The situation as of this week, as of today, November 3, implies that we are going to lose to export transactions 17 or 18 or 20 million hides, thereby making it impossible for the tanners to sustain the production needed for our civilian economy and to fill the outstanding contracts for military boot shoes and leather equipments. Senator PROXMIRE. And you are not asking for an exemption, what you are asking is the ceiling be applied to export sales? Mr. GLASS. Yes. Senator PROXMIRE. Have you taken that to the Cost-of-Living Council? Mr. GLASS. We have brought it to their attention. Mr. GLASS. Nothing. Senator PROXMIRE. How long ago did you bring it to their attention? Mr. GLASS. Last night. We knew about the situation previously. Senator PROXMIRE. The first time you formally presented your case was last night? Mr. GLASS. Yes. Senator PACKWOOD. It is apparently a sellers' market worldwide in hides. Why has Argentina quit exporting hides? Mr. GLASS. For two reasons, first, they had a moderate shrinkage in the slaughter in Argentina, due to the fear of devaluation and the owners hold back on marketing of hides in the expectation of getting more after the devaluation becomes effective. The second reason is Argentina is doing what every other country in the world except the United States has been doing, trying to retain its raw material resources for domestic processing in order to combine the interests of agriculture and labor in enhancing the value of their domestic resources. Argentina is subsidizing the domestic production of leather. Senator PACKWOOD. Is Argentina a shoe-producing country? Senator PACKWOOD. What do they do to the hides in Argentina? Mr. GLASS. They produce shoes to a very growing extent. Argentina has a subsidy system which involves no duty export tax whatsoever on the export of shoes, a minimum export duty on export of leather, a 30-percent tax on the export of hides, which in our construction is direct subsidization of the tanning industry of Argentina. Senator PACKWOOD. So at the moment they can effectively consume all the hides they have? Mr. GLASS. Last May, Argentina imposed an embargo on the export of hides. In the first 9 months of this year, the Argentina export of hides declined by more than 50 percent. That is the reason why the buyers from Eastern Europe and Japan are thronging our markets, paying prices we are not allowed to pay, legally, nor could we pay economically, because the tanners have to respect the ceilings. Senator PACKWOOD. I have no further questions. Senator PROXMIRE. Thank you very much, Mr. Glass, we very much appreciate your testimony. (Mr. Glass' complete statement follows:) STATEMENT OF IRVING R. GLASS, PRESIDENT, TANNERS COUNCIL OF AMERICA I am Irving R. Glass, President of the Tanners' Council of America, the trade association of the U.S. leather industry. I am here on behalf of the leather industry to urge a vitally needed amendment to the legislation authorizing price stabilization controls. I am certain that shoe manufacturers completely support our proposal. And this is, without any qualification whatsoever, in the clear interest of the nation's consumers and essential for the achievement of price stability. Our experience since August 16 has confirmed what we learned during World War II and during the Korean episode. Price control of industrial raw materials such as cattlehides is impossible domestically without concurrent action to control price or quantity of export sales. The freeze announced by President Nixon on August 15 applied to domestic sales of cattlehides but exempted export transaction. That exemption has become a vast loophole. The consequences threaten the operations of U.S. tanners and shoe manufacturers. Producers and dealers of cattlehides have their attention focussed on the lure of foreign sales without price restriction. Who wants to sell to a domestic tanner when business can be done with foreigners at 15% or 20% more than the honest domestic ceiling price? We are not talking about minor quantities to begin with. Last year this country exported more than 40% of our hide production. The major buyers of our hides were Japan and Eastern Europe, Western Europe and Mexico. When such a huge proportion of our hide production moves abroad, the exemption from price control was bound to have disastrous consequences. Foreign buying has been helped, obviously, by the lower rate of the dollar in most of the principal trading countries of the world. Consider the consequences of what is now happening. First, cattlehides are moving out of the country at an accelerated rate because foreigners are bidding more than sellers or buyers can pay under domestic ceilings. Second, I regret to say, conscience is being strained by "hair splitting" when sellers advise their domestic customers that no hides are available because prices from abroad are higher. That can only result in the erosion of the ceiling price structure for hides. Third, the cost of raw material to domestic leather and shoe manufacturers must rise as the pressure mounts. That means that an exceedingly important cost-of-living commodity, shoes, must go up in price, or shoes will not be made, or will deteriorate in quality. We call to the Committee's attention a background factor which has seriously aggravated the problem. Argentina is second only to the United States as a supplier of hides to the world market. Early this year the Argentine government put an embargo on hide exports. That was done ostensibly because of reduced cattle slaughter in Argentina. The effect has been to reduce very seriously the quantity of hides shipped by Argentina this year to the countries of Eastern Europe and Western Europe. In fact, the drop in Argentina exports was more than 50% in the first nine months of 1971. For that reason foreign buyers have had to turn to the United States. We propose that in the amended Stabilization Act now under consideration by the Committee a positive provision be included to deal with such situations as the tanning and shoe industries have encountered. We suggest that in the case of any industrial raw material, of which exports account for more than a stated percentage of U.S. supply, that the Stabilization Law require that the same ceiling prices be applicable to export sales as to domestic sales. This requirement should be mandatory and be effective immediately upon the promulgation of an Executive Order with respect to stabilization of commodity prices. It is certainly conceivable that the suggestion we make may not itself be adequate to deal with the escape of badly needed raw material from the United States. The exceedingly dangerous situation now facing the country in cattle hides may have to be controlled by other and positive administrative means. But, the very least that must be done to prevent such situations from developing is equality of treatment for export and domestic rates. That, we believe, should be mandatory in the legislation controlling any executive price stabilization orders. Senator PROXMIRE. The committee will stand in recess until tomorrow at 10 a.m., at which time we will continue these hearings. (Whereupon, at 12:30 p.m., the hearing was adjourned, to reconvene at 10 a.m., Thursday, November 4, 1971.) ECONOMIC STABILIZATION LEGISLATION THURSDAY, NOVEMBER 4, 1971 U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, Washington, D.C. The committee met, pursuant to recess, at 10:08 a.m., in room 5302, New Senate Office Building, Senator John Sparkman (chairman of the committee), presiding. Present: Senators Sparkman, Proxmire, Cranston, Stevenson, Gambrell, Packwood, Roth, Brock, and Taft. The CHAIRMAN. Let the committee come to order, please. We are continuing hearings as to S. 2712, a bill to extend and amend the Economic Stabilization Act of 1970. As you know, this bill was proposed by the President in implementation of his economic stabilization program. Our first witness today is an old friend, Mr. Andrew Biemiller, director of the department of legislation of the AFL-CIO. May I say I have had the pleasure of serving in the House of Representatives with Mr. Biemiller and he has been before this committee a good many times. But we welcome you back this morning and will be glad to hear from you at this time. STATEMENT OF ANDREW J. BIEMILLER, DIRECTOR, DEPARTMENT OF LEGISLATION, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATION Mr. BIEMILLER. Thank you, Mr. Chairman. May I just simply observe that I enjoyed those years of service with you very much. May I also say before I start on my text that President Meany very much wanted to be here himself. And you will notice the testimony is in his name. He has read the testimony and subscribes to it completely. The only reason he is not here is there is a meeting of the pay board this morning. The CHAIRMAN. I heard that on the radio. Mr. BIEMILLER. Right. The CHAIRMAN. Thank you very much. You have given us a lot of food for thought in your presentation. By the way, your entire paper will be printed in the record, including the exhibits. I assume these are the ones you referred to in your presentation (see p. —). Mr. BIEMILLER. Right, Mr. Chairman. The CHAIRMAN. Senator Proxmire? Senator PROXMIRE. Well, this is an excellent statement, I think, by the AFL-CIO. I think it's so important, Mr. Biemiller, that you stress that the Congress should know exactly what it is doing before it acts, and that we do not now know what we are ratifying until we see what the Pay Board does; what the Price Commission does; until we have some idea of how this works. There is no hurry. This doesn't expire until April 30 of next year. We have 6 months. And for us to act before that would seem to me to be very, very foolish. I am so glad you stress, and stress so hard, that it should be tested by actual operation. I think we have-and I think you underline in your statement so well-the benefit that experience can bring to us in this kind of an area. Frankly, I applaud the freeze. I favored the freeze and I made no bones about it. I thought it was a wise action. And I still think it was necessary. But I must say that my official judgment was that it was working, in the testimony before the Joint Economic Committee of scores of witnesses; we had the most exhaustive testimony, I think, of any committee. We had 5 solid weeks. They all seemed to think it was working well. And then the CPI comes out, as you point out, the Consumer Price Index, and it shows us it was not working; that the frozen commodities went up at an annual rate, if you annualize it, of 4.8 percent. Furthermore, and this is something that your article, the article that you quote from the New York Times, underlines so well, this article by Grace Lichtenstein, that we just are not getting any enforcement of the violations by the administration; the article concludes: With 13 days of the freeze left, the Justice Department has sued, and named, a nationwide total of six violators. Only one of those cases, that of higher season ticket prices charged by the Atlanta Falcons football team, involves a price increase. Four others, one each in San Antonio, Austin, Portland, and Dayton, concern rents; and the sixth is a case of teacher salary increases in New Orleans that the Government lost. So obviously, we are not getting in anything like the kind of enforcement which, on the basis of the clearest Government statistics which we cite, we should be getting. Let me ask you, Mr. Biemiller, about the objection that we have gotten from those who favor the administration people, who favor extending this for a year, that if we do not do so it will create uncertainty in the business community; that this would mean that the economy would continue to suffer. Arthur Burns said something like that. And Secretary Walker said the same thing: that without prompt extension by the Congress, that we are going to have continued economic stagnation. Mr. BIEMILLER. We just simply do not agree with that decision. We think we may have some continued economic stagnation, but not because the Congress doesn't extend the act. We are having economic stagnation because of the fact there is continuing unemployment, and we can't find one single job that is being created by the President's program. And we think when we get around to really tackling the question of unemployment, that is when economic stagnation will stop, and not until that time. When we have a situation in which about 28 percent of our productive capacity is not being utilized at all, when the figures show that during the last quarter we weren't even keeping up with the rate of increase needed to just meet a growing population needs, it is true that we are in economic stagnation, but you are not going to remedy that until jobs are found for people in this country. Senator PROXMIRE. Can you comment on the actions of the Pay Board yesterday? Mr. BIEMILLER. I know nothing more than what is in the papers. Senator PROXMIRE. I was interested to hear your proposal which I think is an original proposal-I haven't heard it before that the Senate might confirm the public members of the Pay Board, and also all seven members of the Price Commission. Mr. BIEMILLER. I presume that you would have to consider all seven members of the Price Commission as published; yes. Senator PROXMIRE. That makes a lot of sense. After all, this is a great power these people have; perhaps the greatest economic power of anybody in this society. We confirm second lieutenants, captains; we confirm all-we used to confirm postmasters, you know, until recently. Mr. BIEMILLER. Yes; that's right. I remember having great difficulty with a fourth-class postmaster one time. Senator PROXMIRE. The effect of Senate confirmation on the President's appointments, the conduct of the appointees, and any prospective appointees who might replace those on the boards, would be very, very salutary. It always has been in the past, in positions of power. So I certainly warmly support that. That's all, Mr. Chairman. The CHAIRMAN. Senator Packwood? Senator PACKWOOD. Assuming that a plan could be drawn that corrects the inequities that you have described, is it the position of the AFL-CIO that we do indeed need wage and price controls? Mr. BIEMILLER. We have made that clear. We have made clear since February of 1966 that we believe that any time the President said there was an economic crisis in this country, that there ought to be not only wage and price controls, but controls across the board on all aspects of our economic life. We stand by that position. But we have insisted that those controls must be equally applied across the board, and that no one segment of our population should be asked to bear the brunt. We think at the moment that wage earners are being asked to bear the brunt of the controls. Senator PACKWOOD. It has been suggested that any number of prices could be made exempt from this legislation-for instance, public utilities that are regulated by the States-while suggesting that in highly competitive industries where competition in and of itself is a sufficient deterrent, they could be left exempt. I think even Senator Proxmire toyed with this idea. What's your view about that? Mr. BIEMILLER. Well, in the past months regulated industries have been exempted from controls. I am not at all sure but what there ought not to be at least some review. But, as a practical matter, I think it is true that most regulated industries do have some controls in existence now. We are still fearful of a growing monopoly in some of those regulated industries, in spite of the Clayton Act. Now, as far as highly competitive industries are concerned, I think that you could leave that legislation to the judgment of a price commission, because everyone might not agree on the definition of what is |