May 25, 1972
Page 18962
U.S. SHOE INDUSTRY
Mr. MUSKIE. Mr. President, one of the most conspicuous yet innocent victims of the unfair inconsistencies of this administration's economic program has been the shoe industry. While price controls on shoes and other finished leather goods are vigorously enforced, the cost of the hides essential to the shoe industry is skyrocketing. U.S. manufacturers cannot get the hides they need because they are being exported to supply foreign competitors. The administration has the power to remedy these problems by imposing temporary export controls – but it has stubbornly refused to act.
Since the beginning of phase I, the prices of cattle hides in this country have more than doubled.
The most immediate cause of this extraordinary price increase has been a sharp reduction in the number of cattle slaughtered in Argentina, the second largest supplier of cattle hides to the world market. To protect its domestic industry, Argentina has taken prompt action to restrict exports, and Argentina's hide exports have consequently dropped precipitously from 7.5 million in 1970 to 3.2 million in 1971. New restrictions imposed early this year will reduce the 1972 total to less than 1.3 million hides.
The effect of Argentina's action has been to create a severe hide shortage on the world market.
All the world's major hide suppliers, with the exception of the United States, have quickly taken steps to conserve the hides necessary for their domestic industries, further depleting the supply on the world market and focusing drastically increased demand on the U.S. cattle hide market. As a result, the U.S. footwear industry is left with less than 60 percent of the supplies it needs. The anticipated increase in the number of cattle slaughtered in the United States this year will not offset the decline in Argentine exports.
As a result of administration inaction in response to the crisis, virtually every tanner in this country is faced with having to curtail his operations to some extent. The shoe industry is, in turn, unable to obtain the leather it needs to maintain production at an acceptable level. American manufacturers competing with foreign industry for U.S. hides are adversely affected because, since devaluation, foreign manufacturers have a currency advantage averaging 12 percent in purchasing raw materials in this country.
The importance of the cattle hide crisis lies in the fact that hide costs are the principal factor determining the cost of making shoes. Hide price increases so far are expected to affect the retail cost of American-made shoes in varying degrees, according to size and construction.
Specifically, the cost of women's shoes will probably rise $1 to $2, men's shoes will cost $2 to $4 more, and women's boots may be as much as $4 to $6 more expensive.
The effect of such increases on the U.S. shoe industry's competitive position would be disastrous.
They must be of special concern in the light of what is already an extraordinarily high unemployment rate in the industry. In my home State of Maine, where leather-related industries account for more jobs than any other industry in the State, the impact has been painfully evident.
The fact that so many shoe-manufacturing operations in this country are small, family-owned businesses has made them particularly vulnerable to price increases and scarcity of supplies.
The administration has made one of its major economic themes the need for American industry to modernize in order to meet foreign competition. The shoe industry has been in the forefront of those making every effort to modernize, at considerable initial expense. And yet, despite its modern techniques, the shoe industry is being crippled by forces beyond its control – but not beyond the administration's control. Unless decisive action is taken, irrevocable damage will be done to this industry which is already threatened because of growing foreign competition.
In response to this crisis, in March I cosigned a letter sent by members of the New England delegation to the President, urgently requesting that the administration consider invoking the Export Control Act on a temporary basis to deal with this critical situation. No action has been taken by the administration and the situation has become steadily worse.
I was chairman of the subcommittee which drew up the Export Control Act and was one of its principal sponsors when it was enacted. The criteria it established for invocation of export quotas were that such action must be necessary to protect the domestic economy against a drain of scarce materials and to reduce the inflationary impact of excessive demand. There is no question in my mind that the present hide situation fits these criteria. It should also be noted that in its report on the administration's economic stabilization bill in November 1971, the Committee on Banking, Housing, and Urban Affairs explained that its amendment to the administration bill requiring that the President take action to prevent shortages of raw materials was directed specifically to the present conditions in the hide market. This further expression of congressional intent should leave no question as to the applicability of the Export Control Act.
I call upon the Secretary of Commerce to invoke export controls immediately. No clearer need for the imposition of temporary export controls could exist. There is no justification for further delay.
We do not need permanent export controls. The Government has the authority to remove as well as to impose controls, and I would certainly expect that they could be removed as soon as altered conditions in the Argentine cattle market bring the world hide supply back to previous levels. In addition, export controls should be tied to price levels. Effective controls would reduce the inflationary impact of excessive and abnormal foreign demand for U.S. hides, and the anticipated result would be stabilization of prices. Controls could and should be eased as it becomes evident that inflation in the hide market is subsiding.
Although the effect of reasonable controls on livestock producers and packers would be minimal since hides represent only 4 or 5 percent of the value of cattle on the hoof, a price floor should also be set so that hide dealers and packers will not be adversely affected by controls. The purpose of imposing export quotas in this case is simply to assure the domestic industry of an adequate supply of hides and to stabilize the market. Controls should be regarded as an emergency action of as short a duration as is required. Controls were invoked by the President in 1966, with immediate results, and were lifted after nine months in effect. If properly administered, controls are a limited, reasonable measure of proven value.
In addition to the failure of the Secretary of Commerce to invoke export controls on a temporary basis to relieve the scarcity and reduce the prices of hides now affecting this country's tanners, the Price Commission has been seriously remiss in not taking action to counter the drastic increase in the price of hides. Although hides are subject to controls, the Price Commission's apparent disinterest in enforcing them has rendered the controls meaningless. Therefore, while the Commission has been extremely tough on leather and shoe manufacturers in preventing them from passing on their own high costs to the consumer, it has done nothing to protect them from the devastating cost spiral which made their price increase requests unavoidable.
The immediacy and gravity for the situation cannot be overemphasized. The administration has had more than enough time to come to the realization that temporary invocation of export controls on hides is not only appropriate under the Export Control Act, but it is essential to save the shoe industry from irremediable harm. Thousands of jobs are at stake. If the administration delays longer, it will have to take responsibility for the bitter results of inaction.