The Watch Tariff

Three big watchmakers--Hamilton, Elgin and Waltham--set off an alarm in Washington last week over tariffs. Before a Senate Armed Services subcommittee, they testified that higher tariffs for watches are vital to national defense. The alarm was well timed. It came as word leaked out that the U.S. Tariff Commission, by a 4-2 vote, has recommended to President Eisenhower that tariffs on all Swiss watches and movements be raised about 50%,* thus putting the squeeze on imports of Swiss movements.

The American watchmakers told the subcommittee that Swiss imports are driving them out of domestic watch production. thereby crippling national defense. Arthur S. Flemming, head of the Office of Defense Mobilization, Assistant Defense Secretary Thomas Pike and Assistant Commerce Secretary Lothair Teetor, testified that the U.S. needs an efficient watch industry.

Slumping Production. In the Capitol corridors, lobbyists for the watchmakers also pressured Congressmen to urge the President to uphold the Tariff Commission. Two years ago, the Tariff Commission had recommended a similar increase, but President Truman turned it down on the ground that the U.S. watch industry was in no real danger from Swiss competition. But now domestic jewel-watch production is off (an estimated 1,600,000 units this year, or half 1951 production), and employment has slumped from 12,000 in 1945 to some 8,000. Says Hamilton's President Arthur Sinkler: "The decline in domestic watch production has been so rapid in recent years that this country is faced with the question of whether or not there will be any domestic industry at all in the event of war."

Good Customer. U.S. watch companies that have already become heavy importers of Swiss watch movements (e.g., Bulova, Gruen) had ex-Senator Millard Tydings to argue their case. Tydings ripped into the U.S. watchmakers' hardship story. He cited the fact that Hamilton's sales had jumped from $4,000,000 in

1935, the year before the present tariffs went into effect, to $19 million in 1952; Elgin rose from $7,000,000 in 1935 to about $51 million in 1952 (sales of both companies included defense work). Since

1936, said Tydings, Switzerland has bought $500 million more in U.S. goods than she has sold to the U.S.

As for the watchmakers' claim that they are essential to national security, the Defense Department has said that such non-watchmakers as Eastman Kodak, Bendix Aviation and National Cash Register have supplied splendid timing devices and fuses for the armed forces (although the watchmakers claimed these companies got some of the vital parts from them).

Trade v. Aid. Others came to the aid of the Swiss. The C.I.O. appealed to Eisenhower to reject the Tariff Commission's recommendation, pointing out that the importation of Swiss movements created "substantial subsidiary employment" in the U.S. (about 15,000 workers make cases and straps, assemble watches, etc.). The American Farm Bureau Federation also asked Eisenhower to reject the tariff increase because Switzerland buys $11 per capita in U.S. farm products.

Eisenhower, who has until July 27 to make a decision, last week gave a clue to his intentions. He overruled a Tariff Commission recommendation that he raise the tariff and set quotas on groundfish fillets (cod, flounder, etc.), now being used in the fast-growing new product, fish sticks (TIME, May 17). Said Eisenhower: higher tariffs and quotas "would hamper and limit the development of the market." But if Ike overrules the commission on watches, the Administration may decide to give the watchmakers more defense orders to make up for their lost watch business.

*An increase of $1.15 to $1.50 in the present $2.10 to $2.75 duty per watch or movement.

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