Mr. KATZ. I cannot argue with you when we get to a question of pay rolls. I can discuss with you the watch industry and if I have not made my point, I do not know how I can.

Senator MILLIKIN. You have been very clear.

Mr. KATZ. I have? Thank you very much. Then may I go on? Mr. Lyne says we manufacture some machinery in the watch business, but in recent years the Swiss, we are informed, have become specially adapted in the manufacture of machinery. Back 75 years ago if one thought of manufacturing anything mechanical one immediately thought of America as outstanding and American workmen as outstanding.

Senator Millikin, I want to assure you that if I were the head of the Waltham Co., I would not admit that anybody outmanufactured me. The Waltham Co. has been outmaneuvered, outmanufactured, outsold, and on the record, nothing will help them except management. I made that statement before the Ways and Means Committee, and I would like to repeat it; 6 million, 60 million, or 6 billion dollars won't help them.

Here is a complaint against Switzerland again. Can you imagine if that time was devoted to selling domestic watches what a wonderful job they would do?

It says here, "The trust was reported." Mr. Lyne is again speaking. Senator MILLIKIN. May I suggest to you that you are spending time resisting them. Suppose you devoted this time to selling watches? Mr. KATZ. I will tell you, I will be able to better sell watches if I get our position clear before the Senate.

Senator MILLIKIN. That is what they are interested in. That is exactly their position.

Mr. Katz, you are both wasting time so far as selling watches are concerned, because you are not going to get any relief.

Mr. KATZ. I do not want relief. The Swiss watch industry is not asking for any relief. The Swiss watch industry goes out and makes and sells watches the best way it knows how.

Senator MILLIKIN. I mean, I am anticipating how the votes would fall. I would like to see the domestic fellows get some relief. They will not get it.

Mr. KATZ. I am very certain you do not want to see them get the kind of relief that we are talking about. That kind of relief is not healthy for this country, because then it penalizes the consumer.

Senator MILLIKIN. I said a while ago no pay roll, no consumer. Mr. KATZ. There is no such a thing. You are talking about 13,000 people against 140,000,000 people.

Senator MILLIKIN. Give them all the opportunity to live safeguarded.

Mr. KATZ. You will do that better if you have a free enterprise, Senator Millikin.

Senator MILLIKIN. I do not object to free enterprise. I am an exponent of it.

Mr. KATZ. You are? How can you be that, and also suggest quota and high tariff?

Senator MILLIKIN. You cannot have free enterprise if you are going to let your markets be engulfed by low-labor-standard countries.

Mr. KATZ, Switzerland is a higher labor-standard country than any country in the world, in my belief, except America.

Senator MILLIKIN. That is right.

Mr. KATZ. Except America, and the difference between the two, Senator Millikin, is approximately 40 to 50 cents an hour in our industry, and assuming that that is correct, and further assuming that it takes 4 to 5 hours to make a watch, and it does not take any longer, then you have got a difference in cost of approximately $2 to $2.50, which is more than made up by the present tariff.

Senator MILLIKIN. You said here that we are now in a position where there is really no competition.

Mr. KATZ. That is correct.

Senator MILLIKIN. And that is a springboard for the argument that since we are able to move ahead on our own steam we can use less of this competition.

Mr. KATZ. Yes; but we do not do that.

Senator MILLIKIN. You are talking about the consumers, that we should have the importations to benefit the consumer.

Mr. KATZ. Yes; that is correct.

Senator MILLIKIN. But you are getting our costs here down to where we can do it at approximately the same cost as Switzerland so that argument falls?

Mr. KATZ. No; it does not fall at all, because you say, do not permit any of the other watches to come in; let the present domestic companies that have shown inability to meet this market go ahead and charge the consumer what they will.

Senator MILLIKIN. I would not carry the doctrine to that extreme. I would let some of it come in, in part, to meet your point. They should not get too fat, and smug, in this domestic market, but I would not allow the thing to continue where three-fifths or two-thirds, whichever set of figures you want to use, is in the hands of foreign countries.

Mr. KATZ. Senator Millikin, I wonder if it would not be better, and I am asking it as a question, to let each country produce what it can best. No one competes with America in automobiles.

Senator MILLIKIN. I emphatically have the most violent difference of opinion with that.

Mr. KATZ. I certainly would not like to have that much of a difference with you.

Senator MILLIKIN. If you were here all morning, I pointed out to you that there is not a thing that we produce, not one thing that cannot be produced elsewhere, and yet your theory would wipe out the sugar business, would ripe out the oil business; your theory would wipe out the minerals; your theory would wipe out the agriculture. You are not talking to the right ran to make that kind of an argument. Mr. KATZ. I did not make that kind of a statement either. We are talking about the watch industry. You see, Senator Millikin, your knowledge is very broad, and mine is very limited. I would like to stick to the watch business, please.

Senator MILLIKIN. I thought you had gotten away from the watches.

Mr. KATZ. I did not mean to.

Senator MILLIKIN. And announcing the general principle that you were doing that.

Mr. KATZ. We are talking about the watch business; I do not even know that very well. So let me stick to that.

Senator MILLIKIN. That suits me.

The CHAIRMAN. Go ahead.

Mr. KATZ. In view of the statement by Senator Millikin that both Mr. Lyne and I are wasting time, I do not like to waste certainly Senator Millikin's time on George Washington's Birthday. It really isn't necessary to finish this, because it is a repetition of everything that has gone on.

Senator MILLIKIN. I did not say you were wasting my time. I suggested that all of the parties to this group were wasting their time, not through any feeling that I have on the subject, but you will find that nothing is going to happen.

Mr. KATZ. I know I would like to meet you back there and ask you a question.

Senator MILLIKIN. I am just looking in this clouded crystal ball that I have, and I am suggesting that you ought to be out selling watches, because nothing will happen. All of you should be.

Mr. KATZ. That is an excellent thought, and I wonder why we all appeared here. How did this whole thing come up? May I tell you how? Because one company in America got itself in trouble, because of bad management, all of us came running down here, and most of us were trying to see how we can revive this sick child that has been sick for 25 years.

Senator MILLIKIN. The Federal Government fancies it has become the Lord, and the Lord looks after even the single fallen sparrow.

Mr. KATZ. Senator Millikin, I am very glad of that, because I may be the single fallen sparrow some day. So I am very happy about that. Senator MILLIKIN. You bring your tin cup down, and we will fill it up.

Mr. KATZ. But I am not going to bring it down here to have my tin cup filled as long as I am in the manufacturing business, because I do not believe that Congress has a right, in my opinion, and I do not understand politics, to bolster one company by any loan of $6,000,000 or any other amount, when that company has failed to show its ability to stay in business.

Senator MILLIKIN. You ought to examine the RFC loan files.

Mr. KATZ. Does that mean we should add to the list, if it is bad? I am finished, Mr. Chairman, unless you have a question.

The CHAIRMAN. I have no questions.

Mr. KATZ. Thank you.

Senator MILLIKIN. You have been a very fine and interesting witness.

Mr. KATZ. I would still like to meet you off the bench. I want to ask you a question.

The CHAIRMAN. The committee will recess until 2: 30 o'clock. (Thereupon at 1: 10 p. m., a recess was taken until 2:30 p. m., the same day.)

AFTERNOON SESSION

(Whereupon, the committee reconvened at 2:30 p. m., upon the expiration of the noon recess.)

The CHAIRMAN. Our first witness this afternoon will be Mr. James G. Shennan, presider f the Elgin National Watch Co.

STATEMENT OF JAMES G. SHENNAN, PRESIDENT, ELGIN NATIONAL WATCH CO., ON BEHALF OF AMERICAN MANUFACTURERS OF JEWELED WATCHES, ELGIN, ILL.

Mr. SHENNAN. Mr. Chairman and gentlemen, my name is James G. Shennan, and I am the president of Elgin National Watch Co. The American manufacturers of jeweled watch movements are Elgin National Watch Co. of Elgin, Ill., which also has a plant at Lincoln, Nebr.; Hamilton Watch Co. of Lancaster, Pa.; and the Waltham Watch Co. of Waltham, Mass. The Waltham company filed a petition for reorganization under chapter 10 of the Bankruptcy Act last December 28, and has been shut down since the first of the year awaiting action by the Reconstruction Finance Corporation on its application for a loan. The Bulova Watch Co., although the largest importer of Swiss watches, also has jeweled watch-movement manufacturing facilities for a part of its product in this country. I understand that Mr. Daniel J. Lyne, one of the trustees of the Waltham Watch Co., appeared before your committee last Saturday and made a statement on behalf of the trustees of that company. I am, therefore, appearing primarily on behalf of the Elgin and Hamilton companies.

Let me make clear at the outset that we are talking only about the industry which completely manufactures its own jeweled watch movements in this country. We are not talking about nonjeweled watches; that is to say, the inexpensive type most people think of as the old Ingersoll dollar watch. The figures I will use exclude the imports of this type-the watches containing only one jewel or no jewel at all. May I make two more things clear:

(1) We are not here to oppose the extension of the Trade Agreements Act. Neither are we opposing the general economic theory behind the trade-agreements program as a whole. We would, however, like to suggest that your committee give serious consideration to including in the bill a provision extending the escape-clause mechanism to existing agreements which do not contain escape clauses. Such clauses have been employed since 1942, but there are a few old treaties, including the one with Switzerland, which do not have them. Such clauses are required now by Executive order, but this is not retroactive. We feel that such a clause would give us greater assurance of favorable action to protect the industry by the administrative agencies than we now have.

The inclusion in the bill of a provision extending the escape-clause mechanism to trade agreements which do not now include them was also suggested by Senator Saltonstall at these hearings. This suggestion, likewise, would seem to be in accord with State Department

policy as expressed by Mr. Thorp, who stated, when he appeared before you last Thursday:

Every effort has been made to include as broad and comprehensive safeguards as possible in the agreements, so that if events prove that mistakes were made, there will be ample means of correcting them.

Apparently Mr. Thorp has overlooked the fact that there is no such safeguard in the Swiss trade agreement. If this were done, it would make possible the modification of the concessions granted without the necessity of first terminating the treaty.

(2) We would also like to call your attention to the very critical situation confronting the American jeweled watch industry and the direct relationship that situation bears to the national defense. From this point on I would like to address my remarks to these aspects of the problem.

The industry has appeared before your committee on other occasions in recent years. You have also heard other witnesses discuss the industry at these hearings. You are, therefore, generally familiar with the issues involved in the controversy. Certainly there is no justification for there being a controversy between any American industry and its own Government, particularly when the national defense is so prominent a part of the problem.

In an effort to avoid repetition let me reduce what has been said about the industry here, and elsewhere, to a brief statement of the basic differences of opinion, as I see them.

These are two in number:

(1) Whether we have exaggerated our importance to the national defense, and is the industry presently adequate for this purpose.

(2) Whether or not the industry has been hurt by the trade agreement with Switzerland. This latter has various subconsiderations, such as the wage differentials here and abroad, profits of the importers of Swiss movements as against those of the American manufacturers, the reasons for the Waltham failure, et cetera.

(1) The national defense importance of the industry: Last November 30, when we were called to Washington for a conference with the National Security Resources Board, we were told at that time, by that Board, after they had made a thorough review of the Nation's industrial war potential, that the American watch industry was one of the four most important industrial problems they were facing. We were also told that, in the event of another war, we would have to supply all of the commercial grades of timepieces, as well as the military timing devices which would be needed; that they could not count on the import of civilian watches from Switzerland, as they did during the last war.

Gentlemen, the American watch industry, including the facilities at Bulova's American plant and the now-closed-down Waltham plant, were not adequate to fulfill the military demand alone during the last war, let alone the civilian demand, too, in the event of a future war. Is anyone in a better position to know the adequacy of our facilities than we, especially with the experiences of the last war so recently behind us? We simply do not presently have the capacity necessary for carrying out the National Security Resources Board's expectations. The importers themselves have conceded that neither they nor any