July 18, 1979
Page 19248
AMENDMENT NO. 353
(Ordered to be printed and to lie on the table.)
Mr. MUSKIE (for himself, Mr. BAKER, Mr. DURKIN, Mr. ROTH, Mr. COHEN, Mr TSONGAS, Mr. HUMPHREY, Mr. FORD, Mr HEINZ, Mr. HELMS, Mr. LEAHY, Mr. NELSON, and Mr. KENNEDY) submitted an amendment intended to be proposed by them to S. 737, supra.
Mr. MUSKIE. Mr. President, I submit an amendment to S. 737, the Export Administration Act for myself and Senators BAKER, DURKIN, ROTH, COHEN, TSONGAS, HUMPHREY, FORD, HEINZ, HELMS, LEAHY, NELSON, and KENNEDY be listed as cosponsors.
It is imperative to take immediate and forceful action to eliminate the threat facing the tanning and leather industries.
The facts of this situation are widely known: A worldwide reduction in cattle slaughter has reduced the supply of hides on the world market. The American supply has come under increased pressure from the major importing countries. Prices have gone through the roof.
The worldwide supply shortage is artificially aggravated by embargoes on hide exports by major producing countries. So American hide and skin production, which makes up 15 percent of the total world supply, now accounts for 75 percent of world trade in cattle hides.
The U.S. hide supply dropped 6.8 percent last year, and 24.5 million hides were exported, out of 39.5 million produced. This year's total domestic supply will be no more than 34.2 million, but exports are not expected to decline. That will cut in half the supply of hides available to domestic industry.
Four hundred thousand workers depend directly on the tanning and leather industries. The implications for these 400,000 jobs — and for the $8 billion of associated retail sales — are clear.
Our Government's efforts to make more supplies available to the international market have failed.
Clearly, we must now look to our own resources to solve the price inflation and domestic shortages which threaten our manufacturers and our own people.
It is for this reason that I am submitting an amendment to the Export Administration Act today.
WHY OUR LEATHER AND TANNING INDUSTRIES NEED RELIEF
Mr. President, the Washington Post this morning carried a full-page advertisement that graphically describes the situation facing the domestic tanning and leather industries. Excessive demand for American hides and restrictive export policies in other countries have combined with the cyclical downturn in cattle production to threaten the continued existence of American tanning and leather industries and the 400,000 jobs they provide.
Export restrictions by other major hide-producing nations have artificially exacerbated the hide shortage. Today the United States is the principal world supplier of cattle hides, even though we produce only 15 percent of the world's total skin and hide supply. Simply stated, American industry and American consumers are being asked to absorb all the costs of the worldwide shortage of this commodity.
An article that describes the origins and dimensions of this problem particularly well appeared in Retailweek recently. I ask unanimous consent that it be printed in the RECORD.
There being no objection, the article was ordered to be printed in the RECORD, as follows:
ON THE TRAIL FOR CATTLEHIDES
The recently launched Hide Action Program may turn out to be the domestic leather industry's last stand. Unless export controls are imposed, the U.S. leather industry won't be able to afford the price of U.S. cattlehides.
Time was, the leather industry — from tanning to turning out the finished product — was a main U.S. industry ranking right up there along with the likes of the steel industry. Today, those who are still left in the U.S. leather industry are finding it necessary to band together and attempt to impress upon Washington that this industry is in danger of becoming as extinct as the buggy whip.
Yes, everyone in Washington already knows that the shoe people in particular have been living with a knife in the back known as imports. But what the entire leather industry is trying to explain to Washington is that as difficult as it is to compete with imports of finished goods, the manufacturers of footwear as well as handbags, luggage, outerwear, sportswear et al. might as well throw in the sponge if they cannot buy the U.S. hides needed to make U.S. products because the majority of them are being sold to those same countries which produce the finished products, which come back to the U.S. to haunt the industry for the second time around.
The irony of the situation is that the United States is the major supplier of cattle hides to the world, representing about 15 percent of the world supply. But the majority are sold abroad with these exports representing about 75 percent to 80 percent of the world supply. This worldwide demand for U.S. cattlehides is exacerbated by the fact that other countries with substantial herds — such as all the South American countries — totally prohibit the export of hides; preferring to keep them at home to develop and protect their own leather industries. These restrictions create an inordinately high demand for U.S. cattlehides that has been abetted by the cattlemen's restrictions in the size of the cattle slaughter.
This combination of foreign demand, South America's refusal to sell hides, and a reduced U.S. cattle slaughter have caused the price of U.S. hides to skyrocket. The domestic industry's dilemma began in 1972 when Argentina cut off its sale of hides, eliminating about 112 million hides from the world market. Hide prices then jumped from 14 cents to 32 cents a pound, then stabilized in the area of 38 cents a pound. At that time the U.S. exported about 48 percent of its hide supply.
But between 1975 and 1977, U.S. cattlemen began to reduce the size of their herds. Cattle slaughter peaked in 1976 when 43.2 million hides were available, but it is estimated the number of hides available in 1979 will be down to 34.2 million. While supply has been dwindling, however, world demand for U.S. hides has been escalating; exports are expected to take 24.5 million of the 43.2 million in 1979. This means that the U.S. in 1979 will be exporting 71.6 percent of its hide supply and supplying 75 percent to 80 percent of the world hide trade. This export level also means only about 10 million hides will be left for U.S. producers when domestic requirements for hides are between 18 and 20 million a year.
This shortage has created price levels that the industry cannot afford to pay, even if enough hides were available. The jump from 14 cents to 38 cents in the early 1970s looks like the good old days. By December 1978 prices reached 58 cents a pound; but between December 1978 and May 1979 prices zoomed to more than $1 a pound.
Neither declining supply nor higher prices have dampened the foreign appetite for U.S. hides. Where else are the Far Eastern and Eastern Bloc countries — anxious to build a business in finished leather goods but without a cattle supply of their own — to go for hides? The U.S. is virtually the only country left with both a large cattle supply and free buying access to this supply.
The country taking the greatest advantageof U.S. policy is Japan. Though it closes its doors to U.S. finished leather products, Japan, nevertheless, has an insatiable appetite for U.S. hides; buying 35.9 percent of U.S. hide exports in 1978. The purchases of Japanand Korea combined account for more than 50 percent of exports with 30 other countries accounting for the rest. Due to an exchange rate advantageous for Japan, the price of U.S. hides has not deterred Japanese purchases. On the contrary, the Japanese have been buying more.
The upshot is that neither Brazil, Argentina, Uruguay, Mexico, India nor Pakistan — countries with substantial herds — will sell hides in the open market. They want to protect their domestic industries. Japan, Korea and the Eastern Bloc will buy almost all the hides the U.S. has to sell, but they will not take finished leather goods. They want to protect their domestic industries. That leaves countries such as Canada, Australia, New Zealand and those in western Europe as world markets for the sale of hides; but it is the U.S. that has the greatest supply. Now the U.S. leather industry is saying enough is enough. It is saying that it doesn't object to operating within the traditional laws of supply and demand; but it cannot survive when, in reality, this means only the U.S. has the supply and every other country makes the demand.
That is why several trade associations in the industry have banded together to launch what is called the Hide Action Program (HAP). This program is an attempt to bring the plight of the industry to the forefront through demonstrations in cities hosting leather-using industries and by blitzing members of Congress and President Carter with letters and personal visits. The program's goal is to convince Washington that action is needed now in the form of export controls on U.S. hides that would both bring down the price of hides and make more of them available to U.S. producers.
HAP's message is that the alternative to action from Washington is the ultimate extinction of the domestic leather industry with the resulting loss of thousands of jobs or, at best, price increases in leather products that the industry estimates could cost customers over $1 billion a year. Given the high U.S. hide prices and the fact that foreign countries are dependent on these hides, customers switching to imported leather products is no longer a viable alternative in an effort to economize. Neither U.S. nor imported leather goods may be affordable by U.S. consumers.
Unfortunately, this recent mobilization by the industry has only a slim chance of producing results. Though it has been aware of the hide situation since 1972, Washington has never displayed any great sense of urgency in alleviating the problem. In 1972, following Argentina's action, the concept of export controls was entertained and then quickly dropped. Since then, despite preferential tariff treatment for the so-called developing countries, these same countries have ignored Washington's efforts to persuade them to sell their hides on the open market. And, negotiations with Japan have extracted only an unofficial promise that it will reduce purchases of U.S. hides by 10 percent. But, even if Japan were to honor this 'promise' — which it hasn't — this 10 percent figure is meaningless since U.S. cattlehide supplies have decreased by much more than this 10 percent figure.
Leather industry members claim that it is only their current desperate plight and past failures in attempting to resolve the problem through negotiations with foreign countries that have left no choice but to push for export controls. If this means that the U.S. leather industry is going to have to explain this 'protectionist' move — so be it. The industry prefers free trade in hides but has been unable to achieve it. Understandably, the industry is now tired of being "the unwitting patsy in the international free trade game." So it is shooting for export controls because all else has failed.
Unfortunately, there is another and more powerful lobby in Washington; they know how to use a six shooter, too. This lobby consists of the cattlemen, or as the leather industry prefers to call them, the cowboys. They have already made it clear to Congress and the Administration that they don't hanker for hide controls. They like things just the way they are. Evidently their message has been heard, for the Administration has already also declared itself against export control of hides.
But, never fear, Washington will concoct a solution, even if it is the wrong one. Right now Washington has suggested that it might be willing to provide subsidized loans to enable U.S. industry members to afford U.S. hides. Unfortunately, Washington has overlooked the fact that loaning money to U.S. manufacturers for the purpose of buying hides at already inflated prices will merely drive the price of hides ever higher, insuring that more and more of the domestic leather industry will surely go down the drain.
It is now high noon for the domestic leather industry. The HAP program is, at least, a sure sign that it intends to go down fighting.