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1976/02/09 - Economic Policy Board
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James M. Cannon Files (Ford Administration)
James Cannon's Meetings Files
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Department of State. 9/1789-
President (1974-1977 : Ford). Office of the Special Representative for Trade Negotiations. (1/20/1974 - 1/20/1977)
Antitrust law
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The original documents are located in Box 56, folder "1976/02/09 - Economic Policy Board"
of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 56 of the James M: Cannon Files at the Gerald R. Ford Presidential Library
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE MEETING
AGENDA
8:30 a.m.
Roosevelt Room
February 9, 1976
1. Review of status of tax initiatives
Treasury
2. Roles of State and STR
Seidman
3. Services and the Multilateral Trade
Negotiations
STR
THE WHITE HOUSE
WASHINGTON
February 6, 1976
MEMORANDUM FOR ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE
FROM:
L. WILLIAM SEIDMAN
gws
SUBJECT:
Roles of Department of State and
Office of the Special Representative
for Trade Negotiations
A series of meetings with representatives of the Department of
State and the Special Representative for Trade Negotiations
have resulted in the following delineation of roles between
the Department of State and STR:
1. Commodity Policy Development and Strategy
U.S. Government commodity policy will be developed through
the Economic Policy Board and the National Security Council.
The Assistant Secretary level EPB/NSC Task Force on Com-
modity Policy will report to the EPB/NSC on a biweekly
basis and will include representatives from:
The Department of State
The Department of the Treasury
The Department of Commerce
The Council of Economic Advisers
The Council on International Economic Policy
The Special Representative for Trade Negotiations
The Assistant to the President for National Security Affairs
The Assistant to the President for Economic Affairs
Strategy for implementing commodity policy in the Conference
on International Economic Cooperation (CIEC) will be devel-
oped through the CIEC Coordinating Committee and its four
subcommittees. The Office of the Special Representative
for Trade Negotiations will have membership on the CIEC
Coordinating Committee. The CIEC Coordinating Committee
will report to the EPB Executive Committee on a regular
basis.
Interagency differences on commodity policy and strategy
will be considered by the EPB/NSC.
2
2. OECD
Representatives of the Department of State and the Office
of the Special Representative for Trade Negotiations will
serve as Joint Chairmen of the United States delegation
to the OECD Trade Policy Committee and as Joint Chairmen
of the United States delegation to all ad hoc OECD com-
mittees relating to trade.
3. STR Membership on Economic Policy Board
The Economic Policy Board will recommend that the President
designate the Special Trade Representative for Trade
Negotiations as a member of the Economic Policy Board.
The Special Representative for Trade Negotiations is
invited to attend EPB Executive Committee meetings when
commodity or trade policy issues are considered.
The Special Representative for Trade Negotiations, as
Chairman of the Trade Policy Committee, will report on
trade policy issues periodically to the EPB Executive
Committee.
The above procedural arrangements have been reviewed by the
White House Counsel's Office, the Department of State, and the
Office of the Special Representative for Trade Negotiations
and have been found in compliance with the Trade Act of 1974.
February 6, 1976
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE
Proposed Agenda
Monday, February 9, 1976
1. Review of status of tax initiatives
Treasury
2. Roles of State and STR
Seidman
3. Services and the Multilateral Trade
Negotiations
STR
Tuesday, February 10, 1976 - EPB/ERC Executive Committee
PRINCIPALS ONLY
1. Clean Air Act Amendments
FEA
2. Report on Project Independence
FEA
3. Establishment of Labor Negotiations
Committee
Seidman
Wednesday, February 11, 1976
1. Regulatory Reform and Broadcasting
MacAvoy/
Schmults
Thursday, February 12, 1976
No Executive Committee meeting
Friday, February 13, 1976
No Executive Committee meeting
THE WHITE HOUSE
WASHINGTON
February 6, 1976
MEMORANDUM FOR ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE MEMBERS
FROM:
ROGER B. PORTER
RBP
SUBJECT:
Services and the Multilateral Trade Negotiations
Secretary Simon has requested that the attached letter regard-
ing services and the Multilateral Trade Negotiations be review-
ed by the EPB Executive Committee. It will be considered at
the Monday, February 9, Executive Committee meeting.
HE SPECIAL REPRESENTATIVE FOR
TRADE NEGOTIATIONS
WASHINGTON
Dear Bill:
One of the novel features of the Trade Act of 1974, as
you know, was the inclusion for the first time of services
within the President's negotiating authority. This was included
at the behest of service industry representatives who stated
that their international problems have not received adequate
attention by the U.S. Government.
Since the passage of the Trade Act, we have received
a number of requests from service industry representatives and
organizations such as the National Chamber of Commerce and the
National Foreign Trade Council for the establishment of a
formal advisory structure for services related to the multilateral
trade negotiations. In August we met with a number of service
industry representatives at a meeting convened by the National
Chamber and requested their assistance in providing topics that
would be appropriate for discussion at the GATT meetings in
Geneva. To date, we have received no response to this request.
In addition, my staff has reviewed the extensive testimony given
by service industry representatives on a number of occasions
in the past to identify appropriate issues for inclusion in the
MTN and we have come up with little in the way of meaningful
results.
Service industry representatives have pointed out to us
on a number of occasions that there is no single Federal agency
that takes a direct interest in the problems and issues that
they face in international markets. There are a wide variety
of industries involved here, including transportation,
communications, insurance, banking, technical services, and
travel services. Some of these industries have relationships
with Federal agencies such as State, Treasury, Transportation,
and Commerce, but there is no overall Government mechanism that
effectively addresses the problems they face.
We have discussed this situation with several Government
agencies over the past months, particularly the U.S. Department
of Commerce, to identify the best next steps to satisfy the
responsibilities set out in this area in the Trade Act. The
primary result of these discussions has been the conclusion,
shared by the Commerce Department, that a comprehensive study
should be coordinated with the service industries to accomplish
the following:
FORD
- 2 -
1. Review international issues of significance
to U.S. service industries and describe
what forums exist for international cooperation
on these topics and how effective they are;
2. Identify the problems faced by the U.S.
service industries in international commerce
not adequately covered by current means of
international cooperation; and
3. Identify the most appropriate solutions and
how the multilateral trade negotiations could
relate to these solutions.
The Department of Commerce has general responsibilities
regarding business and industry, but a study of this magnitude
would obviously have to include the active participation of a
wide variety of Federal agencies. Accordingly, we believe
that the best approach would be to organize the effort as an
activity of the Council on International Economic Policy.
Commerce has offered to chair the study within CIEP.
Since recent developments at Rambouillet and at the GATT
Trade Negotiating Committee in December have prompted us to
undertake an accelerated schedule for the MTN, I believe it
would be appropriate to begin such an effort on a priority
basis to be sure that the service industry interests are fully
considered in our negotiating plans and strategies. I would
be pleased to discuss this with you in more depth at a
mutually convenient time.
Thank you for your consideration of this request.
Sincerely,
Tal
Frederick B. Dent
Honorable William E. Simon
Secretary of the Treasury
Washington, D. C. 20220
CC - Honorable James Baker
Under Secretary of Commerce
Honorable John M. Dunn
Council on International
Economic Policy
TISSAUT GERALD FORD
OF
DEPARTMENT TREASURY THE
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
1739
ASSISTANT SECRETARY
February 3, 1976
MEMORANDUM FOR THE HONORABLE L. WILLIAM SEIDMAN
ASSISTANT TO THE PRESIDENT FOR
ECONOMIC AFFAIRS
Subject:
The President's 1976 Tax Program -
Legislative Status
At your request, this memorandum will briefly outline
the present status of the various tax proposals contained in
the President's State of the Union Message.
Deepened Tax Cuts - We have drafted a bill to implement the
deepened tax cuts on an interim basis as of July 1, 1976 and
to put the President's full program in place as of January
1, 1977. No decision has been made as to whether this bill
should be introduced in the House of Representatives at this
time. The principal alternative would be to have the proposal
considered by the Senate Finance Committee when it takes up
the Tax Reform Act of 1975, as passed by the House, which
contains tax cut proposals for the full year 1976.
Broadened Stock Ownership Plan - Pursuant to the meeting
with Senator Long which Secretary Simon, you and I attended,
we have not submitted a bill on BSOPs. Instead, we are
working with Senator Long's staff to attempt to develop a
mutually satisfactory proposal covering the concepts of
broadened stock ownership and employee stock ownership.
Job Creation Incentive - Working with Bill Gorog, we have
drafted a bill, which is to be introduced by the Republican
members of the Ways and Means Committee, with some Democratic
support as well, some time next week. The bill is in the
final drafting stages, with the remaining problem being to
incorporate certain suggestions made by organized labor.
Estate Tax Relief for Family Farms and Businesses - We have
not drafted a separate bill on this topic as it will be
considered by the Ways and Means Committee along with the
general consideration of estate and gift taxes scheduled as
part of "Phase II". It appears that hearings will be held
on this subject in March.
- 2 -
Social Security Tax Increase - The Tax Policy office has not
been given responsibility for drafting this particular
legislation.
With regard to Committee activities on tax legislation
other than that mentioned in the State of the Union Message,
I attach for your information two memoranda prepared for the
Secretary by John Hunnicutt relating to the schedules of the
two tax-writing Committees over the next several months.
With regard to the Ways and Means Committee, Treasury has
already presented testimony relating to tax option bonds,
bank holding company divestitures and tax return confidentiality.
On the latter two items, Chairman Ullman is having bills
drafted to be introduced by himself; prior to introduction,
Treasury is supposed to be given the opportunity to comment.
With regard to the Senate Finance Committee, it is not
anticipated that consideration of the Tax Reform Act of
1975, as passed by the House, will begin until March 16,
1976. As noted above, this is approximately the same point
in time at which the Ways and Means Committee will be
considering estate and gift taxes as part of the so-called
Phase II. Finally, the Ways and Means Task Force on Capital
Formation has commenced meeting on a regular basis. A copy
of the agenda is also attached.
You should be aware that under the Budget Control Act
of 1974, the tax-writing Committees must give their estimates
of tax receipts for fiscal 1977 no later than March 15,
1976. Accordingly, major revenue decisions will have to be
made by these Committees prior to that date. For example,
if the Committees foresee changes in the estate and gift tax
laws which would be effective in fiscal 1977 that would have
a major revenue impact, they must be able to identify these
changes prior to March 15, 1976.
William m. roldation
William M. Goldstein
Deputy Assistant Secretary
for Tax Policy
Attachments
Date: January 23, 1976
MEMORANDUM FOR: SECRETARY X SIMON
From:
John E. Hunnicutt
Subject: Ways and Means Committee Legislative Program
1. Miscellaneous Minor Tax Bills: Hearings were conducted
during the last session and a "markup" is scheduled for
January 29, 1976. Treasury submitted a report on each
bill (see attached list of specific bills).
2. Tax-Exempt Bonds: Hearings were completed this week. No
further action is scheduled at present.
3. Tax Treatment of Divestitures made by Bank-Holding
Companies: A hearing is scheduled for Tuesday, January 27
(Goldstein to testify), and a "markup" is planned for
the first week in February.
4. Tax Return Confidentiality: A hearing is scheduled for
Wednesday, January 28, 1976, with a "markup" to follow
during the first week of February. The Administration has
submitted its own bill on this issue, H.R. 11090.
5. Tax Reform (Phase II) - Estate and Gift Tax: Hearings to
be scheduled after the Lincoin Day recess (February 7 - 15).
The Treasury position on these issues is to be developed.
a. Taxation of Capital Gains at Death
i. Carryover Basis
ii. Capital Gains Tax
iii. Additional Estate Tax
b. Liberalization of Marital Deduction
C. Rates and Exemptions
d. Unification of Estate and Gift Taxes
LIBRARY GERALD FORD
Initiator
Reviewer
Reviewer
Reviewer
Reviewer
Ex. Sec
Surname
Initials / Date
Form 0S 3120
-2-
C. Taxation of Generation Skipping Trusts
f. Liquidity Problems of Family Farms and Businesses
6. Task Forces:
a. Capital Formation
b. Tax Deferral for Foreign Subsidiary Earnings and
the Taxation of Shipping Income
The specific timetable and agenda for each of the task forces
is uncertain at this time. However, some report or recommendatio
is expected from each in May or June (see attached list for
Members of each task force).
7. Debt Limit Extension (to expire March 15) : Hearings
likely to be scheduled late February or early March.
The Committee has not scheduled an executive session to
consider its recommendations to the House Budget Committee
regarding the level of federal revenues and the amount by
which the aggregate level of revenues should be increased or
decreased by bills to be reported by the Committee. The
Committee's recommendations are due March 15. The First
Concurrent Resolution incorporating the Committee's recommen-
dations must be adopted by May 15.
Attachments
CC: Walker
Goldstein
Bradford
Collinson
Eberle
GERALD FORD LIBRARY
Date: January 22, 1976
MEMORANDUM FOR: SECRETARY SIMON
From:
John E. Hunnicutt
Subject: Tentative Finance Committee Schedule
Senator Long has announced the following tentative schedule
for the Finance Committee:
January 29 - 30
-
Hearings on Trade and World Economic
February 4 - 5
Conditions: Secretaries Kissinger,
Simon, Butz, and Dent; public
witnesses representing industry,
labor and agriculture
February 7 - 15
-
(Senate in recess)
Week of February 17 -
Committee Executive Session on
miscellaneous tax amendments and
noncontroversial administrative
provisions in the House passed Tax
Reform Act
In the closing days of the first
session, the Finance Committee
agreed to a series of "minor tax
amendments" which were to have
been added to a pending House
passed tariff bill. Objection
was raised to the consideration
of the bill and thus no action
was taken. IRS has urged quick
adoption of the noncontroversial
administrative tax provisions.
February 24 - 27
-
Executive Sessions for the Committee
to develop its spending and revenue
FORD :- 076335 LIBRARY
Initiator
Reviewer
Reviewer
Reviewer
Reviewer
Ex. Sec
Surname
Initials / Date
/
/
/
is
-2-
recommendations for the first
budget resolution due March 15th.
If the Committee's recommendations
do not accomodate the President's
several tax proposals and
subsequently the Senate Budget
Committee does not allow for these
programs in the First Concurrent
Resolution for fiscal year 1977, it
will be very difficult to have the
proposals enacted.
Week of March 9
-
Hearings and executive session on the
bill extending the debt limit (due to
expire March 15, 1976) ; and an
authorization bill for the U.S. Inter-
national Trade Commission (required
by the Trade Act of 1974)
March 16 - April 8
-
Committee Hearings on Tax Reform Bill
passed by the House (H.R. 10612).
Persons interested in the energy
tax bill (including those who have
already testified) will be permitted
to submit modified views in writing.
Also, hearings will cover any
additional tax issues embodied in
amendments to the House passed bill
offered by Senators and referred to
the Committee.
April 14 - 25
-
(Senate in recess)
May
-
Committee executive sessions on energy
tax measures, tax cut extension, tax
reform -- H.R. 10612.
No mention was made of Revenue Sharing in the schedule.
Senator Long indicated he wants to wait for the House to act
first. He expressed preference for the formula in present
law (perhaps with minor modifications) rather than the House
formula. Thus, he does not wish to send to the House a Senate
formula and then find himself in a conference having to seek
a compromise between essentially the present law formula and
the llouse formula. He would rather amend the House formula
LISEARY GERALD * FORD
-3- -
and be in a stronger position in conference. Also, he
mentioned that the present Revenue Sharing program continues
until the end of the year and he noted that county commis-
sioners, mayors, and governors do not seem concerned since
he has not heard from any of them.
CC: Walker
Goldstein
Collinson
Bradford
Eberle
LISA GERALD R. FORD
February 3, 1976
AGENDA FOR CAPITAL FORMATION TASK FORCE
There are 11 free Tuesdays from February 10 to April 28.
Under the assumption that the Task Force will meet once a week
for 2 hours, the following agenda should cover the main topics
on capital formation. In each case it is assumed there would
first be a staff or panel presentation and in the last hour there
would be questioning by; and summing up of positions of, the
task force.
Meeting
No.
Date
1
Feb. 10
General Considerations
1. Investment during the current
recession period
2. Investment and savings in the
U.S. economy since WWII
3. The effect of savings and investment
in an economy with slack employ-
ment and production.
The effect of savings and investment
in an economy with full employment
and production.
4. Comparison of U.S. and foreign
experience with incentives.
2
Feb. 17
General Consideration of Alternative Tax
Policies to Encourage Capital Formation
1. Integration of corporate and
individual income taxes
2. Liberalizing depreciation or
amortization rules
3. Lowering the corporate rate
4. Increasing savings in general
5. Using a countercyclical investment
fund
3
Feb. 24
Integration of Corporate and Individual Taxes
1. Explanation of double taxation and
effect on capital formation; equity
considerations and excess burden
with its effect on various income
classes.
-2-
2.
Main ways to achieve integration:
full, partial at corporate level,
partial at stockholder level, and
Wallich proposal to cut rate and
reduce deductability of interest
payments
3. U.S. experience with integration
4
March 2
Integration--Continued
1. Foreign mechanisms to achieve
integration
2. Distributional and burden considera-
tions
3. Relation of integration to other
tax policy issues: windfall gains
5
March 9
Integration--Concluded
1. Administrative problems with
alternative forms of integration:
foreign and tax-exempt sectors,
issues of refundability, inter-
corporate dividend flows, multi-
year accounting considerations
2. Revenue considerations, including
feedback effects and ways of phasing
plans into effect
6
March 16
Panel on Integration: Economics:
Brenk, Eisner, Jorgenson, Pechman,
McClure, Brazer, Richard Goode (These
are possible panelists; they have not
been contacted.)
7
March 23
Revision of Depreciation Laws
1. Effect of depreciation on investment
decision
2. Current law
3. Replacement cost depreciation and
indexing; inventory valuation
4. Selective fast writeoff, by industry
type of investment
5. Conformity between book and tax
depreciation
FORD is GENALD LIBRARY
-3-
8
March 30
Depreciation--Continued
1. Rapid writeoff varying by State
and local unemployment area
2. Administration proposal and
evaluation, revenue effects
3. Administrative considerations
April 6
Investment Credit or Lowering Corporate Rate
9
1. Effect by industry
2. Effect on employment of labor
and capital
3, Selective application of credit
by industry latilities; pollation, Cap.
4. Revenue and economic effects
10
April 13
Increasing Savings in General
1. Forms of savings
2. Shifting of savings between categorie:
3. Plans to encourage general savings
2
(a) Tax on consumption expenditures
(b) Taxes on production
Desirone
(c) Distributional effects
4. Plans to encourage special savings:
mortgage credit, stock savings
deductions (including employee
stock ownership plans), life
insurance, etc.
11
April 27
Capital Formation for Loss Companies and
New Business
1. Net operating loss carrybacks for
business
2. Net operating loss carryforwards
for new and expanding business
3. Capital loss carrybacks for individua
Capital Ones:
&
FORD
071239
LIBRARY
DEPARTMENT
OF
THE
THE SECRETARY OF THE TREASURY
THE
WASHINGTON 20220
1769
February 5, 1976
MEMORANDUM TO: Economic Policy Board
FROM:
Secretary Simon
SUBJECT: Title V of S.1284 (premerger notification and stay provision)
The Antitrust Improvements Act of 1975 (S.1284) has been scheduled
for markup by the Senate Judiciary Committee on February 18 and 19. At
hearings before the Subcommittee on Antitrust and Monopoly, the Justice
Department generally supported the provisions of Title V of the bill
relating to premerger notification and stay procedures. Senator Scott
has asked the Attorney General for a clarification of the Administration's
position on Title V.
Title V would enable the Antitrust Division or the Federal Trade
Commission (FTC) to hold up a planned merger for an extended period with-
out any review by a court. It does so in two ways:
1. By requiring the parties to give notice of a planned merger and
barring the merger for 30 days while the Antitrust Division and FTC
evaluate it. The Antitrust Division or the FTC could hold up the merger
for another 45 days by asking for additional information about the mer-
ger or the parties.
2. By requiring a court to hold up the proposed merger when suit
is filed if the Antitrust Division or the FTC certifies to the court
that the public interest requires that the merger or acquisition not be
completed until a final judgment is rendered.
Since the subcommittee reported the bill and since the EPB meeting
on this bill on December 19, there have been discussions between the
Justice Department, Treasury Department and various representatives of
the business community concerning Title V. As a result of these discus-
sions, the Justice Department has suggested a revision to Title V that
would: (1) retain the premerger notification procedures; and (2) limit
the period in which a merger could be held up pending notification liti-
gation of the Justice Department's or FTC complaint challenging the mer-
ger to 30 days unless the court granted a 30-day extension of the stay
"for good cause shown."
FORD is GERALD LIBRARY
- 2 -
Title V would have the effect of creating a new regulatory scheme
for all significant acquisitions. Mergerscould be held up for extended
periods unless the Antitrust Division and the FTC permitted them to go
forward. This kind of new or additional governmental interference with
business transactions should not be undertaken without a clear demon-
stration that it is necessary to achieve legitimate antitrust enforce-
ment objectives, and that attainment of these objectives outweighs any
adverse effects on the economy. Title V cannot be justified under
either of these criteria.
Title V would discourage healthy, efficient, competitive change of
ownership of businesses in response to economic conditions, decrease the
availability of capital to firms and promote inefficient allocation of
capital resources. It would give the Antitrust Division and the Federal
Trade Commission the ability to hold up a proposed acquisition or merger
for an indefinite period of time without having to make any showing in
court that the transaction violates the antitrust laws. Even under the
Justice Department's suggested revision of Title V, the government would
have the ability to hold up an acquisition or merger for over 135 days
without effective judicial review. The mere existence of this discre-
tionary power in the antitrust enforcers could significantly deter law-
ful mergers and acquisitions to the detriment of the economy. More
importantly by exercising this discretionary power, the Antitrust
Division and the FTC could prevent --- not merely delay -- proposed acqui-
sitions or mergers since the economic reasons for such transactions could
well pass during the period of delay.
The Justice Department maintains that it needs greater ability to
stay a proposed acquisition or merger pending antitrust litigation
because divestiture of stock or assets is an inadequate remedy in most
cases. Even accepting this contention, the Department has not demon-
strated that existing procedure for enjoining a proposed acquisition or
merger challenged by the government is inadequate.
Under present law, the Justice Department may obtain a court injunc-
tion barring a merger.pending the outcome of its antitrust. suit, if it
can demonstrate a reasonable probability that it will succeed in estab-
lishing the illegality of the proposed transaction. Pending the hearing
and determination of the Justice Department's request for an injunction,
the court may at any time enjoin the challenged acquisition or merger
for up to 20 days. This 20 days can, and frequently has been, extended
by consent of the parties to give the court an opportunity to hear the
merits of the case. Recent amendments to the Expediting Act have
strengthened the Justice Department's power to secure preliminary injunc-
tions by giving the Department, for the first time, the power to appeal
at once from a denial of a preliminary injunction in an antitrust case.
LIBRARY GERALD FORD
- 3 - .
The FTC is similarly authorized to obtain a court order enjoining an
allegedly unlawful acquisition or merger.
Existing law allows the courts discretion to apply traditional
standards of fairness and equity in determining the appropriateness of
injunctive relief in merger cases. There has been no showing that the
government needs the power to demand an automatic stay in order to
guard against acquisitions that may be anticompetitive.
Nor has any demonstration been made of the need for the premerger
notification requirements of Title V. This provision would permit the
Antitrust Division and the FTC to delay an acquisition or merger for
well over 75 days. Moreover, premerger notification would be required
in any transaction involving two companies with annual sales or assets
over $10 million. Present FTC premerger notification rules have a $250
million threshold and do not prevent the merger from going forward.
Chairman Engman of the FTC testifying before Senator Hart's subcommittee
on this provision, questioned the need for requiring notification of
smaller merger transactions. He stated that the Federal Trade
Commission's own premerger notification program appeared to be
satisfactory.
Title V is inconsistent with the objectives of the Administration's
program for regulatory reform and, therefore, Administration support of
Title V is incongruous. with these objectives. Title V represents a
clear example of the failure to weigh the benefits of proposed regula-
tion against its costs to the economy. It stands in stark contrast to
the goal of achieving regulatory objectives in a manner that minimizes
the cost impact on the economy generally. Finally, the broad coverage
of the premerger notification requirements conflict with the goal of
eliminating unnecessary government reporting requirements.
In view of these considerations, the Administration should oppose
enactment of Title V, including its premerger notification and stay
provisions.
GERALD FORD LIBRARY
ASSISTANT ATTORNEY GENERAL
ANTITRUST DIVISION
Department of Justice
Mashington, D.C. 20530
February 4, 1976
MEMORANDUM TO: Economic Policy Board
FROM:
Thomas E. Kauper
Assistant Attorney General
Antitrust Division
SUBJECT:
Title V of S. 1284
Title V of S. 1284 would establish a procedural
framework and substantive standard pursuant to which
courts would evaluate motions for preliminary injunctive
relief in cases brought by the Department of Justice or
the Federal Trade Commission to challenge proposed mergers
or acquisitions. Title V has undergone substantial modi-
fication since introduction of the bill, and this formulation
of the stay provision represents the minimal intrusion upon
business transactions that is consistent with the legitimate
enforcement needs of the Department of Justice and the
Commission.
I. The Need for Legislation
Under present law, there is no established mechanism
by which economically significant mergers or acquisitions
are brought to the attention of antitrust enforcement
agencies. The Department of Justice learns of most pro-
posed acquisitions through the Wall Street Journal and
other such sources, and the Federal Trade Commission's
pre-merger notice system is, as a practical matter, useful
only when agreements to merge are reached substantially in
advance of the proposed consummation date.
In those instances when either agency believes that
a proposed merger or acquisition violates the antitrust
laws, attempts are made to file a complaint before the
transaction is consumnated. Unless the parties agree to
delay consummation pending resolution of the antitrust
issues, our complaint will most frequently be accompanied
by a motion for a temporary restraining order and a motion
for a preliminary injunction. Historically, the purpose
of a temporary restraining order is to assure that the
plaintiff will not suffer irreparable harm until the court
LIBRARY GERALD FORD
can rule on a motion for preliminary injunctive relief.
In the merger setting, consummation of a merger itself
constitutes irreparable harm since post-consummation
relief in the form of divestiture has proven ineffective
and a burden to all parties.
Although the Department is generally successful in
obtaining a temporary restraining order, we have found
that district courts frequently are unable to hold a
thorough hearing on our motion for a preliminary injunction
prior to the expiration of the temporary restraining order.
As a practical matter, therefore, companies are able to
consummate a merger or acquisition while the matter is
being litigated simply because the complexity of the anti-
trust issues involved makes it impossible for the district
court to rule on the government's motion for a preliminary
injunction. Given the universal dissatisfaction with
divestiture as an antitrust remedy, the existing procedural
framework for resolving antitrust challenges to proposed
transactions is deficient.
II. The Emergence of a Pre-Merger Stay Provision
As introduced in the 94th Congress, Title V would
have provided for an automatic stay of any proposed
acquisition upon institution of an action by the Federal
Trade Commission or the United States and certification
by the Commission or the Attorney General "that the public
interest requires relief pendente lite." Under this
standard, the district court would have been required to
enter an order prohibiting consummation, which would
remain in effect until the order of the Commission or
judgment became final. The district court was further
directed to expedite the proceeding or action.
The Department of Justice, testifying on behalf of
the Administration, opposed this standard on the grounds
that it was unnecessarily inflexible. Instead, we pro-
posed that the district court be given discretion to lift
a stay upon a showing by the defendant of irreparable harm
or lack of merit of the government's suit. The Senate
Subcommittee on Antitrust and Monopoly largely adopted
this position when it reported the bill to the full Judiciary
Committee on July 28, 1975.
2
FORD & LIBRARY
Representatives of the investment banking community
have contended that even this modified stay provision is
too disruptive. They objected to the fact that the stay
could be entered without any judicial determination of
the merits of the government's case. To counter this
concern, the Department suggested a standard under which
an injunction would be entered only if a judge found a
reasonable likelihood that the government would prevail
on the merits of the case -- the standard presently
applied by courts. The only condition to this proposal
was that the court be guaranteed an opportunity to rule
on the motion for a preliminary injunction before con-
summation of the merger or acquisition. To assure this
condition, a temporary restraining order would be entered
upon filing of the complaint and would remain in effect
until the court's ruling on the preliminary injunction.
The Department was committed to a timely ruling by the
judge so that mergers or acquisitions would not be unduly
delayed; to that end the judge was directed to give these
matters priority and to expedite his ruling.
This formulation was unacceptable to representatives
of the investment banking community. Although they pro-
fessed to accept the Department's position on the need
to preserve the status quo pending a ruling on the pre-
liminary injunction, they were afraid that judges might
not rule on these motions fast enough. Therefore they
objected to any formulation that did not fix a maximum
time on the temporary restraining order.
III. The Current Formulation
After a careful analysis of the steps necessary to
allow a judge to make an intelligent ruling on a motion
for a preliminary injunction, and in an effort to be as
responsive to the various concerns raised as is consistent
with sound antitrust enforcement policy, the Department
presented the current formulation for a pre-merger stay
provision. Under this proposal:
1. A temporary restraining order would be entered
upon the filing of an antitrust complaint and certification
by the appropriate antitrust official that immediate tempo-
rary relief is necessary.
3
GERALD FORD LIBRARY
2. The temporary restraining order would remain in
effect for thirty days or until final disposition of the
motion for a preliminary injunction, whichever period is
shorter, unless extended.
3. The temporary restraining order could only be
extended for up to an additional thirty days upon good
cause, or for such period to which all the parties consent.
4. The Chief Judge of the United States Court of
Appeals would be required to designate a District Judge
who is available to hear the action in an expeditious
manner, and that Judge would be directed to hold a hearing
at the earliest possible time and to give the matter priority.
5. The preliminary injunction would be granted only
upon a showing by the government of a reasonable probability
of success on the merits. Even if such a showing is made,
the defendant could have the injunction modified if it
shows that it will be irreparably harmed by the injunction
(except that loss of anticipated profits may not be con-
sidered).
The Department of Justice believes that any standard
providing a shorter time period cannot assure the district
court an opportunity to rule on the motion for a preliminary
injunction before expiration of the temporary restraining
order and would be unacceptable as a matter of antitrust
enforcement policy. The steps a court must undertake in
ruling on a motion for a preliminary injunction are numerous
and include: pretrial conferences, evaluation of prehearing
briefs, an evidentiary hearing, evaluation of posthearing
briefs and proposed findings of fact and conclusions of
law, and preparation of a written opinion. Historically,
these proceedings have averaged about 50 days, although a
significant number have taken over 100 days. Any period
shorter than that contained in the present formulation is
neither warranted by the concerns expressed nor consistent
with affirmative enforcement efforts.
Under these circumstances, the only acceptable options
for the Administration are: (1) continued support of the
present bill, as amended pursuant to the Administration's
suggestions; (2) suggest to the Judiciary Committee a
substitute provision such as the current formulation; or
(3) to withdraw Administration support for the concept of
a stay procedure and express our preference for current
law and procedure. The Department would favor these options
in the order listed.
4
FORD & LIBRARY GLAVID
Notwithstanding which of these options is ultimately
deemed preferable, the Department would support statutory
language mandating the selection of a judge by the Chief
Judge of the Circuit in which the case is filed, and
requiring that such cases be given priority treatment.
It is our understanding that, on this point, there is no
disagreement among any of the interested parties.
FORD is ,LIBRARY GERALD
FOR OFFICIAL USE ONLY
Business
Conditions
Report
February 6, 1976
DEPARTMENT OF COMMERCE
UNITED OF AMERICA
STATES
FORD & 9.1440 LIBRARY
U.S. Department of Commerce
DOMESTIC AND INTERNATIONAL
BUSINESS ADMINISTRATION
Bureau of Domestic Commerce
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
CONTENTS
Page
INDUSTRY HIGHLIGHTS
PRODUCTIVITY AND UNIT LABOR COSTS: Fourth quarter
increase in compensation raises unit labor costs
1-1
AUTOMOBILES: January 10-20 new domestic car sales
1-1
CONSTRUCTION: Expenditures down 4 percent in 1975
1-1
PLASTICS: Gains in production and sales resume
1-2
SOFTWOOD LOGS AND LUMBER: Log exports up slightly but
lumber exports decrease for 1975
1-3
FLUID POWER COMPONENTS: Shipments decline
1-3
COCOA: 1975 U.S. utilization down from 1974
1-4
PHOTOCOPIERS: Shift in equipment and supplies market
1-4
TRADE: Chemicals contribute strongly to U.S. trade
surplus
1-5
AUTOMOBILES/INTERNATIONAL: Volkswagen considering
investment in U.S. production facilities
1-5
RESTRICTIONS MAY BE REMOVED
90 DAYS AFTER PUBLICATION
BUSINESS INDICATORS
MANUFACTURERS' NEW ORDERS; SHIPMENTS; INVENTORIES
2-1
December orders slide; shipments rise marginally; both
substantially above December 1974; inventories below
December 1974 despite slight monthly rise in December 1975.
MANUFACTURERS' EXPORT SALES AND ORDERS OF DURABLE GOODS
2-2
Durable goods export sales and new orders rise in
December; export unfilled orders decline 2.2 percent
from November, 8.5 percent from December 1974.
NEW CONSTRUCTION; CONSTRUCTION CONTRACTS
2-3
New construction in December rises 1.5 percent from
adjusted November level; commercial and industrial
floorspace contracts rise 21 percent but remain below
December 1974 level.
i
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NEW PASSENGER CARS: Production; Retail Sales; Trade
2-4
PRICE INDICATORS
Production up 33 percent in January, 51 percent above
January 1974; December domestic sales slide as imports
TUESDAY SPOT PRICES
7-1
rise, exports fall.
Foodstuffs fall 2.9 percent in week, to 81 percent of
PRODUCTIVITY AND UNIT LABOR COSTS
2-5
year-ago level; industrial materials drop slightly but
continue above year-ago.
Unit labor cost rises despite rise in productivity
in private economy; manufacturing sector shows
SPOT AGRICULTURAL PRICES: Steers, Hogs, Broilers, Eggs,
greater productivity increase and smaller unit cost
Wheat, Corn, Soybeans, Raw Sugar
7-2
increase than total private economy in fourth quarter.
Grains, livestock, soybeans rise; eggs down 8 percent,
broilers, sugar fall in week; sugar at 41 percent of
ENERGY
year-ago level.
U.S. CATTLEHIDES: Monthly Average Prices
7-6
POWER GENERATING FACILITIES: Cutbacks in 1975
3-1
January price 4 percent above December, 120 percent
above January 1975.
SUPPLY
ISSUES
COPPER: Cutbacks continue
4-1
ALUMINUM: Reynolds reactivates capacity
4-1
ADJUSTMENT ASSISTANCE: United auto workers' petition
8-1
STEEL: Inland Steel agrees to install pollution control
LABOR
facilities
8-1
5-1
LEAD: Dumping case reopened
8-2
NEGOTIATIONS: Garment workers reach settlement
POLYCHLORINATED BIPHENYLS: Monsanto to continue production
8-2
WAGES: Cost-of-living adjustment in basic steel and
5-2
containers industries
BANKING: Reduction of Federal Reserve independence
5-2
suggested
8-2
STRIKES: Striking employees and major strike data
NEW AND SETTLED MAJOR STRIKES: Affected companies and
5-2
unions, locations
ENGINEER/SCIENTIST DEMAND INDEX: Sharp drop in December
5-3
For further information contact:
PRICES
Mr. Samuel B. Sherwin, 967-5491
Mr. Charley M. Denton, 967-5223
CATTLEHIDES: Prices rise
6-1
HYDROFLUORIC ACID: Higher prices announced
6-1
NEWSPAPERS: Higher daily prices in 1975
6-2
Enquiries and suggestions are welcomed.
NEWSPRINT: Price rises scheduled for U.S. and Canada
6-2
ii
iii
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INDUSTRY HIGHLIGHTS
PRODUCTIVITY AND UNIT LABOR COSTS: FOURTH QUARTER
INCREASE IN COMPENSATION RAISES UNIT LABOR COSTS
CURRENT o Fourth quarter 1975 output per man-hour in total private
economy increased at 1.0 percent annual rate, according
to Bureau of Labor Statistics. Output per man-hour in
manufacturing rose at an annual rate of 5.6 percent in
same period.
Unit labor costs, as result of increase in compensation
per hour, resumed its long-term climb in fourth quarter,
rising 6.5 percent in private economy and 0.7 percent
in manufacturing sector. (See chart in Business
Indicators.)
AUTOMOBILES: JANUARY 10-20 NEW DOMESTIC CAR SALES
CURRENT O Auto sales during January 10 through 20 totalled 171,890
units, 31 percent above 131,127 units sold in same 1975
period, when sales were starting to improve due to
introduction of rebates.
o
Car sales for January 1 through 20 totalled 307,898 units,
up 37 percent from year-earlier 224,367.
o
Ford and GM are experiencing difficulty in selling smaller
cars while intermediate sales are above expectations.
o
Due to this uneven demand and resulting difficulty con-
trolling inventories, during February, GM expects to
close two small-car facilities; Ford plans cuts in small
car output; Chrysler plans to close two of its six plants
for certain weeks in February; and American Motors will
close one Pacer line.
CONSTRUCTION: EXPENDITURES DOWN 4 PERCENT IN 1975
CURRENT o Construction expenditures grew from $20.0 billion (current
dollars) in 1947 to $136.0 billion in 1973 and remained
close to that level in 1974, at $135.5 billion. 1975
expenditures declined 4 percent to $130.6 billion.
O
In constant (1967) dollars, construction expenditures
amounted to $68.9 billion in 1975, down 12 percent from
1974 and 25 percent lower than 1973 peak.
1-1
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1975 constant dollar decline, while less than 15 percent
SOFTWOOD LOGS AND LUMBER: LOG EXPORTS UP SLIGHTLY
drop in 1974, is steepest of any other year-to-year decline
BUT LUMBER EXPORTS DECREASE FOR 1975
in construction volume since 1947.
o
Seasonally adjusted annual rate of $138.6 billion (current)
CURRENT o 1975 total softwood log exports of 2.6 billion board
dollars of new construction in December is up slightly
feet (valued at $681 million) represented a quantity
from November and October revised figures of $136.5 billion
increase of 3 percent over 1974 exports.
and $135.6 billion, respectively. This gain reinforces
recovery pattern for overall construction activity that
o
Log exports for fourth quarter 1975 increased 8 percent
marked second half 1975.
over same 1974 period. Japan, which accounted for 87
percent (quantity basis) of U.S. softwood log exports in
F. W. Dodge's December contract award figures of $5.4
1975, increased yearly purchases from U.S. by 8 percent.
billion (down 23 percent from December 1974) suggest,
however, that awards picture must be monitored in coming
o
Total softwood lumber exports for 1975 of 1.36 billion
months for evidence of continued upturn in new construction
board feet (valued at $339.2 million) were down 9 percent
expenditures for 1976.
from 1974.
Dodge awards index, which indicates amount and direction
o
Fourth quarter 1975 exports showed increase of 27 percent
of future construction expenditures, stood at 137 for
over same 1974 period. Japan, which accounted for 38
December 1975 (1967=100) close to 135 low point in
percent (quantity basis) of U.S. softwood lumber exports
January 1975. Total awards for all types of construction
in 1975, showed a decrease of 9 percent from 1974.
were down 4 percent in 1975.
o
Japanese General Demand/Supply Conference for Foreign
o Non-building construction contracts, bolstered by multi-
Timber estimated that imports of American softwood logs
billion dollar Alaskan pipeline, reached record level of
and lumber would be down by 11 percent in first half of
$28.4 billion in 1975, and was only major construction
1976 from same 1975 period.
category to show an increase (5 percent).
FLUID POWER COMPONENTS: SHIPMENTS DECLINE
PLASTICS: GAINS IN PRODUCTION AND SALES RESUME
$1.3 billion fluid power systems components industry
CURRENT o Preliminary figures for December 1975 show an improvement
supplies major end users including aerospace and automotive
over last month in production and sales of the major
industries, machine tool builders, farm machinery, con-
volume plastic materials, according to Society of the
struction equipment, lift trucks, and manufacturers of
Plastics Industry.
marine and special military equipment.
O December figures indicate a return to monthly improvements
as data for November 1975 compared to October 1975 regis-
CURRENT o National Fluid Power Association (NFPA) reports that its
tered first decrease since March.
November preliminary Fluid Power Index stood at 169
(1967=100). This represents a decline from 172 in
o Sales in December 1975 totalled 1.5 billion pounds, a
October and a 27 percent decline from October 1974 record
7.2 percent increase over November 1975. December 1975
of 231. November figure is 6 percent above August low
production increased by 1.4 percent over November to
of 159.
1.6 billion pounds.
Existing order backlog has helped maintain present
o Sales in December 1975 were 29.3 percent higher than in
relatively level pace of shipments. Industry sources
December 1974 and production was 14 percent higher.
are cautious about the possibilities of a quick turn-
However, production and sales in December 1974 were
around or a substantial increase in new orders.
already taking a downward course before start of recovery
in March 1975.
O
Although pneumatic component index has shown strength,
rising for fourth consecutive month to level of 200,
the much larger hydraulic component index has fallen
more than 25 percent since start of 1975.
1-2
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COCOA: U.S. UTILIZATION DOWN FROM 1974
o
Sales of supplies will receive boost by penetration of
o
U.S. is totally dependent on imported cocoa beans and
copiers into lucrative short-run commercial printing
market, where cost savings are possible because copiers
importing 20 to 25 percent of total world production.
is a principal consumer of world cocoa production, generally
require no clean-up or down time in changing from one job
Cocoa bean grind figure is an indicator of future con-
to another.
fectionery output.
Photocopiers cannot compete with speed of printing presses
U.S. utilization of cocoa beans is measured by cocoa
in long runs.
bean grind and net imports of cocoa bean products in
terms of cocoa bean equivalent.
TRADE: CHEMICALS CONTRIBUTE STRONGLY TO U.S. TRADE SURPLUS
CURRENT Commerce announced, in first of quarterly series of
CURRENT Chemical exports in 1975 were $8.7 billion or 8 percent
reports, that U.S. utilization of cocoa beans for 9-
month period January-September 1975 totalled 490
of total U.S. exports. Chemical exports in 1975 were
million pounds, 19 percent below 602 million pounds
1 percent lower than $8.8 billion in 1974.
consumed in comparable 1974 period.
U.S. imports of chemicals in 1975 amounted to $3.7 billion,
o
Within 490 million pound total,
decreasing by 8 percent from 1974 imports.
Decline in exports and imports in 1975 is first registered
-- U.S. cocoa bean grind was 325 million pounds,
19 percent below same 1974 period; and
during past decade.
Trade balance in chemicals for 1975 amounted to $5 billion,
net imports of cocoa bean products totalled 165
a 4 percent improvement over 1974 and represents approxi-
million period. pounds, also 19 percent below same 1974
mately 50 percent of total U.S. trade balance in 1975.
Steep decline in cocoa bean product utilization was
AUTOMOBILES/INTERNATIONAL: VOLKSWAGEN CONSIDERING
attributed to record prices and a tight supply compounded
INVESTMENT IN U.S. PRODUCTION FACILITIES
by high sugar prices. Improvement is expected in fourth
below 1974 total.
quarter 1975 but annual total will be significantly
CURRENT o VW has concluded an agreement to allow American Motors
Corp. to build a 121-cubic inch Audi engine in Richmond,
PHOTOCOPIERS: SHIFT IN EQUIPMENT AND SUPPLIES MARKET
Indiana for sale to VW, as well as for use in its own new
subcompact.
As result of near-saturation of market, Zerox, IBM
Discussions now under way would allow Chrysler to build a
and Eastman Kodak have reduced per-copy lease fees for
97-cubic inch, 4-cylinder powerplant for use in VW Rabbit
volume of copies.
their copiers between 5 and 11 percent, depending on
and its own new subcompact in 1977.
VW-Chrysler engine agreement would force cancellation of
engineering contracts issued by Chrysler to U.S. tool
CURRENT o Manufacturers are placing emphasis on increased revenue
builders for metalcutting equipment according to a
per copier, with a lower priority on new machine in-
trade publication.
stallations. Profit margins on supplies (paper and
chemicals) exceed those on machines.
VW is known to be considering several U.S. locations for
a plant to begin producing cars in the U.S. within next
Market is estimated at $3.3 billion per year, comprised
three years, including sites in suburban Cleveland, Ohio,
of machine sales of $2.2 billion and supplies of $1.1
New Stanton, Pennsylvania, Detroit, and other north-
eastern locations. Decision on plant location will probably
which will grow at rate of 14 percent per year, compared
billion. Ratio is expected to shift in favor of supplies,
be made in April.
with 6 percent for machines.
1-4
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BUSINESS INDICATORS
MANUFACTURERS' NEW ORDERS
BILLIONS OF DOLLARS
(Seasonally Adjusted)
100
Total
85.6
80
60
Non-durable Goods
43.8
40
41.9
Durable Goods
20
0
1974
1975
1976
MANUFACTURERS' SHIPMENTS
BILLIONS OF DOLLARS
(Seasonally Adjusted)
100
Total
86.9
80
60
Durable Goods
43.7
40
43.2
Non-durable Goods
20
0
1974
1975
1976
MANUFACTURERS' INVENTORIES
BILLIONS OF DOLLARS
(Seasonally Adjusted)
160
Total
146.8
140
120
Durable Goods
100
95.7
80
60
51.1
40
Non-durable Goods
0 J A s 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
1974
1975
1976
Source: Bureau of the Census
2-1
LIBRARY GERALD BERALDR. FORD
MANUFACTURERS' EXPORT SALES AND
ORDERS OF DURABLE GOODS
(Excluding Motor Vehicles and Parts)
NEW CONSTRUCTION
(Seasonally Adjusted)
(Seasonally Adjusted)
ANNUAL RATES
Billions of Dollars
EXPORT SALES
BILLION DOLLARS
5
140
138.6
60
4
Total (Left Scale)
3.8
120
40
3
2
Commercial and Industrial (Right Scale)
ILMINI
100
19.7
20
0
95.5
Total Private (Left Scale)
Billions of Dollars
EXPORT NEW ORDERS
0
0
Source: Bureau of the Census
4
3.5
3
CONSTRUCTION CONTRACTS
COMMERCIAL AND INDUSTRIAL FLOOR SPACE
2
(Seasonally Adjusted)
ANNUAL RATES
Million Square Feet
0
1200
1000
Billions of Dollars
EXPORT UNFILLED ORDERS
16
15
800
14
13.8
609
13
600
12
11
400
10
0
0
J
J
M
M
J
J
F M A M J J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
A
S
0
N
D
J
FMAMJ
J
A
S
ON
DJ
F
M
AM
J
J
A
S
0
N
D
J
FMAMJ
JASOND
1974
1975
1976
1973
1974
1975
1976
Source: Bureau of the Census
Source: F.W. Dodge Division, McGraw Hill
2-2
2-3
NEW PASSENGER CARS
Thousand Units
PRODUCTION
1000
Productivity and Unit Labor Costs
(Seasonally Adjusted)
800
Index 1967=100
Total Private Economy
666
170
162.4
600
160
150
400
140
Unit Labor Cost
130
120
114.3
0
Source: Motor Vehicle Manufacturers Association; Bureau of the Census
110
Output per Man-hour
RETAIL SALES
100
Thousand Units
DOMESTIC AND IMPORTED CARS
1000
Index 1967=100 =
Manufacturing
800
Domestic (Includes Canada)
150
139.8
140
600
131.0
606
Output per Man-hour
130
200
Imported (Excludes Canada)
120
101
110
Unit Labor Cost
0
Source: Motor Vehicle Manufacturers Association; Wards Automotive Reports
100
Thousand Units
TRADE
300
1970
1971
1972
1973
1974
1975
Source: Bureau of Labor Statistics.
200
Imports
191
154
100
Imports (Excludes Canada)
2-5
Exports
59
0
JASONDJ 1973 FMAMJ J ASONDJ FMAMJJASONDJFMAMJJASOND
Source: Motor Vehicle Manufacturers Association; Bureau of 1975 the Census
1974
1976
2-4
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ENERGY
POWER GENERATING FACILITIES:
CUTBACKS IN 1975
CURRENT
In 1975, 114 new power generating facilities with
planned capacity of 98,900 megawatts were deferred for
periods ranging from less than one year to indefinite, and
and 13 units with planned capacity of 29,500 megawatts
were cancelled.
Of the 114 facilities deferred, 72 were nuclear
with planned capacity of 70,800 megawatts and 42 with
planned capacity of 28,100 megawatts were fossil
fuel fired. 12 nuclear units with planned capacity
of 28,700 megawatts and one fossil fuel unit of
800 megawatts were cancelled.
Financing problems, a second year of little growth in
peak demand, and economic and technological problems
were blamed for the deferrals and cancellations.
During 1975, seven nuclear units previously deferred
indefinitely were rescheduled for commercial
operation between 1977 and 1984.
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SUPPLY
COPPER: CUTBACKS CONTINUE
Poor business and high costs have plagued the copper
industry during 1975 and early 1976 (see Business
Conditions Report, January 30, 1976).
Present operating rate of industry in U.S. is
approximately 80 percent of capacity.
CURRENT
Kennecott has curtailed production at its McGill,
Nevada mine and mill affecting 500 of 1,200 workers.
Production will continue at the smelter. (Smelter
operations represent 5 percent of domestic blister
capacity.)
Kennecott attributed cutback to a 120-day inventory
overhang of concentrates (mill product used as
smelter feed).
Also contributing to decision to reduce production is
recent court decision (see Business Conditions Report,
December 19, 1975) upholding Environmental Protection
Agency's position to review annually Kennecott's
measures to comply with air quality standards at
McGill site.
Complete shutdown of McGill operations may be effected
in May or June, according to Kennecott.
ALUMINUM: REYNOLDS REACTIVATES CAPACITY
U.S. primary aluminum industry operated at 73
percent of capacity during most of 1975 due to decreased
demand and high inventories.
Total 1975 U.S. production of primary ingot was 3.88
million short tons or 21 percent less than 1974
production of 4.90 million short tons.
There has been a gradual increase in rate of production
since September 1975, due to utilization of new
capacity brought on stream during fourth quarter 1975.
A sight increase in shipments of ingot and mill
products and a gradual decline in total inventories
also occurred during fourth quarter.
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CURRENT Partially in view of these changing conditions,
LABOR
that it was reactivating 17,000 short tons of
Reynolds Metals Company announced on January 29, 1976,
had been idle since March 1975.
capacity at the Arkadelphia, Arkansas plant, which
NEGOTIATIONS: GARMENT WORKERS REACH SETTLEMENT
International Ladies Garment Workers Union (ILGWU)
The State of Arkansas announced decision to exempt
has been negotiating with dressmaker representatives
Reynolds from paying three percent sales tax on
since November, seeking contract that would serve as
electricity used for primary aluminum smelters.
basis for future contract governing entire women's
outerware clothing industry.
No appreciable changes in operating rates by other U.S.
producers are expected until there is significant
Under old contract, hourly wages ranged from
increase in demand and reduction of inventories to
$3.10 to $5.
more normal levels.
CURRENT ILGWU settled on new 40-month contract with dress-
makers, thus averting a strike that would have had
NEWSPRINT
national impact.
o
Key provisions:
CURRENT o U.S. publishers have been gradually turning to alternative
inventories have not yet reached critically low levels.
foreign sources for newsprint although U.S. newsprint
-- Cumulative wage increases of 23 to 25 percent
to be paid in four installments throughout the
(See Newsprint article in Prices.)
agreement.
-- New method of setting standard yields for piece
workers on a factory-by-factory basis that both
establishes a minimum wage for piece workers
and allows manufacturers to increase productivity
by emphasizing total earnings rather than amount
and value of work involved.
-- Increased benefit contributions (pension and
welfare fund)
o
Contract covers 55,000 workers (30,000 in New York
City) and serves as a guide for 30,000 additional
workers whose contracts expire in coming months.
ILGWU reaction to the settlement was favorable.
Manufacturers' reaction was guarded concerning wage
increases, but generally favorable to provisions
concerning uniformity.
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WAGES: COST-OF-LIVING ADJUSTMENT IN BASIC
STEEL AND CONTAINERS INDUSTRIES
ENGINEER/SCIENTIST DEMAND INDEX: SHARP DROP IN DECEMBER
On in February 1, 400,000 United Steelworkers employed
Engineer Scientist Demand Index (1961=100) = measures
basic steel industry received an additional cost-
relative strength of employment demand for scientists
of-living adjustment of 9 cents an hour.
and engineers as reflected by help wanted advertise-
ments in selected newspapers and technical journals.
On February 15, 36,300 United Steelworkers in the
containers industry will receive a similar adjustment.
Throughout 1975, index fluctuated slightly around
average level of 75.0.
Under formulas in the 1974 contract settlements,
employees in the two industries have received
CURRENT
o
In December, index fell to 68.6, down 13.3 points
cost-of-living increases totalling 92 cents an hour.
from November level of 81.9, the highest month of
1975.
STRIKES
The annual average index for 1975 was 74.4, the
third-lowest year in the 15-year history of the
index.
(Source: Federal Mediation and Conciliation Service)
1975 average index reflects across-the-board
During week ending January 28, approximately 39,500
losses in demand in all geographic areas and in
employees were involved in 223 work stoppages throughout
all technical fields.
the United States.
Six of the work stoppages were in major and/or
were in bargaining unit.
significant category where 1,000 or more employees
During approximately same year-ago period, there
were 195 work stoppages involving 45,700 employees.
category. Eight stoppages were in major and/or significant
NEW AND SETTLED MAJOR STRIKES
New:
Junior Toy Division of American Machine &
Foundry Co. and the IAM
Olney, Illinois
4,000 employees; began 2/2/76
City of Newark and Newark Teachers Union
Newark, New Jersey
4,000 employees; began 2/2/76
Settled:
There have been no settlements in major
and/or significant category since last
week's report.
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PRICES
CATTLEHIDES: PRICES RISE
CURRENT Cattlehide prices (composite of three major types)
averaged 28.72 cents per pound in January 1976, 4
percent higher than in December 1975, but 120 percent
higher than January 1975. (See chart in Price Indicators.)
Buying interest, both domestic and foreign, was maintained
throughout January, and prices accelerated for both light
and heavy weight hides; however, demand and prices for
heavy hides began to decline toward the end of the month.
1975 commercial slaughter of 40.8 million head of cattle
was 11 percent above comparable 1974 slaughter of 36.8
million, according to USDA.
Exports in 1975 of 21.2 million were 15 percent higher
than 18.4 million exported in 1974.
Exports in 1975 were 52 percent of production, up from
50 percent in 1974.
HYDROFLUORIC ACID: HIGHER PRICES ANNOUNCED
A large part of hydrofluoric acid (HF) produced is used
captively either by fluorocarbon or aluminum producers;
lesser amounts are used as catalysts in petroleum
alkylation, uranium processing, pickling of stainless
steel, etching glass, and other metallurgical applications.
350,000 short tons of HF are produced annually for captive
and commercial uses. Commercial sales account for 15 to
20 percent of total production.
Trade sources indicate producers are operating at 60 to
70 percent of capacity because of reduced demand.
CURRENT DuPont, a leading producer, announced a $60 per ton increase
to $880 for anhydrous grade and $70 per ton rise to $665
for aqueous acid.
New prices became effective February 1 for spot sales and
as terms permit for contract sales.
Reasons cited for higher prices are increased costs of
sulfuric acid, transportation and labor, as well as higher
cost from reduced operating levels.
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NEWSPAPERS: HIGHER DAILY PRICES IN 1975
CURRENT o Newsprint prices will be increased by $15 in Canadian
market and $25 in U.S. market in early part of 1976 as
a result of the prolonged paper industry strike in Canada,
CURRENT Over three-fourths of all U.S. daily newspapers carried
according to industry sources.
a 15 cent or higher per copy price in 1975, according
to the American Newspaper Publishers Association (ANPA).
Increase would raise price of Canadian newsprint in the
U.S. market to range of $285 to $290 a ton.
o
In 1974, 988, or 53 percent of total, newspapers carried a
15 cent or higher price. By close of 1975, 421 additional
Several leading U.S. newsprint manufacturers have also
announced $20 to $25 price hikes effective March 1.
newspapers level. had raised prices to the 15 cent or higher
Other domestic newsprint producers are said to be con-
Single copy prices on 1,861 U.S. daily newspapers in 1975,
sidering similar increases.
according to ANPA: 1,409 charged at least 15 cents per
copy (76 percent of total) and 452 charged lower than 15
cents (24 percent of total).
13 U.S. papers were priced at 25 cents per copy (compared
copy. to 4 in 1974), and one paper was priced at 30 cents per
Increasingly higher labor and materials costs are indicated
industry. as main causes for price increases in this labor-intensive
NEWSPRINT: PRICE RISES SCHEDULED FOR CANADA AND U.S.
o
Despite resumption of operations at several Quebec news-
print mills and a New Brunswick pulp and paper facility
last week, more than 20,000 pulp and paper workers remain
on strike in Eastern Canada, mostly in Ontario, where
little progress has been achieved in the continuing con-
tract negotiations.
70 percent of annual U.S. newsprint supply is obtained
from Canada. With two-thirds of Canadian newsprint
industry idled by strikes, U.S. publishers have been
gradually turning to alternative foreign sources for
newsprint, although U.S. newsprint inventories reportedly
have not yet reached critically low level.
Two leading East Coast U.S. newspapers recently purchased
a small amount of Swedish newsprint, while a major Midwest
tabloid obtained a supply from Norway and France.
o
A large Southern U.S. publisher is reportedly investigating
sources in Western Canada, where newsprint mills are back
in operation.
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PRICE INDICATORS
TUESDAY SPOT PRICES
1967=100
WHOLESALE
300
This Week
Last Week
Year Ago
290
9 Foodstuffs
196.8
202.6
244.2
13 Industrial Raw
183.1
183.9
178.6
Materials
280
9 Foodstuffs
270
260
250
240
230
220
210
200
"
13 Industrial Raw Materials
190
180
170
160
150
0
J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
1974
1975
1976
Source: Department of labor
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SPOT AGRICULTURAL PRICES
SPOT AGRICULTURAL PRICES
Broilers, Dressed 'A'
Dollars per cwt.
Steers, Choice
Cents per lb.
NEW YORK
70
OMAHA
80
This Week Last Week Last Year
This Week Last Week Last Year
39.50
38.20
42.52
35.05
43.90
41.87
60
70
60
50
50
40
40
30
30
0
0
Eggs, Large White
Dollars per cwt.
Hogs
Cents per dozen
CHICAGO
70
OMAHA
90
This Week
This Week
Last Week
Last Year
Last Week
Last Year
48.15
69
75
63
47.20
38.65
60
80
70
50
60
40
50
30
40
0
0
J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
J A S 0 N D J F M A M J J A S 0 N D J F M A M J JASOND
1974
1975
1976
1974
1975
1976
Source: Agricultural Marketing Service, Department of Agriculture.
Source: Agricultural Marketing Service, Department of Agriculture.
GERAUD FORD LIBRANI
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SPOT AGRICULTURAL PRICES
SPOT AGRICULTURAL PRICES
Wheat No. 2 Ord. Hard
Soybeans No. 1 Yellow
$ per bu.
KANSAS CITY
$ per bu.
CHICAGO
7.0
14
This Week
Last Week
Last Year
This Week
Last Week
Last Year
6.0
4.74
4.48½
5.95½
3.61%
3.51
4.00 1/2
12
5.0
10
4.0
8
3.0
6
2.0
4
0
0
CORN No. 2 Yellow
Raw Sugar
$ per bu.
CHICAGO
$ per cwt.
NEW YORK
5.0
60
This Week
Last Week
Last Year
This Week Last Week Last Year
2.68
2.55%
3.08%
14.85
15.20
36.00
4.0
50
40
3.0
30
2.0
20
1.0
10
0
0
J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
1974
1975
1976
1974
1975
1976
Source: Agricultural Marketing Service, Department of Agriculture.
Source: Agricultural Marketing Service, Department of Agriculture
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U.S. CATTLEHIDES
FOR OFFICIAL USE ONLY
Monthly Average Prices
ISSUES
(Composite of Light Native, Heavy Native,
Cents per Pound
and Butt Branded Steers)
ADJUSTMENT ASSISTANCE: UNITED AUTO WORKERS PETITION
50
Average Annual
Peak Price Oct 27/Nov 3, 1972
o Under the Trade Act of 1974, Title II provides for
44.98 Cents Per Pound
relief from injury caused by import penetration.
One type of relief is "adjustment assistance to
45
1972 30.00 cents Per Pound
workers." (See Business Conditions Report, January 2,
1973 33.08 Cents Per Pound
1976.)
1974 23.45 Cents Per Pound
1975 23.05 Cents Per Pound
CURRENT o United Auto Workers' petition to Department
of Labor for adjustment assistance to workers stated
40
that 78,000 workers were laid off by Ford, G.M., and
Phase 3 1/2
Chrysler as result of import penetration.
o
30,000 laid-off workers were in full-sized car
production and 48,000 were in subcompact production.
35
o
Imports of full-sized cars from Canada increased
1973
from 20,100 units in 1974 to 184,400 units in 1975,
and imports of subcompacts from overseas rose by
95,000 units.
30
o
.
1976
U.S. production of full-sized cars fell by 670,755
units in 1975, and production of subcompacts fell
28.72
1974
by 465,000 units.
25
U.S. dealer sales of subcompacts built in North
America fell by 150,000 units.
STEEL: INLAND STEEL AGREES TO
20
INSTALL POLLUTION CONTROL FACILITIES
1975
CURRENT o Inland Steel agreed to install a $90 million recycling
and filtration system at its East Chicago, Indiana
15
mill, and thereby settle a lawsuit brought against
company by State of Indiana and Cook County Metropolitan
Sanitary District in 1972.
o
Filtration system will enable company to meet EPA
10
1983 standards.
o
Agreement vacates a previous fine of $1.9 million
plus $1,000 per day levied against Inland by a Cook
County, Illinois Judge in September 1975 for
5
polluting Lake Michigan.
o
Settlement marked first time that an industrial
polluter in one state had been forced to rectify
pollution affecting another state.
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Pratts Report of Daily Hide Leather Market
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LEAD: DUMPING CASE REOPENED
CURRENT On January 26, 1976, the U.S. International Trade
Commission announced it would reopen Canadian and
Australian dumping case to determine whether 1974
injury ruling on primary lead metal from Canada
and Australia should be revoked.
Public hearings will be held on February 24, 1976.
POLYCHLORINATED BIPHENYLS (PCB) :
MONSANTO TO CONTINUE PRODUCTION
Manufacturers of capacitors and transformers have
expressed fear that concern over toxicity and
persistence of PCB's might lead chemical companies to
cease production of this material, which is used as a
dielectric insulator for capacitors and transformers.
(See Business Conditions Report, January 16, 1976.)
CURRENT
Monsanto Company, a major supplier of PCB, has announced
that it is planning to phase out production of the
chemical, but will continue production and sale for
use in closed systems until an alternate source or
suitable substitute becomes available.
BANKING: REDUCTION OF FEDERAL RESERVE INDEPENDENCE SUGGESTED
Hearings are in progress before House Subcommittee on
Financial Institutions to develop a legislative package
for reorganization and improvement of the nation's
private financial institutions.
CURRENT
In testimony before the Subcommittee, Chairman of
Board of Governors of Federal Reserve proposed that:
-- Office of the Comptroller of the Currency, which
supervises national banks, be merged with the
Federal Reserve, which supervises state-chartered
banks and bank holding companies; and
term of Chairman of the Federal Reserve Board
be made coterminous with that of the U.S. President.
o
Recommendation on term of office was in sharp contrast
to the Chairman's past opposition to any action tending
to reduce Federal Reserve's independence and its
isolation from political influence.
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FOREGOING RESTRICTIONS MAY BE REMOVED
90 DAYS AFTER PUBLICATION
ANEERICAN REVOLUTION WEENTENNIAL
U.S. DEPARTMENT OF COMMERCE
DOMESTIC
1776-1976
AND db INTERNATIONAL BUSINESS ADMINISTR
@
FOR OFFICIAL USE ONLY
EYES
MINUTES OF THE
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE MEETING
February 6, 1976
Attendees:
Messrs. Simon, Seidman, Greenspan, Lynn, Richardson,
Robinson, Dunn, Zarb, Tyler, Schmults, Parsky,
Kauper, Katz, Collier, Albrecht, Gorog, Porter, Hughes
1.
Report of EPB/NSC Task Force on Commodity Policy
The EPB/NSC Task Force on Commodity Policy reported on
their review and analysis of the Third International Coffee
Agreement. The Task Force analysis indicates that the likely
economic effect is mildly positive. The Agreement relies on
export quotas as its basic operating mechanism, with all
operating decisions by a two-thirds distributed majority vote
giving the United States an effective veto. Moreover, in con-
trast to earlier International Coffee Agreements, this Agree-
ment will enter into force with quotas suspended and provides
for periods when quotas would not be in effect.
The Task Force also reported that there are positive foreign
policy considerations that are likely to flow from the United States
signing the Agreement and that Congress is likely to perceive the
U.S. joining the Agreement as a foreign policy instrument.
The Agreement is open for signature until July 31, 1976, and
must be ratified prior to October 1, 1976. The discussion
focused on the timing of signing the Agreement and submitting
it for Senate ratification. In light of the anticipated continuation
and possible further increase in coffee prices during the next
six months, the Senate Agriculture Committee has scheduled
hearings on coffee prices for March 16 through 18.
Decision
The Executive Committee approved recommending to the President
that the United States sign the Third International Coffee Agreement
and submit it for Senate ratification. The memorandum transmit-
ting the EPB/NSC recommendation will include options regarding
the timing of signing and submitting the Agreement for Senate
ratification.
EYES
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2.
2. S. 1284
The Executive Committee reviewed memorandums on Title V
of S. 1284 prepared by the Departments of Treasury and
Justice outlining their respective positions. The Treasury
and Justice memorandums are attached at Tab A.
The discussion focused on the premerger notification and stay
procedures and the impact that Title V would have on the Anti-
trust Divison's effectiveness in dealing with mergers.
Decision
Representatives of the Departments of Justice and Treasury
will jointly prepare a draft options paper on the outstanding
issues.
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RBP
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