ls the U.S. Really Being Priced Out of World Markets?

Tbe researcb resulrins in tbe attacbed rnaterial ruas done bl tbe Libbey . Outens . Ford Glass ComPany, Toledo, Ohio. under tbe direZtion of lames M. Ashlett. Vice Presihent. Tbouib tbe material d.eals only in brief- Dart utitb Obio, under tbe d,ireTtion ol lames Ashley, Vice Presihent. Tbougb materia.l d'eals in -blief part tbe subiect ol utood and taood. prodacts, ute belieoe tbat the e_ntire subiect is ol aital interest and impottance to any businessrn.tn engaged. in the Arnerican uay ol life.-Editor,

During the past few years, there has been bitter argument as to whether U. S. manufactured products were being priced out of world markets, and are unable to defend their home markets. Some industry leaders have said that, as far as their products were concerned, their labor costs, compared to those abroad, made it impossible for them to match the prices of foreign competitors. Others, notably State Department personnel, have disputed this. They admit that hourly zuage rates in the U. S. are substantially higher, but assert that superior U. S. productivity-the amount of goods each worker can produce in an hour-more than offsets the higher wage rates. They deny that labor cosl per dollar of product produced is higher, in the U. S. This is the hub of the argument.

U. S. Industry Handicapped

There should be evidence in annual exportimport statistics, to show vr''hich point of view is correct. If it is true that labor costs per dollar oi product-as opposed to hourly wage ratesare really handicapping U. S. industry, then U. S. conrmodities with high labor content should be falling behind in the international race for sales, as compared to U. S. commodities with low labor content. That is the subject of this studl'.

[3y comparing statistics on imports and exports, product by product, in years separated by enough time to allow economic factors to come into play, trend lines should become evident to to show which industries are moving aheatl by capturing a larger share of niarket, and which are falling behind by captrrring a smaller share of market.

If there is substance to the indrrstry contention that the U. S. is beirrg "pricecl out of tl-re nrarket" by reason of high labor costs, then the share of market in nost products n'ith high labor content should, after the p:rssage of tinre, show a loss in share of market.

It is obvious that a steel beam has higher labor content than the same nrtmber of dollars rvorth of pig iron from which steel is made. It is obvious that plywood has higher labor content than logs. If LI. S. labor costs ore pricing us out of tlre international marl<et, LI. S. steel beams and other products with substantial labor content should show greater losses (or srtaller gains/ in share of market than pig iron an<l other prodrrcts witl.r lesser labor content.

U. S. Export Increase

Between the years 1951 and 1960, U. S. foreign trade-the sum of all that we brtl' from foreigtr countries and all that lve scll to {oreign countries-increased from $25,679,760,000 to $34,951,674,0N. In 1951, the U. S. export share of that trade was 57.9/o. ln 1960, the U. S. share of this trade was 58.1%. Not a significant changeTWO TENTHS OF ONE PI'R CENT.

What is significant, and vr''hat the o{licial figures of the Bureau of Censns show, is that the character of our exports has changed. U. S. exports l.rave registered large glains in share of market in rau' materials and t.ttanufactures with relatively low labor content. Live animals. Hides and Skins. Furs. Fodders and Feeds. Nuts. Crude Synthetic Rubber. Natural Gums, Resins and Balsams. Oilseeds. Raw Cotton' Goat Hair. Man Made Fibers. Logs. Paper Base Stocks. Pig Iron.

Scrap Iron. Aluminum and other Non Ferrous Ores.

We have registered large /os.sas in share of market in exports of manufactures with relatively high labor content. Leather Manufactures. Fur Manufactures. Grain Manufactures. Rubber Manufactures. Cotton Manufactures. Products made from Man Made Fibers. Food Manufactures. Steel I'Iill Products. Metal Manufactures. A11 kinds of machinery except agricultural. All kinds of vehicles except aircraft. Photographic goods. Sciantific Apparatus. Toys. Firearn-rs.

This is true in small industries as well as large. Tn specific product after specific product imports capture a larger share of market where labor content is high. Exports capture a larger share of market only where labor content is low.

The kind of exports in which we are gaining grountl are those orclinarily associated with turderdcvelopcd countries. The kind of exports in u'hich rve :rre losing ground are ordinarily associatetl rl.ith highly develolred countries. The colnlnon denominator of the difference is labor co.tl. Not horrrly wagc rates. Labor co.rt.

Low Tariff Policy

Thc lorv tariff policies follovv'ed by the U. S. under the Trade Agreements Act have finally caught up with trs. Foreign manufacturers, paying wages far below even the U. S. legal minirnum wage, and insuring high productivity by using the latest, most efficient machinery in many cases provided bi' the Marshall Plan and subseqrrent give-away progralns, are able to best American r.nanufacturers ir.r our home market as well as abroatl-wl.rerever there is enougl-r labor employed to n.rake a significant difference in the cost of the finished product. There is no other conclusion to draw from these clata.

Now the Administration proposes drastically to accelerate this frightening trend by the inunediate further reduction and eventual elimination of import duties otr most manrtfactured products. To accomplish this, various arguments are used -some uninformed, some prtrposefully misleading.

The inclrrsion of $181,000,000 of i{oocls paid for by private ll. S. charity points up the incorrectness of trtirrg lotal U. S. "export" lilrtrres to sell the public on the importance of export trade. Used in that manner, the totals become an annual report of goods .ro/ri. The Secrrrities Exchange Corlmission noultl take a dim view of a corporation wlrich falsely reported its annual sales in order to push up the price of its stock on thc New York Stock Exchange. Yet by failin.q to point out that the reported export figures contain very substantial :rmounts for w'hich thc U. S. is uot paid, highly placed Adrrinistration officials have done precisely that.

Under Public Law 480, the government "sells" agricultural products to other govcrnnents for currenc)'which is not convertitrle. In other wortls, rvc are paid in u-ootlen nickels. Yet tl'rese exports are ir.rcluded in the oflicial ligrrres and shorrld rxrt be referred to by politicians as if they made a contribution to the economy of the U. S. To our military security, perhaps. To our reprttation as a charitable people, perhaps. Bttt not to our economy.

The government buys what domestic cotton manufacturers cannot consume at a price which guarantees the cotton planter a floor to his prices. This srrpport price in 1960 was 6c per pouncl above the world market price. Every pound of cotton reported as exported in 1960 was sold at the world market price. Consequently, we lost 6c per pound on every pound sold. In 196Q we sold 7,816,899 bales of cotton weighing 500 pounds per bale. This adds up to a loss of $234,506,970' Perhaps it is proper for the taxpayers of New York and Pennsylvania and Ohio and other states where cotton does not grow to make this contribution to the prosperity of southern cotton planters. But it is not proper for Administration officials to fail to mention this fact when they speak of the econom,ic importance of U. S. exports. "Stockholders" are entitled to know when merchandise in such quantity is sold at distress prices and below cost.

Give Away Hoax

It has recently been admitted b1' Administration officials that "a substantial part" of the $1,262,152,770 listed among the other export figures as "Special Category Type 1 or Type 2" is giaut away. These are items whose nature or destination is not divulged for reasons of militarl' security. Ferv thoughtful citizens object to giving away even a billior-r dollars if such gifts are truly in the interest of national secttrity. But it is misleading to include the dollar value of these shipments as "sales" iu order to justify some legislative proposal.

We pay cash for what we import. When we tliscuss the balance of trade, it is proper to compare the value of imports and exports only if just tlrose exports are included for which we are paid f or in caslt. Real cash. Convertible cr.rrrency. Certainll' not those items paid for b1' LI. S. citizens either out of tax money or by private charity.

The falsely inflated export figures are bei:ng used by the Administration to urge upon Congress a trade program which looks to the drastic further reduction and eventual elimination of import duties in most manufactures. From this study of U. S. exports and in-rports of all commodities, 1960 versus 1951, we see that U. S. indrrstries are alreadl'losing their sltare of market in the export of virtually every product which has high labor content. Dernonstrably, our itrport duties are already too low to compensate for the foreign labor cost advantage. Withotrt any import duties to partiall)' offset this cost advantage, the downward trend in share of market for U. S. rnanufactures will be further accelerated.

This country cannot live on the productivity of its farrlers. It cannot survive for long b1' exporting the raw materials which are its natural resources. It cannot "retrain" workers displaced b1'their foreign counterparts if all manufactrrring industry is losing share of market. It cannot look for "growth" to provicle eu.rployrnent for the million new u'orkers who enter the labor nrarket each year if the grou-tll is absorbecl b1' foreign competitors.

Capital is resourceful ancl flexible. Capital can survive by following the billions already investecl overseas where cost factors make it possible to compete. As long as the cost of relocation can

Mqnufocturers be amortized in a relatively short time because of manufacturing cost advantages, it will continue to move abroad. Management may regret the resulting loss to U. S. employment. But managemert is compelled as a last resort to make such moves,

Labor must stand and fight in this country. Two choices are open to labor. Labor must either accept lower vrages so tlnt foreign workers with high productivity and low wages cannot take their jobs, or it must insist that the advantage which accrues to foreign products in this market because of lower labor costs be offset by import duties which neutralize that cost advantage. There is no other choice.

No political realist believes that labor will willingly surrender the wage scales for which they have fought so long. Nor is it in this country's interest to have workers receive the marginal wages paid abroad which allow them to buy little more than the necessities of life. The griat market in the U. S. Ior consumer goods has been created by workers' ability to buy' Ifomes. Cars. Television sets. Washing machines. Vacations in Yellowstone Park. Our domestic economy would collapse, and our financial institutions would fail if the average wage of U. S. production workers-$2.96 per hour-were reduced to 75c.

The alternative is within Labor's power. Labor has the strength to demand that their iobs anil their wage scales be preserved' Few politicians would fail to heed such a demand.

The figures cited in the following tables tell a complete and accurate story. They are not as pleaiant to read as some of the glib propaganda put out by the professional apologists for- free lrade. They are not based on economic theory drawn from a college text book' They are the record of what has actually happened. They tell a story whose implications are as plain to any knowledgeable business man as are the symptoms of cancer to a medical diagnostician. They mean that the Administration's trade program is based on Iallacy and misunderstanding and must be so modified as to provide real safeguards for American jobs which now stand in serious jeopardy.

The figures in the following tables are taken from the official export and import data published by the U.S. Department o{ Commerce, Bureau of Census. Exports of military defense items are omitted as not being pertinent to the study. The figures should speak for themselves'

(Editor's note: Space does not permit us to publish all the many tables which have been furnished in the Survey. We have taken the liberty of publishing two groups of commodities which should be of partiiular interest to the building materials industry.,)

Glass & Glass Products.... Clay & Clay Products (3).

Other Non-Metallic Minerals (4)

Filon Plqstics lntroduces

New "Pon-L-Rqk" Progrom

Filon Plastics Corporation's new "Pan-LRak" stocking dealer program-only recently introduced to the lumber and building materials industry and its allied fields-has already created a demand beyond the normal upward spiral of the fiberglass panel industry.

In effect, the neu{ merchandising concept puts any dealer instantly into the mushrooming fiberglass panel business for a marginal investment and with far less of the inventory than was previously required.

"Filon's new 'Pan-L-Rak' program is an entirely fresh and ,powerful technique of selling," according to David S. Perry, president of the Hawthorne, Calif. company, which is the largest manufacturer of fiberglass reinforced polyester panels in the world.

The program consists of four complete packages demanding a minimum space requirement and offering maximum "impulse" sales. All with an average dealer investment of about $200 per package, complete with displav rack.

Perrl' states emphatically that dealers can stock any one or all four of these "rack merchandising" packages and be virtually guaranteed greater profits.

The complete "Pan-L-Rak" program consists of the following:

Four display racks-two for rolls and two for flat parrels-made of light weight tubular steel and extremely simple to put together.

Each rack requires no more than 30 by 30 inches of floor space. And each serves a speclnc purpose: "Pan-L-Rak" #t Rololite-offering

Filon's exclusive 2tf" corcugated fiberglass panel in rolls, 40" wide by 50 lineal feet, in a choice of seven colors. The package features three rolls of Rololite and comes complete with a display awning and awning brackets. Besides awnings, Rololite is ideal for patio roofs, carports, fences and balcony railings.

"Pan-L-Rak" #2 - Filon-offering flat panels in rolls in both solid colors and decorative embedments. Decorative,patterns include Jackstraw and a new butterfly material with satin ,6nish on both sides. This package is especially suited for screens, dividers, partitions, fences and luminous fences and luminous ceilings.

"Pan-L-Rak" #3 - Filon and Filoplatedoffers any combination of standard Filon or Filoplated Filon (guaranteed for 15 years). These flat panels come in widths ranging lrorn 26" to 4O" and lengths from 8 feet to 72 [eet.

"Pan-L-Rak" #4 - Fiberpane-offers 2f" corrugated panels in a unique combination of low cost and quality. Same dimensions as Filon.

The purchase of only one rack immediately qualifies the buyer as a stocking dealer and entitles him to full benefits, such as lower prices, cooperative advertising, full compliment of promotion materials, a continuing series of idea bulletins and all merchandising literature published regularly by Filon.

The success of Filon's Rololite rack program, introduced earlier this year, was the impetus for the newer and larger role of the rack merchandising concept in its 1962 sales program. The company feels its "Pan-LRak" program is in keeping with the in- dustry-wide trend toward packaged selling.

Under the "Pan-L-Rak" program anyone can now become a Filon stocking dealer for only a third of the former costs. For about $200, as opposed to a previous minimum of around $600, anyone can become a full dealer and, at the same time, receive a complete package to do his selling for him.

Filon believes the "Pan-L-Rak" program takes the seasons out of selling translucent fiberglass building panels, in addition to its many other advantages. It offers year 'round potential even to dealers far removed from the lumber and building materials field.

Filon is sold through more than 2,000 distributor and dealer outlets across the United States, supervised by four divisional sales offrces and warehouses.

Full details on the "Pan-L-Rak" stocking dealer program may be secured by writing the: "Pan-L-Rak" Program, Filon Plastics Corporation, 333 N. Van Ness Ave., Hawthorne, Calif.

PATCO Offers Scmple of Mill Pqinr-Primed Redwood

A f ree sample of Palcote paint primed redwood can now be obtained from The Pacific Lumber Company. A descriptive leaflet, showing how the factory primed redwood saves 40/o in finishing costs, is also included with the sample.

Palco's paint primed redwood is available in sidings, and in boards for fascia and trim. It is protectively packaged ih heavy moisture resistant paper wrap. Write for "Palcote" sample, The Pacific Lumber Company, 100 Bush Street, San Francisco, California.