are to have a government, regimented economy, this plan will not work, and we will need high protective tariffs. But if we are to put our best foot forward, in world competition, we want none of this. No modern businessman is afraid of his competitor, domestic or foreign, if he is given a free hand to put the old pioneering spirit to work unhampered by regimentation. All he asks is that the leaden hand of bureaucracy be removed from his shoulder so he can fight. Of course, my viewpoint is that of a manufacturer, but the same general principles apply to any business in which we have a legitimate economic right to be engaged. These general objectives have certainly been well promoted by the good work of Secretary Hull to date, and I urge you to grant him the opportunity to carry on with the foundation work. Respectfully submitted. S. DUNCAN BLACK, President, Black & Decker Mfg. Co., Towson, Md. Mr. COOPER. I move we adjourn until 10 in the morning. (Whereupon, at 5:25 p. m., an adjournment was taken until tomorrow, April 21, 1943, at 10 a. m.) EXTENSION OF RECIPROCAL TRADE AGREEMENTS ACT WEDNESDAY, APRIL 21, 1943 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met at 10 a. m., Hon. Robert L. Doughton (chairman) presiding. The CHAIRMAN. The committee will please be in order. The first witness is Mr. Alfred C. Gaunt. STATEMENT OF ALFRED C. GAUNT, PRESIDENT, MERRIMAC MILLS, METHUEN, MASS. Mr. GAUNT. My name is Alfred C. Gaunt. I am president of the Merrimac Mills, Methuen, Mass. As a small businessman myself, the first president of the New England Small Business Men's Association, the chairman of the National Advertising Council of Independent Small Business, a member of Floyd Odlum's committee on contract distribution to small business, and having a deep conviction that the small farm and the small business, typify that cause of freedom for which we fight, I should most earnestly like to oppose the renewal of the reciprocity acts, unless with modification which will promote worldwide preservation of small homestead farms and small independent businesses-our best insurance for post-war recovery and lasting peace. I believe in the preservation and promotion of competive capitalism as opposed to monopoly as a world-wide policy, with government control to see that labor is protected from the evils of overlong hours and starvation wages abroad as well as at home. So much of this talk is about "What are we going to do at home?" "How are we going to save ourselves?" I think the time is here when our horizons should be broadened and when we should give as much concern, perhaps, in our own interest, to what is going to happen abroad as to just what is going to happen to us. No reciprocity favors should be granted to countries unwilling to grant their protection to labor, or to products the manufacture or sale of which are controlled by monopoly or cartels. Our whole reciprocity program can be a failure if we grant favors to monopolies and cartels for the simple reason that they are the things that can break down our American wage. Monopolies and cartels, whether they are American monopolies, cartels are the things that can break down our own American economy. And this should be the acid test of the desirability of any trade pacts. The small manufacturer and farmer have not the broad markets and selling organizations or the resources to compete with imports from low-wage countries. The welfare of the independent small businessman and farmer should not be sacrificed by neglect to provide proper tariff protection. While I am for the idea of fair reciprocity, the kind that benefits both participants, I am against the law as now written, and the unintelligent application of the pacts as drawn and administered, because I believe they do the cause of world prosperity and world peace more harm than good. I think regardless of whether we are Democrats or Republicans we have to recognize that reciprocity has caught the public fancy, perhaps the world's fancy. There has to be reciprocity. Whether we pass an act or not, we have got to have reciprocity. We have always had it in a measure, but the point, gentlemen, it seems to me, is that reciprocity should be the kind of reciprocity that does not pull us down. Let us make it the kind of reciprocity that lifts the other fellow up. Let us make it the kind of reciprocity that does not promote monopolies or cartels. Let us make it the kind that does promote independent small business and the small farmer and a decent living wage. The high purpose behind any true reciprocity bill is to foster sounder and better balanced economy for all nations and to maintain and promote higher standards of living for all peoples. This should and can be done by the United States without sacrificing our own standards or causing distress or unemployment among our own citizens. Let us let the other fellow balance his. A country should not have nothing but coffee, nothing else. It should have other things too. It is a better customer for us if it does. True progress in human and national relations cannot be had by tearing down the other fellow to benefit ourselves; or by abasing our economies to build the other fellow's. Our laborers, our farmers, our small businessmen, should not be victimized by subjecting them to the unfair competition of countries living on a starvation diet. We could not say that we do not mind fair competition. Someone has said here that the American manufacturer and the American genius can hold their own against the world. They can if they have a fair break, but we object to, and I think that likewise goes for everyone-Democrats and Republicans alike-we object to the unfair competition. This confounded Japanese stuff was just on the brink of raising hell with our industry when the war came on. Rather we should plan to help depressed peoples to raise their low standards of living and to develop more opportunities for all regions and nations to participate in the economy of prosperity and plenty. A former Secretary of State is quoted as having said that in raising the living standards of great masses of people abroad, we must expect to lower our own living standard. Now, that is a terrible thing. That is a terrible way to look at it. They say, "All right, there are 400.000,000 in China working for a nickel a dav. There are 100,000,000 in America working for $5 a day, so you have got to go way, way down for Americans just to lift China a little bit." I do not think we have to approach this thing in that atmosphere of defeatism. It does not seem that we ought to deny the home folks the boon that we want to give the Chinaman, the Englishman-the right to full employment and a proper living wage. The present act has worked out badly in respect to the pottery industry in the Central States, in respect to the paper and textile industries in the East and South, and in respect to agriculture in the Middle West and the coast. Unemployment increased in all these and other enterprises where the tariff concessions destroyed the ability of Americans to compete. If corrections can be put into this bill that will avoid that contingency, this bill may not be so bad. We are now, after several years, in a position to be able to examine free of emotion the net effect of the operation of the trade pacts on the basis of performance. Let us examine a few of the results. One feels very humble in coming here after the scholarly and well-informed presentations of Dr. Coulter yesterday. He has so many facts and figures and my horizon, of course, is extremely limited, running a small woolen mill, as I do, up in Massachusetts; but as one of you gentlemen has also said, you can get so blinded and bothered by statistics that the only thing that would appeal to me as a practical man is just what has happened in certain industries. 1 I went out through Ohio a couple of years ago, and just from the train window you would see pottery after pottery establishment closed down. I do not know much about them. I understand that they have a presentation of their own, but anything that shuts those potteries down in Ohio is unhealthy for Ohio, and what is not healthy for Ohio is not healthy for the United States. As now set up, the law extends to all nations the reductions worked out for any one nation. An agreement was made with Belgium, reducing the rate on paper products. Italy and England were the principal gainers. An agreement with Finland, also on paper products, redounded more potently to the advantage of Sweden. Incidentally, Sweden sold for export at 1 cent a pound less than the price increase, and the Secretary of the Treasury ruled that this was not a violation of the antidumping feature of our law. Under another agreement with England, Japan benefited, and jumped her shipment of hat bodies from 1,155 dozen in 1934 to 385,511 dozen in 1937, and we suffered the complete prostration of an entire industry in this country. There is a town near me up in Massachusetts where 65 percent of their population depended upon the hat manufacturing there, and when this flood of Japanese stuff came in, 65 percent of the people were just thrown completely out on the street. Concessions should be framed with full regard to the effect of the possibilities of our market being flooded with goods from low-wage countries like Japan. Naturally, one speaks of things about which he knows best. That will include the things nearest to his own troubles. This little woolen mill of mine that struggled through the depression was just barely able to get by. Before the war came on it was nip and tuck whether or not we would survive. The blow that hit us when we were pretty well down anyway was that Japan began to ship in yarn and cloth and she came 10 to 15 percent under our costs, shipped all the way across the water and landed them here. If we knocked off all our overhead, there would be no profit, and she was |