our negotiators do not have requisite legal authority to participate in these trade negotiations. If the United States does not participate, one possibility is that the talks will collapse-and the free world will thereby forfeit this timely opportunity to try to solve some of the paramount problems facing it—and another possibility is that the negotiations will go forward without us and produce results not wholly reflective of our best interests.

America must trade if it is to maintain domestic prosperity and world leadership. The day is long past when we were self-sufficient in vital raw materials. Energy needs are only the most spectacular example of this.

These imports require exports because we have no other way to earn the large amounts of foreign exchange needed to pay for the imports.

Exports require reduction or removal of foreign tariffs and other trade barriers because, otherwise, our goods cannot compete.

Removal of tariff barriers requires that our negotiators have the flexibility and authority they need to enter into reciprocal agreements with our trading partners.

Thus, like the links of a chain, our need to import ineluctibly leads to the need for a bill, such as the Trade Reform Act of 1973, which continues our long standing policy of encouraging world trade.

The first three titles of the Trade Reform Act of 1973 are carefully drawn and delicately balanced provisions. They give our negotiators the flexibility needed for the complicated and unpredictable trade negotiations which lie ahead, yet Congress retains important controls and safeguards.

I recently had the honor to co-host a meeting between the New York Congressional Delegation and leading businessmen from all parts of New York, called to discuss the Trade Reform Act of 1973. Attached hereto, to be made part of the record, is the unanimous Joint Statement of these business leaders reflecting our conviction that the best interests of New York and the Nation will be served by prompt passage of the Trade Reform Act of 1973.

Attachment.

JOINT STATEMENT OF NEW YORK BUSINESS LEADERS MEETING WITH NEW YORK CONGRESSIONAL DELEGATION ON TRADE REFORM ACT OF 1973 (H.R. 10710) — OCTOBER 10, 1973

The best interests of New York and the Nation will be served by prompt passage of the Trade Reform Act of 1973 because it would continue America's longstanding policy of encouraging world trade and investment through reciprocal elimination of tariffs and other barriers to world trade.

International trade is a mainstay in New York's and the Nation's economy, accounting for about 10% of gross national product.

Literally hundreds of thousands of New Yorkers owe their jobs to international trade:

moving freight in the ports of New York (the nation's busiest), Albany and Buffalo, and at airports like Kennedy International;

manufacturing goods for export in such high-skill and high-technology areas as aerospace, computers and electrical and other sophisticated machinery where America's comparative advantage over foreign competitors is unrivaled; and

financing and otherwise facilitating both the movement of freight and manufacture of exports.

America's liberal foreign trade policies have been the basis for the growth of this international trade which now plays so major a part in our economy.

Every American has a vital stake in the continuation of these liberal trade policies because America must import if it is to maintain its world leadership abroad and high standard of living at home. Energy needs are only the clearest example of this. But, like the links of a chain, imports require exports to pay for them, exports require removal of foreign tariffs and other hindrances so that American exports can compete fairly, and removal of these trade barriers requires a law giving out negotiators the flexibility to bargain effectively with other countries for their removal.

Foreign trade serves our consumers by offering a fuller choice of goods.

The free movement of men, money and ideas across national boundaries is our best hope for closing the gap between the very rich and the very poor nations of the world and, thereby, for bringing improvement in social conditions.

Protectionist legislation, by contrast, would make a reversion to the jungle of economic nationalism. Far from protecting domestic employment, it would

invite foreign retaliation which, utlimately, would threaten hundreds of thousands of jobs directly and indirectly growing out of foreign trade.

In summary, therefore, prompt passage of the Trade Reform Act of 1973 is urged because it would continue the traditional liberal foreign trade policies which are the basis for much of our current prosperity and which are essential for our future well-being.

CALIFORNIA CHAMBER OF COMMERCE,
Sacramento, Calif., January 10, 1974.

Hon. RUSSELL B. LONG,

Chairman, Senate Finance Committee,

U.S. Senate, Washington, D.C.

DEAR SENATOR LONG: The California Chamber of Commerce wishes to submit by means of this letter its position on HR 10710, the Trade Reform Act of 1973, as modified and passed by the House of Representatives on December 11, 1973.

We ask that the Chamber's views on HR 10710 be included as testimony in the hearings record. Copies of this letter have been sent to the other members of the Finance Committee and to Senators Cranston and Tunney.

The California Chamber of Commerce is pleased to note that almost all of the recommendations it made to the House Ways and Means Committee during its consideration of HR 6767 have been incorporated into HR 10710. Thus, the Chamber unequivocally supports Title I, II, III, V and VI of the bill. The Chamber believes that these measures will give the President: (1) full freedom, flexibility and leverage in negotiating trade agreements with foreign nations, (2) the ability, when required, to extend adequate adjustment assistance to workers and firms, (3) the needed power to curb unfair foreign trade practices and to restrict imports whose rapid growth seriously disrupts or threatens to disrupt the U.S. market, and (4) the ability to assist the developing countries by permitting duty free entry of certain of their products into the United States market.

In addition, the California Chamber of Commerce supports the amendment proposed by Senator Mondale and carried on pages S21683 thru $21686 of the December 3, 1973 Congressional Record. The Mondale amendment, co-sponsored by Senator Ribicoff, would update the Trade Reform Act of 1973 to deal with the pressing need to assure equitable access to supplies of food, raw materials and manufactured goods which we and other nations need to support our growing economies. The events of the past few months have clearly demonstrated the importance, in an increasingly interdependent world, of equitable access to essential raw materials. Certainly if the developed countries of the world have an obligation to help the developing countries increase their economic growth, the countries that have valuable resources have an obligation to use them in ways which, for a fair return, will benefit rather than injure the other nations of the world.

The California Chamber, however, looks with disfavor upon Title IV of HR 10710-Trade Relations With Countries Not Enjoying Non-discriminatory Treatment-as modified by the Vanik amendment and passed by the House of Representatives. The Chamber believes that passage of Title IV into law would be counter-productive and thus urges its deletion from HR 10710. In the Chamber's opinion there are four major reasons why Title IV should be deleted from the bill.

1. The humanitarian intent behind the tying of the extension of non-discriminatory tariff treatment, credits and credit and investment guarantees to the freedom to emigrate is commendable. However, passage of Title IV into law is likely to increase Soviet resentment and thus, increase the difficulties faced by the Jews and other minorities in the Soviet Union. The Soviets do not need trade with the United States enough to acquiesce in our interference in their affairs just as we, if the situation were reversed, do not need Soviet raw materials enough to permit their interference in our affairs. Instead of changing the nature of their society for increased trade, there is a good possibility that the Soviets, confronted with Title IV, may adopt even more repressive policies. This could include further, perhaps indirect, harassment of minorities or even an outright prohibition of emigration altogether. Clearly, the passage of Title IV into law is not worth the risk of increasing Soviet repression and/or provoking a decision to cut back on Jewish emigration now occuring at a rate of more than 3,000 a month.

2. Much of the recent improvement in U.S.-Soviet relations has been brought about through persuasion and quiet diplomacy. This type of slowly developed

and fragile detente, possible in large part because of the Soviet desire for increased trade, is needed more than ever today, especially in view of the explosive Middle East situation. The possage of Title IV into law would be a step away from a policy of detente-progress through private diplomacy— and would force the U.S. and the U.S.S.R. back into a policy of confrontation. Such an undermining of U.S. efforts to bring about changes in internal Soviet policy through persuasion and cooperation would not be in the interest of the United States nor would it be in the interest of Israel.

3. The elimination of credits and credit and investment guarantees would reduce the substantial growth which has occurred in recent years in U.S. exports of peaceful, non-strategic goods to the U.S.S.R., the Socialist Countries of Eastern Europe and the People's Republic of China. In 1973 U.S. exports to these countries were well over 21⁄2 billion dollars while imports were some 500 to 550 million dollars, netting a U.S. trade surplus of some 2 billion dollars. A good measure of this growth has been due to the recent more realistic attitude of the U.S. Government towards the improveemnt of East-West trade. This demonstration of interest in trade, including the elimination of unnecessary export controls and the ability to extend credits in certain well-warranted cases, has encouraged the Socialist countries. It has also encouraged U.S. businessmen to make major long term commitments in funds and personnel which are required to develop these complex and difficult markets. U.S. businessmen will not continue long-range efforts of this type if our Government adopts restrictive policies or an "on and off" attitude. Passage of Title IV into law would put the United States into an ""off" position, discourage U.S. businessmen, and once again, effectively deliver much of the sizeable and growing Socialist market to our West European and Japanese competitors, all of whom are in business for the long haul and none of whom restrict themselves on matters of credit.

4. Title IV is a serious judgment on the morality of another country and such an expression should not be handled as an amendment to legislation permitting the President to improve U.S. trade.

In summary, the California Chamber of Commerce believes, along with the House Ways and Means Committee, that prohibiting the extension of nondiscriminatory tariff treatment to countries restricting emigration would adequately indicate to the Soviets and the rest of the world the importance the United States places on human rights.

In the case of Title IV as passed by the House, however, the additional far reaching restrictions on credits and credit and investment guarantees would have a limiting effect on U.S. foreign policy and U.S. trade, delaying and frustrating the solution of many of the world's deep seated problems for many years to come. Clearly, it would be better to strike Title IV from HR 10710 and hold it in abeyance until such time as hearings can be held to study and weigh its possible effects on the Socalist Countries and on the United States, and especially until we have had a chance to see what progress detente and quiet diplomacy will make in the Middle East talks.

Senator Long, we appreciate this opportunity to make our views known and wish to comend you for giving high priority to the hearings of the Trade Reform Act of 1973.

Sincerely,

JOHN T. HAY, Executive Vice President.

STATEMENT OF THE AMERICAN CYANAMID Co., WAYNE, N.J., SUBMITTED BY JAMES G. AFFLECK, PRESIDENT, MARCH 5, 1974

SUMMARY OF COMMENTS AND RECOMMENDATIONS

1. While the President should be given broad powers to negotiate on behalf of the United States, he should be required to do so within criteria set by Congress and be accountable to the Congress consistent with the constitutional obligation of the Congress to regulate foreign commerce.

2. Current laws and practices governing the taxation of foreign source income should be retained without change to avoid penalizing American business by placing it at a competitive disadvantage with respect to foreign companies in both foreign and domestic markets.

3. The authority for the President to extend most-favored-nation treatment to Eastern European nations should be granted since it offers new markets to U.S. business and represents a step toward achieving a stable and peaceful world.

4. The proposed Act should recognize that environmental control standards of the United States and other countries from which products would be imported into the United States must be a factor in determining international tariffs and trade policy between the United States and other nations. Higher capital investment and production costs resulting from required environmental controls are definite factors in competitive trade.

5. The Executive branch of government should be required to seek and use the advice of expert representatives of American business, industry, labor and agriculture in the preparation for and in the forthcoming trade and tariff negotiations. The proposed Advisory Committee for Trade Negotiations can serve as a desirable and useful mechanism in this regard. It is vital that negotiations of both tariff and non-tariff barriers be truly reciprocal in contrast to the outcome of past negotiations.

American Cyanamid Company (Cyanamid) is a diversified company which operates in four major segments: consumer, medical, agricultural and chemical. Cyanamid sales in 1973 were approximately $1.46 billion. While our principal market is the United States, there has been a continuing demand for Cyanamid products and technology throughout the world. As a result, some 32 percent of our sales were made in more than 125 countries abroad.

Cyanamid employs more than 39,000 persons. We operate 64 domestic plants and 64 sales offices in 29 states.

Outside the United States, we have 43 manufacturing plants in 20 countries and 51 sales offices and research laboratories in 32 countries. We manufacture and market overall some 2,500 products.

Over the past 15 years, the dollar flow to the United States as a result of Cyanamid's export sales and the dividends, royalties and interest received by Cyanamid from foreign sources was in excess of $1.2 billion. During this same period foreign operations have contributed more than $327 million to Cyanamid's net after tax earnings.

Our direct foreign investment has had a strong pulling effect on Cyanamid's exports which in 1973 were in excess of $90 million, some two-thirds of which were sent to the company's subsidiaries abroad in the form of intermediates and raw materials. Jobs for 1,200 U.S. production workers are provided by these foreign sales along with an additional 800 management positions in the United States, including jobs in research and development. Our foreign operations are staffed primarily by local personnel. In fact, Cyanamid employs only 28 U.S. citizens in its international subsidiaries.

Cyanamid's involvement in domestic and international business and the knowledge and experience gained therefrom make it clear that there is a vital need at this time for negotiations of both tariff and non-tariff barriers to be truly reciprocal if they are to benefit the United States and the other nations involved.

This can be accomplished only if both sides come to the negotiating table with a willingness to recognize the realities of doing business and a readiness to participate in hard and mutually fruitful bargaining.

The United States must be ready to make concessions, but only in return for equal benefits to this nation and its people. Past experience has demonstrated that our national policy of free trade has not led to fair trade for the United States, and, in some respects, may have been detrimental to U.S. businesses, individual citizens and labor.

Cyanamid endorses in principle the proposed Trade Reform Act. This is especially so with respect to those provisions that seek to maintain and not impair the competitive position of American industry in the world market place. It is in that spirit and to that effect that Cyanamid offers some comments and recommendations on particular aspects of the proposed Trade Reform Act and suggested related legislation.

NEGOTIATIONS-THE PRESIDENT AND CONGRESS

Cyanamid believes in the importance of and supports international discussions aimed at improving our trading system. While the President should be given broad discretionary powers to negotiate trade arrangements on behalf of the United States, he should do so within the criteria established by Congress and be

accountable to the Congress. The constitutional authority to regulate foreign commerce is vested within the Legislative Branch. Accordingly, the proposed Congressional participation as official advisors to the U.S. negotiators is consistent both with the Constitution and the President's invitation to Congress to "set up whatever mechanisms it deems best for closer consultation and cooperation to ensure that its views are properly represented as trade negotiations go forward."

We also wish to emphasize the valuable experience and knowledge acquired by U.S. business in its international role. For that reason, we are pleased to note provisions for the transmittal of advice from selected industry groups concerning national negotiating objectives and bargaining positions in specific product sectors prior to entering into a trade agreement. Cyanamid supports, therefore, the proposed Advisory Committee for Trade Negotiations, with representatives from industry, labor and agriculture.

To demonstrate Cyanamid's interest in serving in an advisory capacity, we can note the active participation of our personnel with the Trade Advisory Task Forces of the Office of the Chemical Industry. Mr. John Ludden, President of Cyanamid's Pigments Division, is a member of the group's Policy Committee, and other Cyanamid experts are serving on task forces for medicinals, dyes, rubber process chemicals and pigments.

In developing the guidelines for trade negotiations through passage of enabling legislation, the Congress should be mindful that while nations may become trading partners, the individual trading units of those nations, i.e., the business corporations, are severe competitors. Even as the negotiating nations seek an increase in overall trade through elimination of barriers through common agreement, the negotiators must obtain a hard and reciprocal agreement based on the hard facts of existing and anticipated competition.

TAXATION OF FOREIGN INCOME

Although we recognize that the subject is not yet an integral part of the proposed legislation, we anticipate that the Finance Committee will be asked to consider tax revisions on U.S. foreign investment, and therefore, we would like to comment on this matter.

American foreign investment has produced beneficial results for the United States. It has improved the U.S. balance of trade and overall balance of payments at a time of heightened foreign competition, generated additional and enhanced job opportunities for American workers and generally strengthened the U.S. economy. Moreover, the benefits of U.S. overseas investment transcend this nation; they have been positive contributors to developed and developing countries all over the world.

In Cyanamid's case, foreign operations have contributed more than $327 million to net after tax earnings over the last 15 years. More than half of our subsidiaries' earnings have been returned to the United States as dividends, and, importantly, both U.S. and foreign income taxes have been paid on these dividends. Our subsidiaries retain a portion of their earnings as working capital and for additional plant facilities to permit their business activities to grow and to ensure a strong competitive position for Cyanamid's products in foreign markets.

Cyanamid and other U.S. enterprises operating overseas currently pay heavy income taxes to their host countries. We have had to invest abroad in order to remain competitive with foreign companies. The competition we face is such that if we are restricted in our ability to make foreign investments, we foresee our competitors exploiting this situation to our very real detriment.

For example, our studies indicate that if the U.S. tax laws were changed to impose tax currently on the entire unremitted earnings of foreign subsidiaries, Cyanamid's additional tax payments would approximate $4 million annually. Of this amount, it is estimated that approximately $2 million would be paid to foreign governments as withholding taxes and only $2 million would be paid as additional U.S. taxes. This is because sound business practice for Cyanamid (and presumably for other companies similarly situated) would undoubtedly dictate that the entire earnings of foreign subsidiaries actually be distributed as dividends in order to satisfy in full the ultimate liability for both foreign and U.S. taxes on such earnings rather than pay penalty taxes to the United States on unremitted earnings.