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and one day I decided we had better take a look at them and see what kind of equipment they have and their habits and their business. So we went up there. They had a bunch of old clunkers. The machines were 20 or 25 years old, called the plunger type. The latest type in injection molding is called the screw type. They had a horse and buggy operation, yet were able to undersell a good American supplier by 10 percent.
Mr. GAYDOS. Can I interrupt you right there. I want to make one point. I want to thank you for being here, believe me, because it's a privilege for the committee to hear you. You see, it's Americans participating in their government-you're not coming here as an adversary but let me direct this little question to you and I'm not blaming you. You admit it right there that because of many circum stances you had to take advantage of a foreign supplier because you had to keep competitive, you had to go out of the country. You see how complicated it gets. You're a good American and your background indicates that, yet because you were in business you were forced to cross that border and pick up that plastic knob to make your product sell. Now that is the problem. You have to be fairwell, not fair, I want you to understand that is what makes our problem so difficult because there are extenuating circumstances. There is a reason you were forced into it and down deep in your heart I know you wouldn't do it if you could have got it in this country.
Mr. DAY. Except that I started a company of my own with the latest and finest equipment and now I make this part at cost and only bare cost to compete so I don't give it to Canada.
Mr. GAYDOS. But if that man was only making the knob, he couldn't make it at bare cost. He couldn't survive in our system, he has to make a profit.
Mr. DAY. He couldn't survive in the Canadian system, he makes a profit on this. His costs are less. Mr. Gaydos, let me tell you something. We started a football game 10 years ago and we say, "Hey, Canada, you're kind of weak, you have 11 guys and we've got a pretty good backfield, we don't need any linemen, we'll play you, we've got 4 guys on our team and you've got 11." That's how we started the game.
Mr. DENT. Give us the score. What was the score?
Mr. DAY. I'll tell you, they're 30 points ahead of us right now. Mr. GAYDOS. And only a minute in the last quarter.
Mr. DENT. Have you ever evaluated the loss of these jobs directly to a loss of business due to the Canadian Pact?
Mr. DAY. Directly!
Mr. DENT. Did you say that is the reason?
Mr. DAY. I lost the business and when you lose that portion of the business you lay the people off.
Mr. DENT. Did you lose it to the Canadian or did you lose it to a American competitor?
Mr. DAY. I lost it to a Canadian. I can hold my own with my American competitors because I'm competitive. I have the equip ment, the people, the knowhow, the industriousness to hustle to a the job. I'm a small business. I have to work many hard hours a da and I have to hustle and I have to have the finest people and the bes equipment to do it and I can compete with my American competitor
but I can't compete with somebody that starts a ballgame with 12 points against us or they start with 11 guys and I got 4. It's unfair. Let me make just a couple other comments. You know small business comprises 98 percent of the companies in the United States. These are employers under 500 people and this includes the mom and pop stores and the gas stations and stores and so forth. We represent 43 percent of the gross national product. Fifty-five percent of all the national private nonagricultural work force are small business and the reason I'm saying that is that I'm here and I don't know if you have other small businesses here but I know you have a lot of big business who come in and you have the unions that come in all the time. Most of the small business can't afford to go to Washington and spend time. and do this. So I think we have to be heard at the grassroots level of the free enterprise system. We work hard.
The other day an Internal Revenue man was in, a young fellow and he was quibbling with my accountant about some little depreciation thing and he said it amounts to $200 and I said, "Look, forget it, take it." I said, “After all, your boss is my partner." and he looked at me and I said, "Yeah, your boss is Uncle Sam, and he owns 50 percent of my business and I know I have to pay taxes." We need taxes in this country. We need money to support our Government but by giving Canada 150,000 jobs or whatever it is, that income is going into the Canadian Government and not into the United States. Mr. DENT. Do you belong to the Chamber of Commerce out there? Mr. DAY. Yes; I belong to the local Chamber of Commerce in Detroit.
Mr. DENT. What is their attitude?
Mr. DAY. I haven't talked to them.
Mr. DENT. Maybe you ought to start. They tend to represent small business and they are very supportive of free trade and the Automotive Pact.
Mr. LIEBENSON. May I interject, Mr. Dent. While there is supposedly a relationship between a local and a national chamber, you will find that the main street merchant which generally constitutes a local chamber, his policies will be totally different than the national chamber whose various committees are dominated by major companies, and the major company policy and that is when they are appearing before Congress they are representing the major company interests, although they say they are representing the main street merchant and you now know in your own districts, if you go to the main street merchant, his philosophy and his thinking is entirely different from the national chamber.
Mr. DENT. I approved of that. In 1961 and 1962 when we were holding hearings on the Reciprocal Trade Act, I was a member of the Chamber of Commerce of the city of Jeannette, Pa. I presented my position to the Chamber of Commerce, who were merchants getting cheap products from Japan, and selling them at a higher profit. Nevertheless, they unanimously voted to support my stand against the Reciprocal Trade Agreement. When we go to local people, talk to them, lay the cards on the table and show the effect of any kind of a trade agreement, we find the local chapters listening.
Mr. LIEBENSON. Except in a city like Detroit where you have so many major companies. That chamber would tend to be, because their income comes from the major firms
Mr. DENT. I understand that. You're not going to win fair allies in the big cities. You're going to have to win this thing i small communities, in the towns that are losing plants and indu Mr. DAY. I'll look into that.
Mr. GAYDOS. I'd like to make this observation again, I wa emphasize the fact that you should not infer from some of the ques I might have asked or in some of my offhand comments, tl mean any disrespect to you, but rather I commend you for h thought enough of your Government to come down here. Y down here hopefully as an affirmative witness to try to help while you're here along the lines of what the gentleman has outl we're hearing about a problem that might affect you personally. talking about foreign investors.
Now, the Canadian people have what they call a CDC, Cana Development Corporation, financed by the Government where are in the process of reacquiring all the controlling interests in al countries that have bought up Canadian interest and this is a ma of law. Mexico does it and here is where our problem comes in. chairman and I on a boring subject, and I have to emphasize because most people won't even take time to read about it, we in duced legislation and we're trying to get support on the legisla which would put a reasonable limitation on all this extra money aro the world coming in and buying you out and buying your compe out and running you out of the business because they have all kind money. Our legislation is very reasonable. It puts a 5-percent lim tion on a controlling interest and a 35-percent limitation on nonvoting stock of the corporation and we're having a difficult tim I'm just mentioning this to you. In the course of your every business activities and life you may come across it. We're proba going to ask you again to come back and help us but I hope you not victimized. This problem is not isolated, it transcends many, m other problems. In my original statement which I made so sincerel you, we find it grossly difficult to marshall these facts because we h a very, very clever adversary and a lot of hidden-many, people have interests; the importer, the franchise owner. We h enemies in Government. Not enemies per se, but enemies to philosophy. They will do everything to take the opposite position So there is a difficulty we have as a committee and what they a defunct, nonproductive Congress which now the public shares t opinion of us.
I want you to know in closing and I won't take any more of y time, you've come down here and you've been exposed to a little of the problems we have and I want you to know I appreciate y true 100-percent American attitude. You have demonstrated that how you served the country and now in your business role and I h there is some way in our legislative enactments we can make yo business activities in the next 10 or 20 years of your lifespan pay y off to where you've gotten proper reimbursement for the servi you gave your country. I want to thank you for being here.
Mr. DENT. I think it's particularly important to note that recen the President denied protective relief to the footwear industry. said imports were not injurious to the American economy, an opini totally contrary to the International Trade Commission's. At t
same time, however, he recommended that trade adjustment assistance benefits be expedited for these workers. Now, if you say there is no harm to the economy, and that there are no jobs lost, you cannot turn around and say expedite their compensation for losing their jobs.
Mr. DAY. I'm not here to look for a Federal handout for what I might have lost. That's an interesting thing and I'll look into it. I'm only here to talk about jobs that we have lost abroad and that includes Japan. If you'll let me go on, I'm almost through.
By the way, I want to touch on Investment tax credit which you have raised from $50,000 to $100,000 on used equipment. I can't afford to buy new equipment the way General Motors or Chrysler could. So they raised the base from $50,000 to $100,000 per year. For one new machine I need to manufacture this gear shift lever, new, it costs $140,000, so I'll buy a used machine for $60,000 or $70,000 and I need a couple of them so that's going to be $120,000, so all I can write off and take the investment tax credit is $100,000 of that amount and yet a big company can take a new machine and take the entire investment tax credit.
So what I'm saying is the investment tax credit is too low and it penalizes small business. So kind of take that into consideration. Mr. DENT. Did your organization or you, when the legislation was going through, contact your Representative or let your views be known to the committee?
Mr. DAY. I haven't written a letter to Congress-I wrote a letter to you and I wrote a letter to a friend of mine a former Congressman. He lost in the last election. A very close friend of mine.
Mr. DENT. Did you get an answer from me?
Mr. DAY. Did I get an answer? Oh, yes. I mentioned OSHA and all these things I have to contend with that Canada doesn't. I mentioned the trade pact and I'm just going to go on.
Incidentally, we talk about retaliation. Mr. Gaydos said the reason for this was that Canada's volume was too low and therefore, they needed more volume to lower their costs to invigorate the economy in Canada. All well and fine. The position of General Motors is that this agreement was designed to prevent retaliation between Canada and the United States but let's talk about retaliation.
A U.S. citizen cannot own land in Canada today. This is a new move. We have this in Detroit. They own cottages across the lake. There's a big spirit of nationalism in Canada. It's like we were 200 years ago in 1776. You can't start a subsidiary in Canada and have control and have members of the board of directors. This is pretty loaded, this is pretty strong. They are preventing U.S. directors from sitting on Canadian boards of directors. They are cutting us off on crude oil by 1980 and Trudeau didn't say they had a problem and we would like to take a look. He put the gun to our head and he said this is it. He's a smart cookie. He said this is it and you're going to be cut off in crude oil by 1980.
So when I see these revolting figures-there is a trade deficit of $1.8 billion. I wish it was $4 billion and then maybe Canada would say, "We need some U.S. dollars to offset this, let's sell the United States crude oil." That's the only way to do it.
By the way, they're going to put a 50-percent publication tax on all magazines and publications going into Canada. Time magazine
is very concerned about this because they will lose a hell of a money in Canada.
And I mentioned to you they have been dealing with Castr the whole trend in Canada is the hell with you and the United S we're going to have this spirit of nationalism. We're going to wa do things ourselves. Fine, let's get our fingers out of the auto ind but we have to protect the investment of GM, Chrysler and some way. Let them go their way.
I want to digress for just a second about Japan. I was in T and I have a man there who represents us. He said he wanted to a Pontiac and I said for him to go ahead and buy one. Then he he couldn't buy one and I wanted to know why. He said it would $15,000 and I said that was 200 percent tax and he said yes. I him to buy a Toyota. He said he couldn't. I asked him why he cou buy a Toyota. He said he had to wait a year. I asked him why he to wait a year and he replied that they're all sent to the U States. That takes preference. All the employment in Japa Japanese labor.
Mr. DENT. Mr. Day, it might be very interesting if you w read the records of this committee because what you're saying is to what we've been saying for 18 years.
Mr. DAY. Just to go on, Nixon imposed a 10-percent tariff-N did several years ago.
Mr. DENT. I want you to tell me what that 10-percent tariff Mr. DAY. All of a sudden my Canadian competitor was on an e basis with me because his costs were my costs. He was compe with me headon and all of a sudden, I think it was the customs dep ment that said that is illegal and it's off. Nixon said we got suck on the wheat deal and you can say what you want about Nixon know he made one big mistake but I think he was a pretty cap guy and he recognized this. I'm not advocating we put a great tariff on everybody, 10 percent on Japan or Canada. I think we ha sensitive, delicate situation because Japan is important to us, m so than Canada. Japan is very important as our defense in the East. So we have to work with Japan.
I have some suggestions if you want to listen to what I recomme First of all, I think we ought to terminate the auto agreement effec July 1, 1977. Just cut it right off, don't amend it. It's too comp now. Stop it and impose a 2 percent duty on all motor vehicles parts coming into the United States as of July 1, 1977. Acceler that to 3 percent as of July 1, 1978, 4 percent as of July 1, 1979 an maximum of 5 percent in 1980. That happens to coincide at the t they are going to cut us off on crude oil. So they will come back say this is a retaliatory thing and it isn't. It's just fair-play.
Mr. DENT. Retaliation. This threat of retaliation has always b a one-way street. We never threaten to retaliate.
Mr. DAY. You know, David sits there with that slingshot and got a big stone and we're big Goliath. We're kind of boobs and he h us right in the jaw and knocks us over each time. I think it's time used a little common sense and tell Canada they are no longer lit babies. You know that when your son and daughter get to a cert age you've got to cut them loose and let them get out and shift themselves. You can't baby them the rest of their lives.