distribution channels. During this testing period, distribution is currently limited to 40 retail outlets, the number of test centers may be raised to 60 if the present negotiations congeal. Presently, these products must remain at these test centers for a l-year period, however, a reduction to 6 months is also pending the outcome of the current negotiations.

Mr. Chairman, I realize these hapless circumstances are recognized by you and the members of your committee, as well as Ambassador Askew. I feel I must emphasize the extent of these problems so the suitable steps will be taken to achieve a more equitable trade relationship for tobacco with Japan. If these differences cannot be resolved in a more befitting arrangement, the United States is confronted with the possibility of losing a substantial share of the already sliding Japanese market.

American tobacco sales contribute meaningfully to the positive side of our balance-of-payments ledger. Three tobacco firms rank among the 30 leading exporters for 1979, exporting approximately $1.3 billion worth of tobacco. These figures cannot be ignored, our Nation's economic welfare hinges on the success of our exports. Favorable negotiation with Japan not only would enhance our unstable trade relationship with that country, but also would represent the purchase of approximately 45 million pounds of additional U.S. leaf tobacco by U.S. companies from U.S. farmers.

Again, I thank you, Mr. Chairman and your subcommittee for your interests and action toward improving our trade relations with Japan, and especially for your demonstrated concern in regard to tobacco. Ambassador Askew's progress to date pleases me, and I am looking forward to the successful completion of the current United States-Japan trade negotiations.

STATEMENT OF THE BETHLEHEM STEEL CORP., D. SHELDON ARNOT, EXECUTIVE VICE PRESIDENT

High technology industries can be a significant source of jobs and economic growth, now and in the years to come. But in order to realize the full potential of these industries, government policy must recognize that the technologies in these industries will evolve rapidly. Consequently, those who start first will have an opportunity to "move up the learning curve" and acquire an advantage that their competitors will be hard-pressed to overcome.

The synfuels industry is a critical case in point. It represents technologies that will evolve and at the same time stimulate related technological development within supplying industries. Products will be invented and refined. Processes will be developed and enhanced. Jobs will be created and expanded. Skills will be learned and upgraded. Commercial relationships will be established and strengthened. In short, it will serve as a technological and economic catalyst.

There is no question that this will happen. The central question is Where will it happen? In the United States, where industries have been declining; where jobs all too often appear threatened; where real incomes are actually shrinking. Or elsewhere?

This is not the time to dissipate the economic and technological stimulus that the synfuels program represents. Yet, fears that this stimulus will benefit others, not our own existing and future industries, are real and well founded.

There is in the United States today only one synfuels project that promises to yield commercial quantities of energy during this decade. It is the Great Plains coal gasification project, and its construction began during the summer of 1980 near Beulah, N. Dak.

Unfortunately, this encouraging and exciting beginning has been accompanied by a development that raises Bethlehem's concern that our country may already be squandering the technological and economic stimulus of this and future snyfuels projects. Specifically, it now appears likely that the pressure vessels that will be a crucial part of this project are to be supplied by a foreign, rather than a domestic, company.

This important, first move up the learning curve will not be taken by an American firm. But even more immediately, wages and salaries that could be earned by American workers will be lost, as will potential tax revenues of governments at the local, State, and Federal levels.

CBI Industries, Inc., the lowest American bidder on the pressure vessels, would have constructed them at its Birmingham and Memphis plants-both of which are currently operating with only about 40 percent of their normal work force.

Bethlehem is among the companies that supply the American firms like CBI Industries that are capable of providing the equipment that will be needed to produce synfuels in this country. We have, in other words, a "commercial interest."

The 2,000 tons of steel plate required for the 14 pressure vessels that will convert coal into synthetic natural gas, and the 20,000 tons of steel that will be used by the entire project would provide much-needed employment in the American steel industry.

But there is a broader concern that we share, and it is that an opportunity is being wasted. Our sense of dismay is compounded by the fact the U.S. Government is a party to the squandering of this critically important chance to provide jobs and an impetus to technological development and economic growth in our Nation.

The Great Plains coal gasification project is going forward with a loan guarantee from the Department of Energy. In fact, it would not be going forward at this time without the guarantee. The American people, through their Government, are providing assistance to a project that is vital to our energy future and has the potential of playing a significant role in relieving current unemployment and in shaping our economic future. The American people provide the support, yet a major benefit-the technological and economic stimulus-is realized by others.

We believe that a useful step to correct this situation would be a meaningful bid preference for domestic materials in future synfuels construction projects that are federally aided. The benefits will be both immediate and long term as workers are employed, wages, and salaries are earned, taxes are paid, the steel balance of trade is strengthened, further dependence of foreign steel producers is avoided, and stimulus is provided to future technological and economic development in our country. We believe that this is of such great importance that a domestic bid preference amendment is worthy of consideration. This amendment would be made to the Federal Nonnuclear Energy Research and Development Act of 1974. While this legislation does not fall within the purview of the Committee on Ways and Means, we call it to your attention and hope that you will support the amendment at the appropriate time. A copy of the proposed amendment is attached:

NONNUCLEAR ENERGY RESEARCH AND DEVELOPMENT ACT OF 1974

We recommend that a new subparagraph be added to title 42, section 5919, paragraph (x), and that it should read as follows:

"(3)(A) The Administrator shall not approve any financial assistance under this section unless the recipients agree that only domestic articles, materials, and supplies shall be used by contractors or subcontractors in the performance of construction work financed in whole or in part with assistance under this section.

"(B) The provisions of subparagraph (A) of this paragraph shall not apply where the Administrator determines

(i) their application would be inconsistent with the public interest;

(ii) domestic articles, materials and supplies of the class or kind to be used in the performance of the work are not reasonably available; or

(iii) the use of domestic articles, materials, and supplies will increase the cost of the overall project contract by more than 15 per centum (25 per centum, if the domestic articles, materials and supplies are produced in a "Substantial Labor Surplus Area" as defined by the United States Department of Labor)."

STATEMENT OF THE CALIFORNIA-ARIZONA CITRUS LEAGUE, WILLIAM K. QUARLES, JR., PRESIDENT

This statement is submitted by the California-Arizona Citrus League in conjunction with the August 26, 1980, hearings held by this subcommittee on House Concurrent Resolution 376, a sense of Congress resolution relating to the Japan-United States trade imbalance.

Citrus is specifically mentioned in House Concurrent Resolution 376 as an area "where Japanese trade barriers and practices prevent or restrict the importation or sale of American goods, thus contributing to the extraordinary trade imbalances between the two nations * * * (H. Con. Res. 376). The purpose of this statement is to elucidate the current situation as it specifically pertains to the U.S. fresh citrus trade with Japan, and to suggest avenues to be pursued by that country that would enable it to, as is stated in the resolution, take such steps in cooperation with the United States as are required to help correct the deficit now growing between our two countries.

The California-Arizona Citrus League (the league) is a voluntary, nonprofit trade association composed of marketers of California and Arizona citrus fruit. Members are farmer cooperatives and independent shippers which represent over 90 percent of the 10,500 citrus fruit growers in Arizona and California. These growers produce

oranges, lemons, grapefruit, tangerines, and limes. The fruit is marketed in both fresh and processed forms.

The league speaks on behalf of the California-Arizona citrus fruit industry on matters of general concern such as legislative, foreign trade, and other similar topics. Representatives of the league have devoted much time and effort to the promotion of exports and have concerned themselves with international trade problems since early in the 1920's.

The league wholeheartedly endorses the spirit and the letter set forth in House Concurrent Resolution 376. For many years the league and its members have continually, with minor successes, striven to increase the amount of U.S. citrus imported into Japan. It is significant that gains have recently been achieved and Japan has signalled a willingness to cooperate further. Nonetheless, barriers remain which hinder trade and contribute to our own deficit with Japan.

FRESH ORANGES

Japan has erected dual impediments to the importation of fresh oranges from the United States: high import duties combined with quantitative limitations. While the league is well aware of Japan's desire to assure maximum protection for its own citrus industry, these trade barriers effectively frustrate an open market situation. The duty on fresh oranges imported into Japan is 40 percent from December 1 through May 31, and 20 percent from June 1 through November 30. This is an unrealistic level. The U.S. import duty for fresh oranges (including Japanese mikans) is 1 cent per pound, resulting in an ad valorem equivalent of approximately 10 percent (based upon a conservative value of 10 cents per pound). The Japanese import duty should be harmonized with the U.S. import duty.

In addition to this high duty, Japan has placed a quantitative limitation on the importation of fresh oranges. Although Japan recently agreed, in the Multilateral Trade Negotiations, to increase its import quota to 82,000 tons by 1983, this remains minimal. The 82,000 tons is equivalent to less than 3 percent of the Japanese mikan (tangerine) production.

The Western citrus industry has two varieties of oranges: valencia or summer oranges, and navel or winter oranges. In conjunction with its quota system, Japan has implemented a license system which requires that the bulk of the fresh orange imports enter Japan during the late spring or summer. This virtually precludes Western navel growers from participating in Japanese markets.

Fresh oranges, thus, are scarce during the spring and summer in Japan. Increasing the amount of imports in conjunction with a lowering of the duty to realistic levels would result in larger quantities of fresh U.S. oranges being available to Japanese consumers throughout the year. It is believed this will increase the overall demand for fresh citrus which should be beneficial to both Japanese and U.S. citrus producers. It is further believed that, in accordance with the goals of House Concurrent Resolution 376, this would also evidence Japan's willingness to cooperate with the United States in reducing the trade imbalance between our two nations.

CONCLUSION

The California-Arizona Citrus League feels that some headway is being made in negotiations with the Japanese to eliminate the existing trade barriers to the importation of fresh oranges from the United States. The recent MTN agreements to gradually increase the quotas is definitely a significant step forward.

Nonetheless, the barriers remain and remain at unacceptable levels. Japan could do much to encourage further trade in U.S. citrus by the accelerated removal of these barriers. Doing so would be clear signal to the United States that the Japanese Government recognizes the seriousness of our present trade imbalance situation and, in accordance with the spirit of House Concurrent Resolution 376, is willing to pursue steps to ameliorate that imbalance.

STATEMENT

OF ARTHUR G. ALBERTSON, WASHINGTON REPRESENTATIVE, CBI INDUSTRIES, INC., ON BEHALF OF CHICAGO BRIDGE & IRON Co., OAK BROOK, ILL. Mr. Chairman and members of the committee, you have asked for comments on Japanese and U.S. trade relations, and this statement is submitted accordingly. I appreciate having this opportunity to present to you a serious situation that has occurred, will continue for the duration of the synfuels program and will be extremely detrimental to our economy unless corrected.

My name is Arthur G. Albertson, Washington representative, CBI Industries, Inc., which is the parent company of Chicago Bridge & Iron Co. (CBI), with executive offices at 800 Jorie Boulevard, Oak Brook, Ill.

Chicago Bridge & Iron Co. was incorporated in Illinois in 1889 as a structural steel fabricator and erector and has continued in this area of business, specializing in plate work. CBI designs, fabricates, and erects metal plate structures and related systems that are used in the nuclear; hydroelectric power; liquefaction, vaporization and storage of natural gas; and transportation, storage, and processing of petroleum and chemical products; pulp and papermaking; aerospace research and operation, fuelmaking, water, and waste water treatment, and marine and offshore production and drilling equipment. The company has extensive supportive research facilities located at Plainfield, Ill.

One of the company's major product lines has been the design and production of pressure vessels. The fabrication of these vessels requires the highest degree of skill. Ongoing research, particularly welding, testing, and quality control procedures, massive tooling so that the rigid specifications are met insuring the vessel will perform withstand the tremendous pressures and temperatures as applied in the required process. The company has been one of the major fabricators of such vessels in the United States. Of particular note is the fact that CBI has and is furnishing equipment for the huge Sasol coal gasification plant in South Africa with the major items being pressure vessels. Therefore, CBI's competence and reputation in this field is unchallenged and is so recognized within the industry.

As you are aware, to endeavor to attain our Nation's goal of energy independence you men and others in the Congress are commiting huge sums of money to develop a synthetic fuels industry for this Nation. The goal is the production of 1.5 million barrels of synfuels per day by 195; $20 billion has been programed to encourage a diversity of pertinent technologies. A synfuels corporation will manage and develop this program and plans are to invest an additional $68 billion on further synfuel development.

The first commercial synfuels plant is now approved to be built at Beulah, N.D., estimated to cost $1.4 billion. This is an undertaking by ANG Coal Gasification Co. being a group of five companies and approved by the Department of Energy. This plant will produce synthetic gas from coal and will use a Lurgi process similar to the one employed in the Sasol, South Africa, plant previously mentioned for which CBI is furnishing pressure vessels. It should be noted that the Lurgi Corp. is acting as agent for ANG Coal Gasification Co.

THE SITUATION

I stress that in reporting this activity the details are based upon sources believed to be reliable. CBI representatives have not examined the bidding records. Some details have been public knowledge within the industry for some time, and we know of no challenge or refutation by anyone concerning their reliability.

In February 1980, based upon solicitations from ANG, CBI, and others submitted bids for the fabrication of 14 pressure vessels for this project. The initial bids were submitted on an FOB plant basis. On July 17, 1980, as requested by ANG, CBI requoted this job including estimated freight charges in addition to the base price of approximately $10 million.

The freight charges from CBI's Memphis plant was estimated to approximate between $700,000 and $950,000 depending upon the handling of the shipment. At this point and even now CBI was and is the lowest USA bidder for the procurement of these vessels.

In procuring the vessels and other facilities for this first synfuels plant, the Department of Energy, ANG or someone made the decision to resort to "worldwide" purchasing and the procurement for this facility proceeded accordingly. Hatachi, Ltd. of Japan also submitted a bid on these vessels and their freight charters from Japan were estimated to approximate $3 million.

At that point, the CBI and Hitachi bids were comparable and competitive and it would appear that CBI was the low bidder. On or about July 17, on a revised bid, Hitachi's freight charges were reduced to $1 million, thereby making Japan the low bidder by approximately $2 million-about 20 percent. On August 6, 1980 CBI was advised that a letter of intent had been issued to Hitachi, Ltd. for the procurement of these vessels. This ANG plant is the first commercial plant to be approved by the Department of Energy and the Federal Energy Regulatory Commission. The DOE has provided $20 million to get this project underway and a $250 million loan guaranty and, based upon recent statements, plans to extend this guaranty to $1.4 billion being the full estimated cost of the entire plant.

This contract is of particular importance because it is the first major procurement in the synfuels program. This applied policy of "worldwide" procurement raises many serious questions and poses a real threat to our economy and the well being of the Nation. Some of the more important questions are:

QUESTIONS

1. Is it reasonable to assume that Hitachi, Ltd. will be able to ship 14 pressure vessels from Japan, across the Pacific, through the Panama Canal, up the east coast, to the St. Lawrence Seaway and then transship from Duluth, Minn. to the site at Beulah, N. Dak. for $1 million?

The answer seems obvious for if the first figure of $3 million represented a valid estimate then this drastic reduction is not realistic but a device used to obtain the contract. Further, it would seem that such a substantial reduction might have been subject to question at the time the final decision was made.

2. Will it be the policy of the Government to encourage offshore procurement to stimulate foreign employment to the detriment of U.S. industry, jobs, balance of payments, advancing technology, loss of skills, and the common good of the Nation? It is no secret that employment is a current major problem and CBI's situation is no exception. The Cordova, Alabama plant is closed. The Birmingham plant is operating at about 40 percent, and the Memphis, Tenn. plant-which formerly specialized in nuclear reactor pressure vessels at about the same level. All three plants manufacture pressure vessels and related items. Before any such decision is made to go "worldwide," at some time during the process real consideration should have been given to areas of unemployment and the utilization of American industrial facilities.

3. Is it important for the United States to retain its skilled workforce, advance its technology, not export it, continue to modernize its facilities and research capabilities, and provide jobs through this program?

Of course it is. There are some three U.S. companies that are capable of fabricating this hardware. The possibility distinctly exists that skilled personnel needed for the fabrication of pressure vessels and nuclear hardware will be lost along with the capability to provide such hardware in the future. Exporting our technology and providing such access on a "worldwide basis only complicates further the competitive position of U.S. companies in the foreign markets.

4. Is it the policy of Japan to solicit bids on Government or Government-sponsored projects when the items needed can be produced or supplied by Japanese firms? Insofar as it can be determined the answer is no. CBI would not be afforded to bid on such vessels or hardware and based on Japanese policy we do not expect such consideration in the future.

5. Is there a solution to this problem?

In the passage of the synfuels legislation and subsequent thereto much as been made of the fact that its implementation would provide thousands of jobs, put people to work again, promote industrial growth and modernization of our plants and at the same time substantially help achieve the goal of energy independence. This first major procurement falls far short of such intentions. The continuation of this "worldwide" procurement policy can only cripple the country's ability to produce for itself.

In the debates and discussions during the passing of this synfuels legislation there was no serious or full consideration of this problem and therefore, no so-called buy America provisions designed to meet this problem were enacted. The "worldwide' procurement concept now part of the synfuels program exporting U.S. jobs is contary to representation made at the time the legislation was passed. A remedy can only come from appropriate legislation or administrative determination that will assure that, in the awarding of contracts under the synfuels program, real consideration is given to the problem of unemployment and depressed industries and other economic factors that may apply. You are probably aware of a study by the Library of Congress regarding the Buy American Act (analysis of S. 2318, the Buy America Act-dated February 28, 1978). This study was requested by the Honorable Senator John Heinz from Pennsylvania. This study shows conclusively that, for Japanese prices to be the economic equal of American prices, after considering all economic factors, the foreign price must be 50 percent lower than the American price. When we look at the net cost to the American economy of buying Japanese goods, we see a different total picture. Any U.S. expenditure with U.S. companies produces revenue returned to the Government in the form of State and Federal corporate income taxes, employee income taxes, other benefits from full employment, reduction in unemployment payments and other items. Therefore, for Government assisted procurement, we must assume that the cost is not merely the initial purchase price but instead the purchase price plus the lost tax revenue, unemployment payments and other lost benefits that would accrue from domestic purchasing. Unless these actual factors are taken into account in contract awards U.S. contractors, fabricators and suppliers will find it virtually impossible to compete as shown in this pressure vessel transaction, because the Japanese are assessing these costs to their economy in establsihing their price levels.