The Plant Engineering Department, responsible for the engineering in both plants, was located at Hart. The Accounting, Sales and Billing Departments for both plants were centralized at Hart. All Purchasing and payments for raw materials for both plants were performed at Hart

6. The Plants closed together. To use the words of the Production Control Manager of the Bower Roller Bearing Division, "neither plant could operate without the other."

This conclusion is not only warranted from the administrative and functional integration of the plants but also from the very way in which the plants were closed. In the original plant closing announcement (October, 1971), the Company stated it intended to keep Hart open up to two years past the Shoemaker closing. In fact, however, the Shoemaker plant ceased all activity on November 1, 1973 and Hart production ceased but one month later, December, 1973. Thus, it is obvious that the Hart Plant, even though intended to survive independent of Shoemaker, could not last more than one month on its own.

Finally, the Union submits that the original certification has resulted in widespread individual inequities. Workers who spent all their lives exclusively in the production of passenger car bearings are being denied benefits solely due to the fact that they worked at Hart or were reduced to Hart in the final months of the phase-out period. At the same time, Hart workers who were displaced by Shoemaker reductions, only weeks or months before the total plant closings, received benefits if they were fortuitous enough to be "bumped" directly by a Shoemaker worker. If more than two bumps at Hart occurred, no one is entitled to benefits. Regardless of how the guidelines or clarifications are applied, the above results simply defy logic. The closing of the Hart Plant on the heels of the Shoemaker Plant, together with a seniority system which considered both plants as one unit, has created a quagmire that no set of carefully drafted guidelines can escape.

7. The last months of Hart operation were on Shoemaker work.-The November 1, 1973 termination date on the certification was picked on the basis of the Shoemaker closing date. However, the facts reveal that as the Shoemaker operations were being phased out, entire departments (machines, benches, workers and supervisors) were physically relocated into the Hart Plant and continued until the Hart Plant closing.

Thus, it is obvious that the November 1, 1973 termination date bears no relationship to the termination of the passenger car roller bearing operations. At a minimum, the certification-termination date must be extended.

In addition, after Shoemaker closed, over one million bearings produced at Shoemaker were rejected and returned for rework. All of this rework had to be done at Hart since Shoemaker had closed. This rework job on Shoemaker bearings kept Hart open longer that it otherwise would have been.

CONCLUSION

The Union believes that an extension of the certification to the Hart Plant is warranted on the basis of the involvement of Hart in under 4" bearing production and on the basis of the clear integration of the operations. Moreover, the inequitable results of the restriction of the certification to the Shoemaker Plant cannot be ignored. Out of an original 2,000 workers, of which at least 1300 had jobs solely because of under 4" bearing production. Yet only 200 are recognized as eligible for benefits.

MOTOR VEHICLE MANUFACTURERS ASSOCIATION

OF THE UNITED STATES, INC.,
Washington, D.C., July 23, 1976.

Hon. JOHN H. DENT, Chairman, Subcommittee on Labor Standards, Committee on Education and Labor, Rayburn House Office Building, U.S. House of Representatives, Washington, D.C. DEAR CONGRESSMAN DENT: At the conclusion of my testimony on May 6 before the Subcommittee on Labor Standards, you asked me to attempt to provide quantitative estimates of the impact of the operation of the U.S.-Canadian Automotive Products Trade Agreement upon employment in the United States, in order to assist the Subcommittee in its study of the Agreement. I must report that due to the methodological difficulties of taking into account all of the critical factors that must be considered in such a calculation, we have been unable to make quantitative estimates that we believe are economically sound and that would make a positive contribution to your deliberations.

While, on the basis of our intensive efforts, I do not believe at this time that accurate quantitative estimates are possible, it is definitely possible to gain a clear understanding of the nature and direction of the impact of the Agreement upon employment in the United States through a non-quantitative, though nevertheless sound, economic analysis. I will present the logic of that analysis in this letter.

Our analysis is fully consistent with, and supportive of, my testimony before your committee. Our conclusion is that the Agreement has had a beneficial impact upon employment in the United States. At the same time, the Agreement has had a beneficial impact upon employment in Canada as well.

When the United States and Canada entered into the Agreement, they reeognized that the interests of industry, consumers, and labor, in both countries, would be served by "sustaining high levels of efficient production and continued growth in the automotive industry", as the preface to the Agreement states. The objective of the Agreement was to increase the welfare of the citizens of both nations by lowering trade barriers and allowing a more efficient pattern of motor vehicle production to evolve. My testimony of May 6 demonstrates how the Agreement achieved this desired result. The clearest indicator of this rationalization of production has been the tremendous expansion in automotive trade between the two countries which has increased about 2,000 percent in the last ten years.

The balance (the net surplus or deficit) of trade in automotive products between the United States and Canada has historically been used as an indicator of the benefits or costs of the Agreement to the U.Š. and Canadian economies at any given time. The reason is understandable: the trade balance data are the only readily available and relatively simple indicator of the operation of the Agreement. Nevertheless, as I testified before your committee, the balance of automotive trade does not provide a comprehensive measurement of the benefits of the Agree ment generally or the employment effects specifically. As the analysis to follow will make clear, the trade balance is a poor reflection of only some of the effects of the Agreement. It is the total expansion of automotive trade, and not the balance at any one time, that is relevant. Critically, the total expansion of automotive trade is important because it is an indicator of the degree to which automotive production has become rationalized into more efficient patterns in both countries. It is from this rationalization of production and increased trade that the benefits of the Agreement flow.

I would like to take this opportunity to supplement my statement before your Subcommittee regarding the inappropriateness of the trade balance as an indicator of the effects of the Agreement by commenting upon the quantitative estimates submitted by the U.S. International Trade Commission, which were prepared at the request of the Subcommittee.

The employment estimates provided to the Subcommittee by the ITC suggested that trade in assembled autos under the Agreement has resulted in a loss of jobs in the United States every year since 1970. However, one important shortcoming of the ITC analysis is that it is incomplete. It is based only on trade in assembled automobiles. If the automotive trade balance is to have even limited relevance as an indicator of the effects of the Agreement, any analysis based upon it must take into account the total automotive trade under the Agreement and not only a part of it.

Trade in automotive products between the United States and Canada is com posed of assembled vehicles, including automobiles and commercial vehicles, and original equipment parts. My staff has made estimates, to which I referred in my testimony, which take into account the total trade under the Agreement, that is, trade in both assembled vehicles of all types and of original equipment components.

When this total trade is taken into account, the results differ sharply from those derived by the ITC. In 1974, for example, the ITC found a net loss of 8,20% jobs. However, taking into account the total trade under the Agreement, MVMA estimates a positive job impact of about 22,000. In 1974, total North American automotive sales were $50.8 billion and total employment was 934,000, yielding a level of $54,402 per employee. The U.S. automotive trade balance with Canada that year was $1.2 billion which, divided by $54,402, indicates an employment level of about 22,000 jobs.

The reason for the disparity of the two results is that, while under the Agreement the United States imports a larger number of assembled autos from Canada than it exports to Canada, the deficit is more than compensated for by the large US surplus in original equipment parts exports to Canada. While vehicles assembled in the United States contain minimal Canadian content, vehicles which are

assembled in Canada contain substantial U.S. content. In 1974, the U.S. exported $3,226,000,000 worth of original equipment parts to Canada while importing less than half of that figure. This large export market for U.S. original equipment parts, which would not have been possible had the Agreement not come into effect, is primarily responsible for the U.S. balance of trade surplus under the Agreement in the last few years.

While use of the total automotive trade balance suggests a positive employment impact of the U.S.-Canadian Agreement, I nevertheless, cannot endorse this method of evaluating the U.S.-Canadian Agreement with respect to either the U.S. economy or the economy of Canada. There are three principal reasons why I believe this methodology to be inappropriate for analyzing the effects of the Agreement.

(1) Conceptually, a balance of trade is a zero-sum game situation where (assuming only two countries are trading) one country can only “gain” (sustain a surplus) if the other "loses" (sustains a deficit). This is not an appropriate concept for analysis of the U.S.-Canadian Automotive Agreement.

As total trade grows, all countries participating can gain. This is clearly the case with respect to the U.S.-Canadian Agreement. Between 1964 and 1975, trade under the Agreement grew from $700 million to over $13 billion, a 19-fold increase. I will explain the implications of this growth in trade in more detail below.

(2) A calculation of the effects of the Agreement based on the trade balance assumes that U.S.-Canadian automotive trade would have been the same in the absence of the Agreement.

As I stated in my testimony before this Subcommittee, the Agreement was negotiated to defuse a potentially serious trade conflict. Had the Agreement not been successfully negotiated in 1964, even the level of trade at that time, $700 million, could most probably not have been sustained. A decline in trade would have caused a concomitant contradiction of employment in both countries.

A trade balance calculation cannot take into account the level of employment in the U.S. industry that would have existed had the United States not had access to the growing Canadian automotive market.

(3) Most fundamentally, analyses based upon the trade balance ignore the effects of increased productivity and efficiency on employment, on prices, and on the real income of workers.

The principal objective of the United States and Canada in entering into the Agreement was the creation of a broader market for automotive products within which the full benefits of specialization and large scale production could be achieved. This was achieved by the liberalization of automotive trade between the two countries which permitted the rationalization of component production and assembly.

The realization of this objective has had effects throughout the economies of both the United States and Canada, some obvious and direct, others subtle and indirect. As a result, computation of the exact number of jobs gained or lost is not possible. I propose to consider qualitatively the economic changes that the Agreement has brought about and draw some conclusions about the long-term benefits in terms of employment and general economic welfare in the United States.

The increase in U.S. exports of original equipment components to Canada has had several favorable effects on the U.S. economy. First, the increase in exports directly stimulates jobs in auto parts manufacturing. Second, by producing automotive parts in larger volume, scarce resources are used more efficiently and economies of scale are realized. Therefore, it is highly likely that productivity in C.S. automotive parts manufacturing has improved.

The increase in productivity improves the general economic welfare of the U.S. Real income is higher and automotive components prices are lower than they would be otherwise. Increased real income translates into a higher standard of living for all citizens. Increased U.S. exports of original equipment to Canada benefit both the automotive sector and the economy as a whole.

As I demonstrated in my statement before this Subcommittee, the Agreement has resulted in increased efficiency in the Canadian automotive industry. The U.S. can expect to benefit from this improvement in the Canadian industry because of several interrelated effects: general stimulation of the Canadian eocnomy due to more efficient allocation of total economic resources, stimulation of the Canadian automobile market due to a reduction in relative prices, and higher import demand for U.S. products due to increased purchasing power of Canadian

consumers.

Prior to the Agreement, the Canadian automotive industry was substantially less efficient than its U.S. counterpart. This disparity was caused by the inability

of the Canadian automotive industry to realize the advantages of large scr production. The Agreement essentially created one North American market f automotive production. Efficiency in the Canadian industry increased due higher and more specialized levels of production.

Increased efficiency in one of Canada's major industries results in better utiliz tion of the country's total resources. As the Canadian economy expands and comes more efficient, the United States, as Canada's major trading partner, al benefits.

Other things being equal, higher productivity leads to a fall in relative pri and/or an increase in wages. There is evidence that both of these effects ha taken place because of the Agreement.

According to data collected by the U.S. Department of Commerce for t Annual Report of the President to Congress on the Operation of the Agreemen there has been a significant reduction in wholesale price differentials betwe motor vehicles assembled in the United States (expressed in U.S. dollars) and Canada (expressed in Canadian dollars) over the life of the Agreement. This d cline in relative price had two effects that can be related to employment in t United States. First, the lower new car prices stimulated Canadian new c sales and thus U.S. exports to Canada of vehicles and original equipment cor ponents. In addition, the improved efficiency of the Canadian industry ma North American automotive products more price competitive in sales to Canadia consumers relative to imports from third countries such as European countri and Japan. Therefore, a higher percentage of increased Canadian motor vehic purchases were of North American vehicles than would have been the case in t absence of the Agreement.

Second, the decline in relative prices released purchasing power. As a resul Canadian consumers have more money to spend on other goods and service In 1975, merchandise imports were 22% of Canadian GNP. Of those import 68% or 15% of total Canadian GNP was accounted for by imports from th United States. Therefore, U.S. workers in many sectors benefited directly fro improved efficiency in the Canadian automotive industry.

The other major effect of increased productivity in the Canadian automotiv industry was an increase in real wages, which also contributed to increased re purchasing power in the Canadian economy. Workers' earnings in the Canadia automotive industry rose from 69 percent of their U.S. counterparts in 1964 91 percent in 1975. The effects of increased purchasing power described wit respect to auto prices also apply to increased real wages in the auto sector.

The impact of the U.S.-Canadian Agreement on the U.S. and Canadian eco omies in the areas that I have outlined have resulted in an increase in U.S. en ployment and in the real income of U.S. workers. Data and statistical technique are not reliable enough to measure the effect of the Agreement in terms of th specific number of jobs. Nonetheless, the history of the last several hundred yea indicates clearly the importance of rising productivity and real wages in improvin the standard of living for all citizens.

In conclusion, I would like to emphasize that an assessment of the U.S.-Cans dian Trade Agreement cannot be made by focusing solely on employment. To foc singularly on the counting of jobs is to miss one of the most important benefit of the Agreement. It is not just that the Agreement has resulted in more jobs by that these jobs are better paying. The productivity gains brought about by th Agreement have resulted in higher real wages and a higher material standar of living in both countries.

In the final analysis, it is only against this background that the Agreement ca be judged a success or a failure. I hope you will find this letter to be of help i your deliberations.

Sincerely yours,

W. D. EBERLE.

MOTOR VEHICLE MANUFACTURERS ASSOCIATION,
OF THE UNITED STATES, INC.,
Washington, D.C., August 16, 1976.

Ms. JULIE DOMINICK,

Subcommittee on Labor Standards, Committee on Education and Labor, U.S. House of Representatives, Washington, D.C.

DEAR JULIE: In 1973 Senator Ribicoff asked the GAO to study a question that has also been raised by you and Mr. Dent: Why the differences in statistics measuring U.S.-Canada auto trade?

After three years the GAO findings have been released and are enclosed. The GAO reconciles the figures (consistent with our own submissions to the Subcommittee last year) and concludes:

"Both (the ITC and Commerce) methods have statistical validity. When fully explained, they can provide a better insight into the overall results of U.S. automotive trade with Canada."

This finding does not "settle" the issue but it confirms both the statistical validity of the measurements in the President's annual report (which MVMA endorses) as well as the persisting complexity of the Auto Agreement. We continue to hold the position that, notwithstanding the GAO's determination of statistical validity of the ITC method, the data presented in the President's annual report is the more accurate measurement of the actual trade and, therefore, the more appropriate to employ in a policy analysis.

Of course, I am always at your disposal to discuss these issues. I was disappointed (as was Bill Eberle) that our attempts to quantify the employment impact of the Agreement did not bear fruit. I hope our response was of benefit in shedding a little more light on this complex issue.

Best regards,

Enclosure.

Hon. ABRAHAM RIBICOFF,

JOHN V. Moller,

Manager, International Affairs Department.

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., December 6, 1973.

Chairman, Subcommittee on International Trade,
Committee on Finance, U.S. Senate.

DEAR MR. CHAIRMAN: Your March 8, 1973, letter asked us to investigate the trade figures presented in a print by the Senate Committee on Finance of the Sixth Annual Report of the President to the Congress on the Automotive Products Trade Act of 1965" and an addendum that contained statistical data furished by the Tariff Commission. The report and the addendum contain information relating to U.S. automotive trade with Canada for calendar year 1971. Department of Commerce officials prepared the report, including one schedule which showed the 1971 automotive trade balance with Canada to be a deficit of $1,185.3 million and another schedule which showed this balance to be a deficit of $197 million. A third schedule, prepared by the Tariff Commission and included n the addendum, showed the balance to be a deficit of $1,374.8 million. Your letter tated that the explanation for these wide differences, appearing on page 15 of the report, is inadequate. The results of our analysis of the components of the three deficits and the reasons for the differences between the three deficits are discussed below.

Both the $1,185.3 million deficit calculated by Commerce and the $1,374.3 nillion deficit calculated by the Commission were derived from Commerce's Bureau of the Census statistics. The important figures were based on legally defined customs values, and the export figures were based on values defined in Census Bureau regulations. The "customs value" is legally defined for imports as he wholesale market value of the item in the foreign country from which the item simported. Regulations define the "value of exports" as an amount based on elling price (or cost if not sold), including inland freight, insurance, and other charges to the U.S. port of exit.