Senator FORD. I thank the chairman for that.

One thing, in closing, Mr. Chairman, that disturbs me considerably, we talk about other countries subsidizing their products, country-owned, that sort of thing. Then I read where we're a part of funding those constructions, those operations. We even go so far as to loan the money to buy the bulldozers and the tractors and the big shovels and that sort of thing so that other countries can extract their coal and bring it into this country and sell it under us, and we're funding them to displace our workers here.

There is something about that that just gnaws at my gut, and I don't like it. And at some point I think we're going to have to look at this total structure, particularly as it relates to foreign aid and how we get the money into other countries to give them the capacity to displace us.

Now that's not any part of a trade barrier, I guess, or tariffs or that sort of thing. It's a policy and procedure of this country. And I think it reflects directly and I'm sure Mr. Steuart might have other ideas about tariffs and quotas and that sort of thing, but I listened to the panel, which is extremely good, this morning, and they talk about Japan, who will not allow anything into their country-gasoline or whatever it might be-yet they're 98 percent dependent.

Why can they do it and flourish and we sit here and we're the only vulnerable country of the whole bunch? We're the only real purchaser and we keep on, as the fellow says, you nibble on your thumb, first thing you know, you're eating on your shoulder. And I don't particularly like what I see happening to us.

I thank the chairman.

Senator NICKLES. Thank you, Senator Ford.

Senator Rockefeller.

Senator ROCKEFELLER. Thank you, Mr. Chairman. I'll be brief. I strongly associate myself with the comments of the Senator from Kentucky, the senior Senator from Kentucky. It is something that I would hope we as a con.mittee would get into more as we go along, this whole question of indirect aid through either foreign aid directly or Export-Import Bank loans, grants or whatever that we as a nation are, through our policies overseas, allowing therefore other countries to underbid us and underprice us, outsell us, take away our jobs, and we come back and talk about tariffs, ad valorem barriers, import fees, quotas, all kinds of other things.

And we may be exacerbating our own problem in a whole other area that is, foreign assistance, Export-Import Bank-without giving it a close analysis. I think we have to, not only in the area of construction of oil and gas, but coal and all the rest of it.

I would just simply make one point because our hour is late. We all have caucuses to go to, and you have been very patient, Mr. Chairman, as has our panel, and there's another one to come yet. Mr. Hall, you said on page 4 of your testimony, you listed a series of circumstances and you said "We believe this practice constitutes a clear subsidy." Now I've heard some discussion this morning from Mr. Tell and others that it's very hard to get the trade laws to work to your advantage, even to the point, Mr. Tell, that I would guess that you are rather fatalistic about that ever coming to be.

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That is, that the time and the expense that would be caused by implementing that action would be so long that you might choose to avoid even taking the action in the first place, or placing that action in effect.

To Mr. Hall I would say if there is a clear subsidy, in your judgment, then I would have to assume that you believe you have a case. You clearly point out that there's a danger, and you invoke national security, with which I agree. And so why can't you then use effectively for your purposes our trade laws?

Mr. HALL. As I understand it, sir, one of the criteria for the trade laws is that the product not be sold into our country at a price that's lower than the price in the exporting country. In the case of Mexico, for example, that doesn't apply. If they've got their crude oil price at $10 a barrel and after refining costs they're selling gasoline for $13 or $14 a barrel, if they ship that gasoline here and undercut our market, they're not dumping under the term of our laws, because they're not selling it here for less than what they sell it for in their own country.

And that's the problem, the reason the trade laws won't work in this particular situation.

Senator ROCKEFELLER. So that then, going back to Commissioner Stern's chart, it would only be in the case of Canada, among all those countries, where you could get this kind of a countervailing situation. All the others, by definition, would rule themselves out. Mr. HALL. Well, again if the measure is the price of the product in that country versus the price in this country, as long as they're going to keep the raw material lower in their own country the antidumping provision won't work.

Senator ROCKEFELLER. So when you or Mr. Tell or others talk about reforming-you don't think, therefore, you by definition rule out winning a trade case?

Mr. HALL. Yes, sir, at this point.

Senator ROCKEFELLER. You wouldn't bring one because you'd lose it under the rules of the game?

Mr. HALL. Under the antidumping rules, as I understand it, we would lose it, yes.

Senator ROCKEFELLER. Now you've suggested bringing an ad valorem matter, an ad valorem tariff of 10.8 percent, right, or at least that's in the Anthony bill and you're supportive of that?

Mr. HALL. Yes.

Senator ROCKEFELLER. Would you consider, do you think it's too much or too late or impossible or unlikely to reform the trade laws so as not to reflect, to box you out?

Mr. HALL. My concern would be that this is an urgent situation, as I see it.

Senator ROCKEFELLER. No time?

Mr. HALL. The decline in demand for petroleum products has run its course. Demand is now flat. Most of the inefficient refineries have gone. All these products are coming at us and we're already on the razor's edge from a national security point of view, and I would be concerned that rewriting the trade laws will take years and wouldn't be able to respond quickly enough to the problem.

Mr. TELL. May I comment just briefly on that, Senator Rockefeller? I agree with Mr. Hall that the situation is urgent today. I do,

however, think that it would be most useful for Congress this year to quickly move to redress the trade laws and make them workable. I think it would send a very salutory signal to the rest of the world that we're not going to tolerate these kind of below-cost, subsidized, unfair competition.

If you had the substantive and the procedural elements of the trade laws brought up to date and made workable with respect to subsidies in the natural resource area, it might also provide a basis for our trade negotiators to work out voluntary agreements.

So I share Mr. Hall's view that the trade laws will not probably represent the full and complete solution, and unfortunately there will be time lags involved, but I still very much feel it's an effort we ought to undertake this year.

Senator ROCKEFELLER. Would either of you gentlemen consider constructively a Btu import fee based on Btu's, which could cover a variety of oil, gas and coal, for example?

Mr. HALL. In the case of the petroleum industry, if it applies equally to crude oil and products it would not necessarily deal directly with our refining problem. So I would say a measure like that, if you want it as a revenue raiser, perhaps, as a policy you might want to consider it, but as a solution to our problem of imported products, it would not be a solution.

Senator ROCKEFELLER. It would not be helpful. Would you agree with that, Mr. Tell?

Mr. TELL. Well, my comment would be that I think we should be very careful not to artificially distort interfuel competition so that you would favor petroleum over coal or coal over petroleum or electricity over natural gas. I mean, I think that's one of the things you have to be sensitive to if you're getting into the tariff area.

Now if we're talking about just gasoline, where there is not competitive fuel interchangeability, that consideration certainly wouldn't be present in the way that it would be if you were talking distillate or fuel oil or even crude, for that matter.

Senator ROCKEFELLER. Thank you. Thank you, Mr. Chairman. Senator NICKLES. Thank you very much, Senator Rockefeller. To our panelists, we appreciate your input and I apologize to some extent that we of necessity had to hurry through. Thank you very much.

On our next and final panel we have Mr. Urvan Sternfels, president of the National Petroleum Refiners Association; Mr. Tom Van Arsdall, vice president, National Council of Farmer Cooperatives; Mr. Jack Griffith, Griffith Petroleum, Stillwater, OK; and Edwin Rothschild, assistant director, Citizen/Labor Energy Coalition.

Mr. Sternfels, please proceed. And to all of our panelists, I apologize for the fact that you're the final panel and meetings have already started, and for that reason several members of the committee had to leave. But I think it would be more appropriate to finish the hearing than try and have you wait around and then reconvene. It might be more difficult and we expect several votes on the floor today. I think it may just be more appropriate to try and finish the hearing.

Mr. Sternfels; please proceed.

STATEMENT OF URVAN R. STERNFELS, PRESIDENT, NATIONAL PETROLEUM REFINERS ASSOCIATION

Mr. STERNFELS. Thank you, Mr. Chairman. I appreciate your perserverence as well as your courtesy in allowing us an opportunity to conclude this hearing today and appear before you and discuss what I consider and my members consider an extremely important issue facing the manufacturing segment of the refining industry.

I am Urvan Sternfels. I am the president of the National Petroleum Refiners Association, which is a group dating back originally to 1902, representing most of the refining and much of the petrochemical industry in the United States today. The membership has a great deal in common. The principal thing is that they use crude oil and its derivatives as their raw materials.

The association has struggled with this subject mightily. As you can imagine, there are many different views, some of which are controversial areas of concern and contention within the industry as a whole, within our membership certainly. So I come before you today principally to apprise you of the concern of the majority of our members, a large majority of our members, with the growing dependence and growth of the product imports coming into the United States from many sources throughout the world, principally in the areas of gasoline and other light petroleum products.

I have submitted in addition to my statement, which was submitted earlier, several pieces of paper containing graphs detailing refining capacity, gasoline imports, and light product imports. I think it's important to note, as has been represented at this table here this morning, that the trend in total imports is not the significant issue here. The trend in light products, particularly gasoline and gasoline blending materials, is what is at issue.

And that is critical because in most cases most refiners in this country have invested tremendous amounts of money to improve and enhance the quality of the gasoline, partially to offset, or, rather, to acknowledge the requirements of unleaded gasoline, but other quality considerations as well, and that is where the bulk of investment has gone in the refining industry in recent years. And this is the area of investment that has been particularly threatened by the growth of imports.

The charts that I have given you contain several figures. The last two tables detail total gasoline imports as a percentage of light product imports. I think it is interesting to note that the area between 1984 and 1985 shows a percentage of 29.3 in 1984, and we estimate a percentage over a third of the amount of light imports of gasoline will be gasoline imports from overseas. And the problem here is that when you take a look at this in terms of gasoline demand you see figures of 5.7 percent, 6.0 percent, and total percentage of gasoline demand, of total gasoline imports, and these are derived from EIA figures.

We don't believe these are representative of the true situation, but it's difficult from the data that's available from the Government to determine what the true picture is because not all of the imports are totally identified. In some cases, it's been documented that there are misdeclarations.