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realizes that tariff barriers, to say the least, have been a source of international friction, does not welcome the relief which has been extended.
In my view, however, on certain products it does not go sufficiently far removing barriers which are still prohibitive even when relief is extended to the full extent possible under the present reciprocal act--that is a permissible reduction to 50 percent of the United States tariff schedules established in 1929.
This is, as far as these products which I have in mind are concerned, due to the fact that while present tariffs frequently establish an equalizing price factor in relation to the country which has a low cost of production, the country with a higher cost of production finds it difficult to do business when duties are added to his higher costs. These products, produced in high-living standard or relatively highwage countries or materials produced in better quality or more fashionably styled have been put to an extensive disadvantage-in some instances prohibitive disadvantage. The United States tariff duties added to the cost of finished materials produced in low-wage countries frequently at least equalize the difference in cost between the foreign country's product and the United States cost of production or selling for a similar article. When, however, the United States duties are added to the production costs in the high wage- or highliving standard country, the United States landed duty-paid price of the article from the high-wage country becomes high in relation to the duty-paid price of the article and it finds a very restricted sale here and if sold here at all, is consumed by a small fringe of the American population.
The facilitating of imports from high-wage countries is particularly pertinent under considerations of reciprocal tariff agreements. I would suggest for your consideration what proportion of our finished goods exports such as automobiles, typewriters and business machines, household equipment, shoes, and many other items have been purchased by the higher-living-standard nations.
The products to which I refer, are broadly speaking, the better qualities of textiles and apparel, principally cotton or wool, but some times made from other textile fibers and for which the potentialities for sale are under the usual normal structures of trade, usually comparatively limited.
Some of these products are what might be termed "craft industries," where in most instances production is relatively small and the potential consumption in the United States of America, relatively moderate. They are produced in such high-wage countries as Great Britain, Switzerland, and many of our European United Nations allies.
There is one common denominator among all of these products, to which I refer, namely, that they are the products of relatively highwage countries where the standard of living or cost of living is higher than some other countries in the world. My personal observation is that very little, if any, damage would be done by increasing the reasonable sale of these high-wage products in this market.
The amount of production set aside in the United States of America for these types of materials is relatively small and their introduction to this country is a style stimulant through example, to American mass-production industries.
In consumer goods such as textiles, public demand or style demand is a governing factor in the stimulation of consumer buying. It is something like an original painting which supplies inspiration and work to many reproducers of the original.
An infiltration of new types of goods tends definitely to increase turn-over. In most instances, the products to which I refer arrive in this country in the form of piece goods which are made into garments in the U. S. A. Consequently, in the selling price of the finished garment, something less than one third of the selling price covers the cost of the imported material.
While these materials are offered at a relatively high price, they are not necessarily luxury goods because they frequently have intrinsic wearing qualities or style which to some minds compensate for their higher cost, as compared to similar materials produced elsewhere. Many of these materials have added to the economic wellbeing of America through having introduced to this country new ideas, new constructions and new types of finish and textile cations or styles which have been taken up by American looms or textile or apparel producers and placed in mass production in quantities far beyond the modest production of the original article in its initial construction or quality. Such items as English broadcloth, shirtings, permanent-finish organdies, perspiration-resistant linings, various types of fine woolens—many of these and similar goods have introduced new names as well as production to American producers. Had a reasonable quantity of these goods been permitted sale in their original construction and quality, I do not believe that most of the original producers would complain that cheaper mass production of these types was taken over by the American producers.
I would like to briefly illustrate how the importation of English broadcloth shirtings contributed to American well-being or economy, This cotton cloth was first introduced to this country from England in the early 1920's. The name "broadcloth” was not at that time used in the cotton-textile industry. It referred chiefly to a woolen material, first I believe, made in Germany. This English broadcloth was what is generally known as a poplin weave. It was made from long-staple Egyptian fiber and given an extremely high-luster finish. It was introduced first to the higher-prices shirt trade. After some months, American manufacturers also introduced this construction. Varying degrees of quality in this construction were introduced by the American trade. Broadcloth is a term universally used in the American cotton-textile trade today whereas at the time of its first introduction from Great Britain the term itself was utterly unknown. Millions and millions of yards of this material have been produced on American looms. The value of this import over the years has been relatively insignificant compared with the value of American production. This is only one instance of reciprocation. Many others could easily be found.
By excluding such material from the American market through prohibitive tariffs or otherwise you seriously affect a definite stimulation to internal American production.
From personal contacts and conversations which I have had with producers of these textiles and apparel, I have observed relatively little, if any, desire to introduce goods to this market in such quan. tities as would disturb the internal economy of the country. A healthy, prosperous internal economy is one of the best bases upon which to build permanent trade.
I suggest for your consideration the fact that the basis on which the Reciprocal Tariff Act must in any event function is the present tariff law which at all times governs the basic operations.
I would also suggest for your consideration that because once a new schedule is agreed to through reciprocal tariff arrangements, such new schedules apply equally to the products of all countries. In the initial instance the schedule is reduced to benefit a particular style or make of product peculiar to the country with which the agreement is made. There is, however, nothing to prevent a country where the wage or cost of production is lower adopting the same principle of manufacture for the article, or if already available in production, offering that same article in the U. S. A. at considerably below the cost from the country to which the tariff advantage was first established.
In the case of English broadcloth shirtings to which I have previously referred, even giving effect to the present reciprocal tariff schedules, such materials, through action of the 1929 tariff plus the reciprocal tariff agreement advantage, would not normally be sold here at less than 10 to 30 percent above the American-made article of similar construction. Shortly before the present war, however, products of a similar construction introduced from Japan were offered here at considerably below the price of American-made products. These materials were somewhat imperfect at that moment, but given time, I believe they would have made serious inroads on both the Americanand English-made material.
I would suggest for your study whether this has not in fact happened in the case of several products, such as turned shoes, first give preference-duty treatment in the reciprocal agreement with Switzerland, fine ladies' hadkerchiefs, certain linen materials, Swiss organdy, certain types of English poplin shirtings, where had the war not intervened, undoubtedly the advantage extended to Great Britain would have been mostly beneficial to the Japanese. Many additional circumstances may develop as a result of such a survey.
To further illustrate the position of high-wage countries—in this instance Great Britain, may I submit:
The case of English-spun cotton yarns made from long-staple Egyptian fiber, the cost of these materials in England, plus freight and carrying charges and without the assessment of the present tariff of approximately 30 percent ad valorem, plus 10 cents a pound for longstaple cotton that is the cost of the yarn plus carrying charges without the duty, is similar in price to a comparable yarn spun in the U. S. A. from domestic long staple or the Egyptian cotton staple which the Government recently stock-piled.
Here is an article which has already been subject to a slight reduction under the reciprocal agreement with Great Britain. In spite of these reductions and in spite of the fact that the British prices on these British-spun yarns have only advanced in price about 30 to 33 percent since October 1939, whereas U. S. A. prices have advanced 37 to 40 percent during the same period there is still the very great spread.
This spread in price between the cost of yarn will give you a guide as to how far out of reach are English-made cotton goods compared with American prices.
I am not claiming that some countries could not come closer to American quotations in their landed U. S. A. prices, but it would have to be a country with a lower wage or standard of living than Great Britain.
If the intention is to benefit primarily and permanently the country with which the agreement is drawn it would seem to me an improvement in the fixation of arrangements could be established.
I do not suggest special treatment for the production of these individual countries. I merely suggest that an equalizing instrument of some kind could be set up where any country which at present or in the future attains a high standard of living could achieve certain advantages in its trading opportunities in the U. S. A.
True, for certain products and in certain ways this, to what would prove a limited extent and on relatively few products a certain preference, might appear to be extended to high-wage countries, but there would be no discrimination but rather an inducement for the nationals of any country to devote their energies to increasing their internal standards of living which is an objective we are all striving for.
Through the efforts both now and for the post-war, to increase the self-sufficiency of various substandard countries, no doubt this tendency will continue.
I suggest for your consideration that if an impartial survey were made of our present United States tariff laws, they would be found to be in many ways a jerry-built structure.
This is perhaps not surprising inasmuch as each tariff law when passed had grafted thereto some of the clauses from previous tariff laws.
Cases in point are various methods of determining the rate for assessing duties. The present law provides various methods for determining such basis. I suggest for your consideration a review of these.
Since Great Britain established its purchase tax to control internal economies, many of the British products have been subject to assessment of duty on this tax, largely because the assessment of internal purchases taxes are to be taken as part of the home market value in assessing duties. The clause was established in the American tariff for quite another purpose, but as written the appraisers had no recourse but to assess duty upon it in the case of many British products.
From my observation I feel that many of the difficulties met with in importing goods to the U. S. A. are due to administrative procedure in the U. S. customshouse.
This in no wise implies a criticism of the Administrative staff. My observation is that the appraisers and others given the responsibility of administering the customs laws are open-minded, considerate public servants who are willing to look into all phases of applications, nevertheless they are given directions in the tariff law with reference to the assessment of duties and other matters which are extremely rigid.
While it is true that the Reciprocal Tariff Act is intended to be and is within limitations somewhat flexible, many of these administrative appraisal statutes are extremely unflexible. I suggest, therefore, for
your consideration, that if the present extension of the reciprocas tariff law is intended to be a part of the post-war planning of easier interchange of commerce, as in fact it would actually prove to be if it were extended to 1946 or later, that the entire basis of the U. S. A. tariff structure be reviewed so as to bring both the Reciprocal Tariff Act or something similar as well as the basic tariff structure, into a better relationship with the realities of post war-conditions.
If continuation of the reciprocal tariff arrangements is approved, I suggest some method whereby the differentials between high wage producing countries and low wage producing countries be equalized and other discrepancies in the reciprocal intent of these arrangements be adjusted.
I would suggest for your consideration that less than 25 years ago Japan was a relatively unimportant producer of cotton materials, and note the transition from that time to shortly before Pearl Harbor, such a study will supply at least a rough idea of the competitive position of the products of a low-wage country introduced into the internal economy of a high-wage country.
My own personal feeling, based upon contact with its effect, is that the tariff structure of the U. S. A. could be overhauled and thereby many features of it brought more in line with the current international position and the current internal economy of the country.
We are concerned with a changed and changing world. Many of the premises on which the current tariff structure was built have been out-moded by world events. Not the least of these changes is due to the industrialization of many areas and countries. These countries, many of which are low wage level countries will continue to expand their industries.
The CHAIRMAN. The next witness will be Mr. Andrew P. Shea.
STATEMENT OF ANDREW P. SHEA, PERUVIAN-AMERICAN
ASSOCIATION, NEW YORK CITY
Mr. SHEA. The Peruvian-American Association is an association organized in New York for the purpose of furthering culture in commercial relations between the United States of America and the Republic of Peru.
The membership of the association consists largely of American citizens engaged in repetitive activities, including commerce, manufacture, mining, finance, communications, and transportation.
I have come on behalf of the association to testify before your committee in favor of the renewal of the Reciprocal Trade Agreements Act for a 3-year period in its present form.
The Peruvian-American Association has always strongly endorsed the reciprocal trade agreements policy as one of the best ways to effectively implement the good-neighbor policy and to strengthen hemispherical solidarity.
Peru is traditionally one of the best friends of the United States in the Western Hemisphere, and I believe it can fairly be said that