~ ~ 0) ~ a ~ >- ~ = ~ Lnr-~c~ ~0~J~)fl0O C,) - - --U, - 0 ~ 0) ~ .~ PAGENO="0443" 4883 ~)O)N.CO N.OO~OO ~O~cO c'~ ~ ~ ~C~4 ~ C')Lt)C~4~-~CO U) S c,~c~,u,c,co .5 0~ ~ ~ ~ .5 .5 a, ~)U)~.f~OOC~ 0000cO a~a~.-' c~j-- ~ - ~1 !!!!!E~! :~ C.) ~ ~ a, S PAGENO="0444" 1967 Cheese Argentina Canada Denmark Finland France Italy Netherlands Norway Swiss 1,216,703 3,686,374 2,248 Process Gruyere 238, 027 3,031,348 22, 387 60,940 3, 000 pecorino-not grating - 1, 557, 835 pecorino-grating 9, 580,627 Reggiano, Parmesano, Provolone, Romano made from cow's milk 5, 650, 198 2,627 1,262 4,232,236 Roquefort 1,808,444 Cheddar 707,097 31,465 Blue mold 4,454,500 834 113,330 1,161 53,357 Edam and Gouda 188,404 1,953,394 12,806 8,049,365 369,169 Colby' 1,009 12,836,575 3,576,688 Other cheese 57,202 202,842 9,773,619 1,441,275 3,333,882 669, 516 185, 057 666, 192 Total 5,896,813 912, 566 30, 504,283 8, 173, 065 8,744,483 16, 153, 544 8,339, 115 1,826,155 Cheese Switzerland Sweden Austria West New Zealand Other Total Germany countries Swiss 6,214,020 56,607 1,944,670 246,820 210,308 14,354,779 Process Gruyere 3,274,873 966, 165 2, 159, 077 79,888 9,835, 705 Pecorino-not grating 3,307 3, 355, 329 4,916,471 pecorino-grating 1, 106, 789 10,687,416 Reggiano, Parmesano, Provolone, Romano made from cow's milk 20, 028 9,906, 351 Roquefort 1,808,444 Cheddar 9,043 8,321 3,207,720 1,002,942 4,966,588 Blue mold 8, 155 96,345 60,866 4,788, 548 Edam and Gouda 139,169 8,511 504,484 388,683 11 613,985 Colby' 5,055 601,808 1,525,644 500,953 29,937,162 6,249,618 5~,234,512 Other cheese 768, 188 1, 534, 751 76,906 1,297,577 27,900 3,632,276 23, 667, 183 Total 10,262, 136 2,349, 533 4, 530,217 4,808, 563 33, 172,782 16, 106, 727 151, 779,982 PAGENO="0445" `Includes imports of Colby cheese from the following countries: Source: Compiled by Cheese Importers Association of America, Inc., from U.S. Department of Ireland - 2,163,814 Commerce reports. Belgium 2,067,917 Bulgaria 44,813 Australia 1,680,681 United Kingdom 65,465 Czechoslovakia 71, 148 Hungary 44,092 Yugoslavia 111,688 Total 6,249,618 PAGENO="0446" 4886 CHEESE IMPORTS, DOMESTIC PRODUCTION Mr. BtmxE. Are there any -questions? Thank you very much, Mr. Fromer. (The following letters and statements were received, for the record, by the committee:) STATEMENT OF HON. ROBERT (1 STEPHENS, ER., A REPRESENTATIVE IN CONGRESS FI~oM THE STATE OF GEORGIA DAIRY IMPORT CONTROLS Mr. Chairman and Members of the Committee, I appreciate being given the opportunity to testify on behalf of my bill, H.R. 11232, the Dairy Import Act of 2,000 & DOMESTIC CONSUMPTION _____ 1931-1966 1931 `23 `4 `5 `6 `7 `8940 123456789 `59 1' `2 `34 `5 `6 `78 `960 1234651966 EXCLUDING COTTAGE CHEESE - 4.6 POUNDS PER CAP. (900,000,000 LBS.) SOURCE U. S. DEPARTMENT OF AGRICULTURE & U. S. DEPARTMENT OF COMMERCE PAGENO="0447" 4887 1967, during your hearings on trade and tariff proposals. Similar bills on dairy imports have been introduced or co-sponsored by many members of the House and the Senate. The Dairy Import Act is needed to stop the flow of dairy products which are continually being shipped into the United States even though they are not really needed by the American consumer. This bill would establish automatic quotas on dairy product imports, based on the average butterfat and nonfat milk solids shipped in from 1961 through 1965. The years 1966 and 1967 would not be in- cluded in the base figure because of the abnormally high level of imports during those years. The bill also provides, however, that as the U.S. domestic market grows the dairy import quotas would be increased in direct ratio to increases or decreases in the annual consumption of milk and milk products. The President is also given the authority to permit additional imports if he finds such action is required by overriding economic or national security interests of the U.S. In order to understand the need for this legislation it is necessary to look at the background and history of dairy import controls. Agricultural import controls were first provided in Section 22 of the Agricul- tural Adjustment Act and have been maintained by Congress for more than 30 years. Section 22 provides that foreign trade programs and policies should not be adopted if they will undermine the programs which Congress has set up for American agriculture. This Section has been used since 1953 to place quota con- trols on the importation of some dairy products. It has been subject, however, to a history of evasion and subterfuge of the import quotas established there- under. The action taken last year in the Presidential Proclamation of June 30, 1967, pursuant to Section 22 of the Agricultural Adjustment Act, did place more restrictions on dairy imports and provided some relief to our domestic dairy farmers. However, many loopholes have continued to be available for the impor- tation of foreign dairy products in evasion of quota controls. These loopholes add to the many problems facing dairy farmers and their cooperatives and in- crease the cost to the Federal Government in its operation of the price support program~ The excess importation of dairy products is also important in relation to our balance of payments problems. It is my understanding that the dollar drain for these imports was $73,702,697 in 1967 and is estimated to be $36,796,255 per year for 1968 and subsequent years. It can readily be seen that import controls are necessary not only to provide dairy farmers with a level of income commensurate with that received by other segments of our society but also to aid in the problems our country now faces with regard to its price support program and the balance of payments. STATEMENT OF HON. CLARENCE J. BROWN, Ju., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO Mr. Chairman, last year, I offered legislation to restrict imports of dairy prod- ucts. I feel that action is long overdue to relieve the dairy farmers' struggle since their efforts in regard to fair and equitable milk prices is directly related to the overflow of dairy products into our country through loopholes in the existing import quotas. While action taken last year, as a result of the Presidential Proclamation of .Tune 30, 1967, did provide some relief to dairy farmers, it still leaves some im- ports such as evaporated milk, chocolate crumb and some cheeses, which are being imported in ever-increasing quantities, untouched by quotas. I would like to see immediate steps taken to plug the gaps in the quota law and our government's policy adjusted to permit our dairy farmers to make a decent profit on their produce. The legislation which I sponsored specifically relates to excess imports of butterfat and nonfat milk solids. Under the provisions of my bill, imports would. be limited to the respective average annual quantities which were admitted for consumption during the period from 1961 through 1965. The bill allows the President to permit additional imports in the case of over- riding economic or national security interest of the United States, but provides that no additional imports shall be admitted at a time when prices received by PAGENO="0448" 4888 dairy farmers on a national average are less than parity unless the Secretary of Agriculture removes a corresponding quantity of dairy products from the domestic market. Importers have used loopholes in the existing quota regulations to increase by 12 times the amount of dairy products brought in the U.S. since 1966. The result has been sagging markets and prices for domestic products. HOtTSE OF REPREsENTATIvEs, Washington, D.C., July 1, 1968. Hon. WILBUR D. MILLS, Chairman, Ways and Means Committee, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: The Maryland and Virginia Milk Producers Association, Inc. has contacted me with regard to the hearings on trade which your Committee is now holding. They have expressed their desire that the provisions of the Dairy Import Act of 1968 be included in any bill that the Committee may report. I would appreciate your giving this request every consideration. With best regards, Sincerely, WILLIAM L. SCOTT, Member of Congress. STATEMENT OP HON. BOB DOLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS DAIRY IMPORT ACT VITAL TO AMERICAN DAIRYMEN Mr. Chairman, I have introduced legislation now pending before your com- mittee which would, if enacted, provide safeguards for the American dairy industry. Unwarranted imports from nations providing export subsidies to their local producers (thus gaining much needed hard currency) have seriously deteriorated the position of the United States producer. This legislation, H.R. 4860, is important for the economic well-being of the Nation and the dairy farmer. Plainly stated, the United States imported $133,267,000 worth of dairy products in 1967-a year of unprecedented dollar drain and fiscal crisis. In my opinion, there is no excuse for this great loss. Our imports of dairy products not only cost the domestic producers valuable domestic markets, but significantly contributed to our national balance-of- payments deficit. EXAMPLES OF UNWARRANTED IMPORTS Mr. Chairman, my bill would not, of course, stop all dairy product imports. But imports would be brought into line with reasonable historic trade policies. This legislation, called the Dairy Import Act of 1968, is needed to stop the imports of dairy products which are shipped into our country in virtual evasion of established quotas. Let me give you a few examples: Imports of evaporated milk grew from 4,000 pounds in 1962 to 1,311,000 pounds in 1967. Sweetened condensed milk imports grew from 69,000 pounds in 1962 to 4,074,000 pounds in 1967. Chocolate crumb is a so-called "new" product designed to evade import quotas. During 1967, imports of chocolate crumb increased to 21.5 million pounds. Cheese imports totaled 152 million pounds in 1967. Imports of butterfat sugar mixtures jumped from zero in 1961 to 105,626,- 000 pounds in 1966. CONTROL ACTIONS TOO LITTLE, TOO LATE Some actions have been taken to stem the flood-tide of dairy imports, but these controls have been too little, too late. For instance, prior to June 30, 1967, there PAGENO="0449" 4889 was no quota on Colby cheese, with the result that ever-increasing quantities were imported. Finally, when action was taken last year a quota of 6,096,600 pounds was granted. In the case of frozen cream, no quotas had been established until last year with the result of again large quantities coming into the United States. When quotas were established, 12,540,000 pounds were permitted. In other words, we reward countries which develop products in evasion of our quotas by granting them quotas on those very products. Not only are our dairy farmers hurt by these imports, but imports added $131,177,198 of unneces- sary cost to the price support program in 1967. Import controls are necessary to provide dairy farmers a level of income commensurate with that received by non- farm segments of our society. URGE EARLY COMMITTEE ACTION Mr. Chairman, farmers must achieve parity prices, the United States must improve her balance of payments deficit, and price support payments to producers should be reduced as income increases. I urge your committee to favorably re- port the Dairy Imports Act of 1968 at the earliest opportunity. This legislation will be the first step toward reasonable import policies for dairy products. HOUSE OF REPRESENTATIVES, Washington, D.C., June 17, 1968. Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, Longworth, House Office Building, Washington, D.C. DEAR MR. CHAIRMAN: As the sponsor of H.R. 13130, I would like to have this statement concerning dairy imports made a part of your current hearings on tariff and trade proposals. At the present time, large quantities of dairy prod- ucts are imported into the United States without any controls. The action taken last year in the Presidential Proclamation of June 30, 1967, pursuant to Section 22 of the Agricultural Adjustment Act, provided some relief to our domestic dairy farmers. However, many loopholes continue to be available for the im- portation of foreign dairy products. Through these loopholes evaporated milk, chocolate crumb, and various cheeses are being imported in ever-increasing quantities, adding to the many problems facing dairy farmers and their cooper- atives, and increasing the cost to the Federal Government in its operation of the price support program. I join with 200 other Members of the House who feel that Section 22 is not effective and can never be so. I hope very much your Committee will give earnest consideration to these views. With best wishes, Sincerely, CARL D. PERKINS, Member of Congress. HOUSE OF REPRESENTATIVES, Washington, D. C., June 20, 1968. Hon. WILBUR MILLS, Chairman, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: I would like to encourage the Committee to give full consideration to HR. 8542, the Dairy Import Act and similar bills during your current hearings on trade and tariff proposals. The need for control of dairy imports has become increasingly apparent. I hope the Committee will thoroughly investigate the problem and recommend concrete legislation and administrative remedies. With high regard. Sincerely, CHARLES McC. MATHIAS, Jr. 95-159 O-68-pt. 1O-29 PAGENO="0450" 4890 HousE OF REPRESENTATIVES, Waslthwton~, D.C., June 13, 1968. Hon. WILBUR MILLS, Chairman, House Ways an4 Means Committee, Washington, D.C. DI~AR MR. CHAIRMAN: For some time I have been aware of the hardships placed on our dairy farmers by lax import regulations of Section 22 of the Agricultural Adjustment Act of 1935. I joined a number of my colleagues in the introduction of the Dairy Import Act which would establish effective controls on imports of all milk and dairy products, and would, I sincerely believe, greatly help our dairymen throughout this country to earn a decent price for their products. Section 22 of the Agricultural Adjustment Act of 1935 was enacted as part of agricultural programs aimed at providing just returns to our producers meas- ured in terms of parity prices. The 1951 amendments to this Act provided absolute clarification that protec- tion for agricultural program's would take precedence over trade agreements. Not until 1953 did dairy farmers realize this protection. But this was not to last. because the administration of this section has been ineffective. The result has been the addition of millions of dollars and unnecesasry cost to the dairy price support program and the substantial interference with the achievement of the goal of parity prices in the market. The Dairy Import Act of 1967 is, in my opinion, fair to all concerned. It would use as a base the 1961-1965 imports of butterfat and nonfat milk solids. This average would provide an automatic control and would not require long and unsatisfactory proceedings as at present. Additionally, these controls would be flexible enough to permit recognition of any legitimate new products while at the same time preventing circumvention of the quota's we have witnessed in recent years. Included also in this legislation are provisions for expansion of the domestic market due to population or other factors so that the import total would increase by the same ratio. This would insure that foreign countries would share in U.S. market growth but their exports to the U.S. could not grow by displacing domes- tic production. By establishing a definite and known level of imports and providing for ad- justment of the market, both our own dairy industry and that of foreign countries can make sound plans for the future. Mr. Chairman, I therefore strongly favor enactment of this legislation pro- viding measures to adequately and effectively control milk and dairy products imports so that our own dairy industry will not be driven out of business by the continued flow of unlimited dairy imports. Sincerly yours, IOHN J. DUNCAN, Member of Congress. DEPARTMENT OF STATE, Washington, D.C., July 11, 1968. Hon. WILBUR D. MILLs, Chairman, Committee on Waqjs and Means, House of Representatives, Washington, D.C. DEAi~ Mn. CHAIRMAN: The Department of State has received from the New Zealand Embassy statements prepared by the New Zealand Dairy Board * * The Embassy has requested that the two statements be transmitted to the Coin- mittee on Ways and Means for its consideration for possible inclusion in the record of the recently concluded hearings on tariff and trade proposals. In for- warding these statements to the Department, the Embassy has noted that the New Zealand Government endorses and supports the views expressed in the two statements. I am, therefore, pleased to forward three copies of the enclosed statements for your consideration. Sincerely, WILLIAM B. MAC0MBER, Jr., Assistant Secretary for Congressional Relations. Enclosures. PAGENO="0451" 4891 STATEMENT OF THE NEW ZEALAND DAIRY BOARD New Zealand, a small and remote country, is the world's leading exporter of dairy produce. The production of milk in New Zealand plays a greater role in its economy than it does in that of any other country of the world. The New Zealand Dairy Board, elected representative of the dairy farmers of the country, is obviously vitally concerned with world market opportunities for New Zea- land's butter, cheese and other dairy products. Both the United States and New Zealand are agricultural exporting countries. While agricultural products only comprise about 20% of total exports from the United States, agricultural foreign trade yielded to the United States, in 1967, almost precisely 1~ of its favorable international trade balance. For New Zea- land, dependence upon agricultural exports is far greater. Almost 95% of our exports consist of agricultural products, practically all the products of livestock, mainly dairy products, meat and wool. Both our countries have an important stake in maintaining opportunities for international trade in agricultural prod- ucts. Both our countries are deeply committed to a cowpetitive international economy, where the free interchange of goods can yield the greatest dividends to the populations of our countries and of our trading partners. Total imports of dairy products into the United States now aggregate less than 1% of American consumption. New Zealand shares this small marketing oppckrtunity with many other dairy producing countries. While the volume of New Zealand dairy produce coming here supplies only a trivial portion of the enormous volume of American consumption, the market is important to New Zealand dairy farmers. We are deeply concerned about the proposals put before this Committee to reduce these imports even further, and to do so through a rigid formula which would place a straightjacket on the import trade in these commodities. The relative position of dairy farming in the United States has been declining since the war, throughout the period when it has been severely insulated from foreign competition. There has been a steady reduction in per capita consump- tion of milk and milk products in the United States, to the point where the American consumer is now being supplied with far less milk than his counterpart in a dozen other countries of the world with living standards, in other respects, far below those which prevail in this country. Butter has become too expensive for the average American; margarine sales are now double those of butter, and its lead is increasing. U.S. per capita consumption of fluid milk and cream has also been declining, and new imitation products threaten to accelerate this trend. Dairy farmers in the United States are finding other agricultural and industrial pursuits more attractive. There is a real need for added imports to maintain nutritional standards here. We appreciate that the pattern of price support measures in the United States would not permit unrestricted imports of dairy produce. Nevertheless, the dic- tates of international trading policy make it undesirable that the market be in- sulated completely from international competition. Moreover, with U.S. pro- duction of milk declining, and the population growing, there is a real need for more, not less, imports. Agricultural support measures are maintained in many other countries of the world. Frequently, rice levels have been fixed at such unrealistic levels as to discourage consumption, and encourage production, with resulting rapid build- up of surplus stocks. The agricultural policy put in force in the European Eco- nomic Community has had precisely this effect. Enormous surpluses, particularly of butter, have been built up, and are continuing to accumulate. Wide resort has been had to export subsidization in a desperate effort to reduce the excessive stocks. These overhanging world surpluses are threatening the United States dairy market, and other world markets. We recognize that the United States cannot become a dumping ground for all the world surpluses of dairy produce. The bills before this Committee, however, represent a heavy-handed and in- discriminate method of coping with the problem admittedly present in the world market today. Because many countries may be practicing unfair trade methods in subsidizing dairy exports is no reason to restrict trade with those which do not subsidize, and which are prepared to operate fairly and openly in the tradi- tion of competitive trade. We submit that the way to cope with subsidization is to employ the traditional defense against subsidies, countervailing duties, for which there is ample statu- PAGENO="0452" 4892 tory authority in the United States. If the countervailing duty statute of the United States were vigorously applied, according to its plain terms, the entire threat of excessive imports of dairy products into the United States would evapo- rate overnight. Even the existing restrictions which have been maintained since 1953 under the Agricultural Adjustment Act could be removed. The United States maintains health standards governing the domestic pro- duction and marketing of milk and milk products which are among the highest in the world. In substance, these standards have been made equally applicable to imports of fluid milk and cream by the Import Milk Act of 1927. New Zealand is licensed to ship frozen cream under this statute. However, this statute is not applied to other milk products, such as condensed and evaporated milk and cream, milk powder, cheese, ice cream mixes, and other edible derivitives of milk. The existence of a world over-supply of dairy products provides an excel- lent opportunity for the United States to bring its health standards applicable to imports up to the level of its domestic standards, without impairing neces- sary supplies for the American market. An appropriate expansion of the coverage of the Import Milk Act would put the dairy exporting countries on notice that they must bring their standards up to American standards if they wish to have an opportunity to serve this market. With the vigorous application of countervailing duties against subsidized imports, and with a strengthening of the health standards applicable to im- ported dairy products, the whole pressure of the world dairy surplus, much of it produced under lower standards than those prevailing in the United States, would be removed. If such measures were taken, the quota schemes here pro- posed would be entirely unnecessary, and even the quota scheme which has been in force for 15 years, could be removed, with benefit to America's dairy economy. The United States needs some dairy imports to supplement its own shrinking domestic production. It should welcome such dairy products so long as they are produced under standards equivalent to those which prevail in the United States, and so long as they are marketed here on a fair competitive basis. New Zealand believes its health and sanitation requirements applicable to milk and its products are the highest in the world. New Zealand is the world's most efficient producer of dairy products. New Zealand does not subsidize its dairy exports, and is ready to meet competition anywhere in the world on a fair and equitable basis. The New Zealand Dairy Board, controlling all exports of dairy products from New Zealand, is well aware of the need for orderly market- ing patterns, and would see to it that its produce coming to this market would not serve to disrupt the domestic market. I STATEMENT ON BEHALF OF WESTERN DAIRY PRODUCTS, INC., SAN FRANcIsCo, CALIF. Many bills, most of them identical, which would impose new, severe and rigid restrictions on the importation of dairy products, have been referred to this Committee. These bills would not only reach basic dairy products such as fluid milk and cream, butter, cheese and milk powder, but would also cover every product, no matter what its form or use, which contains 5% or more of butter- fat or nonfat milk solids or any combination of the two. Thus, it would reach far into the field of food products, beverages, and confectionery, and might even include such industrial products as adhesives and sizing, made from portions of milk. It is extremely difficult to predict with certainty all the ramifications of so sweeping a restrictive measure. This bill represents one more attempt to shore up the long-standing effort to insulate the American dairy products market from competitive influences abroad. The present structure of import restrictions was established in 1953, and was originally made applicable to basic and certain specialized products. Further restrictions were imposed in patchwork fashion, twice in 1957, and, more broadly, in 1967. Other administrative proceedings enlarged some of the quotas in 1960, 1961, 1966 (temporarily) and 1967, and rejected proposals for still other restric- tions in 1955 and 1967. Now the Tariff Commission has called another hearing later this month to reexplore some of the same ground on which it passed only a year ago. The plain fact is that the structure of restrictions and controls on our trade in dairy products has been a failure, and the situation is getting worse. The number of American dairy farms has declined by almost 75% since the end of the war. The dairy farmers who remain are comparatively worse off today than PAGENO="0453" 4893 the dairy farmers of 20 years ago. Aggregate U.S. production of milk is only slightly greater today than it was at the end of the war. As a result, per capita consumption of milk in all forms has dropped more than 20%, and is now far below that of many other countries of the world. The American consumer has been using less fluid milk and cream, and substituting margarine for butter. Newly developed substitutes for fluid milk and cream presage a further decline in milk consumptioil. This Committee's functions do not encompass domestic agricultural programs, so that it would not be appropriate here to comment on that side of the picture. However, proposed measures of import trade control are now nuder considera- tion in this Committee. These bills would not only serve to reduce the trickle of imports permitted, but would do so under a sweeping and inflexible formula which would stultify any efforts to introduce new products to the American consumer. With per capita consumption of milk down 20%, and imports of dairy products supplying less than 1% of the reduced ration of milk and milk products, it is obvious that the United States needs greater, not smaller imports. As long as domestic milk price support programs remain in effect4 imports cannot remain entirely free of controls. However, the real threat to our domestic milk programs comes not from free and fair foreign competition but from sur- pluses created by dairy price support programs elsewhere. The situation is par- ticularly acute in the European Economic Community, where high support prices encouraged production and discouraged consumption to the point where an enormous surplus, amounting to some 500 million pounds of butter, has accumu- lated. Very large subsidies, sometimes as high as 8/4 of the home price, are being offered to move some of this surplus into export trade. Much of the volume supplies of newly-contrived dairy products which have been imported in the past few years had their origin in subsidized export from the European Economic Community, and elsewhere. Certainly there is no justification for permitting the U.S. market to become the dumping ground for foreign surpluses of dairly products. However, there is no need to enact new legislation to prevent such dumping. Under Section 303 of the Tariff Act of 1930, the Secretary of the Treasury has the power and the duty to impose countervailing duties whenever subsidized products are imported into the United States. The foreign schemes for subsidizing dairy products have been widely publicized, and are well-known to officers of our Government. Enforcement of Section 303 would remove the need for the whole jerry-built structure of import controls which has dominated our trade in dairy products for so long. There is, however, one opportunity for legislation to improve the quality of the supply of imported dairy products to the American consumer. Since 1927, the Import Milk Act, 21 USC § 141-149, has required that milk and cream imported as such be produced under conditions of health and sanitation substantially equivalent to those required in the United States. However, similar requirements have not been applied with respect to dairy products derived from milk, many of which involve similar health hazards. We suggest that the Import Milk Act be extended to other dairy products. At a time of plentiful world dairy supplies, we could well take the opportunity to improve the quality of our imports. We, and predecessor companies, have been privileged for many years to handle imports of New Zealand dairy products. New Zealand's health and sanitation standards applicable to dairy products are as stringent as any in the world. New Zealand, the world's leading exporter of dairy products, does not subsidize. It has long supplied moderate quantities of dairy produce to the United States, and could increase its shipments modestly to absorb some of the shortfall in domestic production. It can do so in an orderly fashion, on a fair competitive basis. In summary, we submit that: (1) the United States needs more, not less, imports of dairy products, (2) supplies produced under the most stringent standards are available and should be encouraged from fair competitive sources, (3) subsidized imports should be prevented by applying our countervailing duty statue, (4) the Import Milk Act should be extended to dairy products made from milk and cream, (5) if subsidized imports were banned, and the trade limited to fairly competitive, high standard merchandise, the need for an elaborate sys- tem of restrictions would disappear, and (6) the time has come to re-examine our dairy programs with a view to protecting the American people against a further deterioration of nutritional standards with respect to milk and its products. PAGENO="0454" 4894 STATEMENT OF BERNARD A. TRUGMAN, TRUGMAN-NASII, INC. Mr. Chairman and members of the Committee, my name is Bernard A. Trug- man and I am President of Trugman-Nash, Inc., of New York City. My family, commencing with my father, has been in the dairy products since 1921 and I have personally dealt with, import and export of dairy products since 1934, a period of 33 years. I have come before you today to urge that this Committee take no action that would lead to imposition of further import quotas on dairy products. The reason for this is very simple: The United States Tariff Commission, on June 11, pub- lished notice of an investigation of Dairy Products under Section 22 of the Agricultural Adjustment Act, as amended, pursuant to a request from President Johnson dated June 10, and covering a comprehensive list of cheeses and other dairy products. A hearing is scheduled to commence July 22. Soon thereafter the Commission will report to the President, and he is of course empowered by law to impose such quota restrictions as are appropriate. Until this administrative process has been completed, it is submitted that legislative imposition of import restrictions would be premature. This is the second Tariff Commission Section 22 investigation in a little over a year. As a result of the first investigation, the President imposed strict import controls on a number of products. The current investigation covers practically the entire remainder of dairy products that are not already under stringent quotas. Accordingly, it is respectfully suggested that legislative action on proposals for dairy import quotas be deferred until the conclusion of the Section 22 investigation. _______ STATEMENT OF JOHN P. GEHL, OF GEHL's GUERNSEY FARMS, INC., GERMANTOWN, Wis. Subject: Milk Crumb Imports: Recent imports: 1903: Nil; 1965: 2,000,000 Lbs.; 1967: 21,500,000 Lbs. GENERAL COMMENTS Milk Crumb is a sugar-butterfat mixture used in the manufacture of milk chocolate coatings. It is being imported in ever increasing quantities because it is a means of avoiding support prices on milk and sugar. The domestic market for this product is the 600,000,000 pounds of milk chocolate coatings produced in this country. The Department of Agriculture has been appraised of the problem, but has failed to act because they have: 1. Relied on the Tariff Commission's Report on June, 1967, which was completely in error. 2. Misinterpreted Section 22 of the Agricultural Adjustment Act. 3. Completely disregarded their recent Amendment to Section 817.10 of the Sugar Act signed by Secretary Freeman on February 21,1968. A review of the above three facts is included in Exhibit "A". Unless immediate action is taken to curb the imports of chocolate crumb the dramatic increase in the last two years will continue to skyrocket to the detri- ment of the farmer, the sugar refiners, and the Commodity Credit Corporation. Exhibit "B" is a more detailed discussion of the impact of milk crumb imports on our domestic industries, a brief review of the Sugar Act, a detailed comparison of domestic and foreign prices, as well as other pertinent information. RECOMMENDATIONS Initiate immediate action to place milk crumb under quota under authority granted by the Sugar Act Section 1116 U.S.C.-Title 7 or Section 22 of the Agricultural Adjustment Act Section 624 U.S.C-Title 7. EXHIBIT "A" DEPARTMENT OF AGRICULTURE'S POSITIO~T ON MILK CRUMB For the past eight months in numerous letters to Senators, Congressmen, Sugar and Dairy Representatives, the Department of Agriculture has maintained that milk crumb cannot be placed under quota for two reasons: 1. The Tariff Commission's report of June, 1967, recommended against it. PAGENO="0455" 4895 2. The volume of milk crumb being imported (i.e., 21,500,000 pounds in 1967) is not of sufficient volume to materially affect the Price Support Program. Neither of the above statements are valid reasons for excluding milk crumb from our import laws; in fact to use them as such is to distort the truth. ERRORS IN TARIFF COMMISSION'S REPORT OF JUNE 1967 The Tariff Commission's very brief comments in their report of June, 1967, stated the following: 1. "United States consumption of chocolate crumb in recent years has roughly approximated the volume of imports." This statement is a gross error as in 1965 imports were about 2,000,000 pounds while domestic production certainly exceeded 100,000,000 pounds and could possibly be as high as 300,000,000 pounds. 2. "Little if any milk crumb is produced for commercial sale in the United States." Again the Tariff Commission has not documented the fact correctly as our company alone produced over 8,000,000 pounds forcommercial sale. 3. Milk crumb imports "are not likely to become major factors in the United States import trade in dairy products." Less than one year after the Tariff Com- mission's report we have been the imports of crumb skyrocket from 2,000,000 pounds in 1965 to 21,500,000 pounds in 1967. Since most other dairy products are under quota milk crumb has indeed become a major factor in United States import trade. The above three points are the main facts upon which the Tariff Commission made its recommendation to exclude milk crumb. Since their facts were in error their conclusion is brought into serious question. In fact, common sense demands that absolutely no confidence can be placed in their recommendation. FALSE LOGIC USED BY DEPARTMENT OF AGRICULTURE The second reason given by the Department of Agriculture for not including milk crumb under quota, namely; "that the volume of milk crumb being im- ported is not of sufficient volume to materially affect the Price Support Pro- gram," is to treat United States Senators and Congressmen as if they were naive. As recent as February 21, 1968, Secretary Orville Freeman signed an Amend- ment to the Sugar . Act and placed under quota other sugar-butterfat mixtures that in the Secretary's own words "are not even coming into this country." The exact wording in the Amendment (7 CFR 817.10), signed by Mr. Freeman, is as follows: "It is hereby determined that prospective importations into the United States of sugar-containing products with less than 5.5 percent butterfat will substanti- ally interfere with the attainment of the objectives of the Sugar Act and shall be subject to the import limitations provided in this paragraph." To say that products not coming into this country interfere with our Price Support Program on milk and sugar while in the same breath maintaining that another sugar-containing product coming in at the rate of 21,500,000 pounds does not, is sheer nonsense and deserves no further comment. ERRONEOUS INTERPRETATION OF AGRICULTURAL ADJUSTMENT ACT BY DEPARTMENT OF AGRICULTURE There is one point which I believe is important when reviewing the Depart- ment's position. Section 22 of the Agricultural Adjustment Act (7 USC 624) reads as follows: "Whenever the Secretary of Agriculture has reason to believe that any article or articles are being or are practically certain to be imported into the United States under such conditions and in such quantities as to render or tend to render ineffective, or materially interfere with, any program or operation undertaken under this title . . . or to reduce substantially the amount of any product proc- essed in the United ~S~tates from any agricultural commodity . . he shall so advise the President.. . ." Thus, Section 22 which the Department has been quoting as the reason they can do nothing very clearly points out that they do in fact have ample authority to act regardless of the quantity imported when, in fact, imports may "reduce substantially domestic production of any product." Since foreign milk crumb was sold in the United States in January through March Quarter, 1968, for $16.80 per cwt,, while domestic ingredient costs for a similar product were $19.80 per cwt., domestic production already has been and in the future will certainly be reduced substantially. PAGENO="0456" 4896 Since all of the above can be documented the milk crumb industry will be in shambles, to the detriment of the farmer, the sugar refiners, and Commodity Credit Corporation, unless the Department of Agriculture acts immediately. Certainly Section 22 of the Agricultural Adjustment Act or Section 1116 of the Sugar Act gives them ample authority to do so. EXHIBIT "B" IMPACT OF MILK CRUMB ON DAIRY AND SUGAR INDUSTRIES In recent months several sugar refiners and dairy representatives have become increasingly alarmed over the dramatic increase in milk crumb imports. The Department of Agriculture has allayed these fears by pointing to the United States Tariff Commission's report of June, 1967, which stated milk crumb was not likely to become an important factor in sugar imports. This conclusion could not have been further from the truth as in reality the potential market is 300,000,000 pounds dry sugar 60,000,000 pounds milk solids annually. The Tariff Commission estimated the annual United States production of milk chocolate to be 600,000,000 pounds. Of this at least 300,000,000 pounds is sugar and 60,000,000 pounds is whole milk solids. Since sugar and whole milk powder can be purchased cheaper in the form of foreign milk crumb than domestic pur- chases of milk and sugar we can expect a substantial movement to foreign crumb in the immediate future as evidence by the increase in crumb imports from 2,00,000 pounds in 1965 to 21,500,000 pounds in 1967. In addition to stating that crumb imports are not significant the Department has maintained they can not place crumb under quota even if they wanted to do so. Below is a brief discussion of Section 1118 of the United States Code- Title 7 and why the Department indeed does have the authority to act on crumb imports. AUTHORITY GRANTED BY THE SUGAR ACT Section 1116 of the Sugar Act reads in part as follows: "Sugar containing products shall not be subject to quota unless the Secretary determines that the actual or prospective importation will substantially inter- fere with the attainment of the objectives of this chapter. . . . In determining whether the actual or prospective importations will or will not substantially interfere with the objectives of the Act the Secretary shall take into con- sideration: 1. Total sugar content of product or mixture. 2. The cost of the mixture in relation to the cost of its ingredients for use in the United States. 3. The present or prospective volume of importations relative to past importations. 4. Other pertinent information." REASONS MILK CRUMBS MUST BE PLACED UNDER QUCYPA In support of placing milk crumb under quota under the Sugar Act the fol- lowing information is pertinent: 1. Milk crumb varies from 50 percent to 65 percent sugar and thus by volume sugar is the major ingredient in milk crumb. 2. The cost of a typical milk crumb mixture in relation to the cost of Its in- gredients for domestic producers is as follows: 37 percent milk solids (3X$4.17 per cwt.) $12.54 56 percent sugar (56 percentX$10.00 per cwt.) 5.60 6 percent cocoa (6 percentX$25.00 per cwt.) 1.50 Average ingredient cost per cwt 19. 64 Average price of milk crumb delivered to the United States in January through March Quarter-1968 as reported by the United States Tariff Commission: Per hundredweight Netherlands $16. 10 Ireland 17. 80 United Kingdom 16. 80 Belgium 16.00 Average selling price per cwt 16. 68 PAGENO="0457" 487 3. The present volume of importations relative to past importation is as follows: 1965 Imports: 2,000,000 Lbs. (Figure published in the U.S. Tariff Commis- sion's Report of June, 1967) 1967 Imports: 21,500,000 Lbs. (Figure published by the U.S. Tariff Commis- sion in January, 1968) These increases take on even greater significance when it is remembered that crumb is used in only one industry for only one product (i.e., chocojate industry for milk chocolate coatings.) 4. Other pertinent information: (a) One major chocolate manufacturer has already closed its domestic plant which produced milk crumb and is purchasing their requirements overseas. (b) The effect of the devaluation of the British Pound of 20 percent and the most recent increase in the domestic support level on milk has not yet had its effect on import figures as the additional price advantages are just becoming apparent. (c) If the price advantage of foreign crumb continues it is likely that milk crumb will no longer be produced domestically. (d) In the near future many milk chocolate coatings which previously were manufactured using whole milk powder and dry sugar will in the fu- ture be produced using milk crumb. This, in fact, has already taken place to some degree as there is no other explanation for the dramatic. rise in the usage of crumb since 1965. (e) On February 21, 1968, the Department of Agriculture found reasons to amend the Sugar Act and place under quota all sugar-butterfat mixtures containing less than 5.5 percent butterfat. Since justification was found for placing sugar-butterfat mixtures under quota which are not even coming into this country political integrity demands that another sugar-butterfat mixture which in 1967 came in at the rate of 21,500,000 pounds be placed under quota immediately. STATEMENT OF FRED J. GREINER, ExECuTIvE VICE PRESIDENT, EVAPORATED MILK ASSOCIATION Mr. Chairman and gentlemen of the Committee, my name is Fred J. Greiner and I am Executive Vice President of the Evaporated Milk Association, a non- profit corporation organized and existing under the laws of the State of Illinois with offices and principal place of business at ~10 Seventeenth Street, N. W., in Washington, D. C. The Association is organized for the purpose, among others, of promoting the use and consumption of domestically produced canned milk and to undertake and engage in any or all of the specific activities of a trade association for that industry. The Association renders its service to companies producing canned milk in hermetically sealed containers in the United States in approximately fifty plants. SIZE AND IMPORTANCE OF THE INDUSTRY Canned milk in hermetically sealed containers in the United States consists primarily of evaporated milk and sweetened condensed milk. Both of these prod- ucts are major products of the dairy, industry in the United States. USDA statistics indicate that 63,700,000 pounds of sweetened condensed milk and ap- proximately 1,500,000,000 pounds of evaporated milk were produced in 1967. Other indications of the size of the canned milk industry can be determined from the fact that over 3,300,000 base boxes (106,375 tons) of metal were consumed in 1967 in the manufacture of cans for the packaging Of these products. (A. base box is an area of 31,360 square inches, equivalent to 212 sheets, 14 inches times 20 ,inches in size.) There are approximately 4500 direct employees and milk haulers engaged in the day to day operation of bringing milk from the farm and processing it into the products involved. There are approximately 105 milk plants and receiving stations in the United States receiving milk from approximately 36,000 farmers, which is processed into evaporated milk or sweetened condensed milk. PAGENO="0458" 4898 CANNED MILK IMPORTS INTO THE U.S. Imports of evaporated milk and sweetened condensed milk into the U. S. are shown in the following table: U.S. IMPORTS' [In thousands of poundsi Evaporated Sweetened milk, tariff condensed milk, item 0040000 tariff item 0040100 1962 4 2 71 612 1963 3 988 1964 31 1,768 1965 1966 1967 1968: January February March 611 1,311 ~ 89 96 189 1,159 2,678 4,084 200 121 509 666 April May 430 June 825 2241 I Official statistics, U.S. Department of Commerce. 2 Incomplete. - CHEAP OFFERS MADE TO U.S. DOMESTIC MARKET Heavy production of milk in western Europe has been coupled with a deterio- ration of world dairy product prices caused by the subsidization of dairy prod- uct exports by European countries in an effort to reduce internal stocks of dairy products.3 This resulted in a number of firm quotations to export evaporated milk to the U.S. The following are documented offers made to U.S. importers: EVAPORATED MILK Quotation Country Case lots Price 1 West Germany `1, 000 $6.38 ex dock New York duty paid. 2 Denmark $6.23 ex dock New York duty paid. 3 France (2) $6 duty paid to midwest points with freight from New York up to 50 cents. 4 European 5, 000 $5.60 ex dock New York duty paid. 5 do 5,000 Do. 6 Netherlands 5, 000 $5.20 c.i.f. New York plus duty (433~ cents). 1 Containered in 500 lots. 2 Up to 250,000. These compare with U.S. domestic prices varying from $6.90 to $7.85 per case evaporated milk.4 Currently importers are selling foreign sweetened condensed milk (24-14 oz. cans per case) at $4.00-$4.35 per case CIF east coast ports. The comparable U.S. price for sweetened condensed case goods is $7.0O-$8.l0.~ MILK PRODUCTION IN EUROPE Practically all price quotations received by American importers of evaporated milk have been from European countries. Therefore, the supply of total milk in the milk producing countries in Europe is important. The following table indi- cates the milk production for certain countries for the periods indicated: 3 Situation-USDA-March 1968. 4Dairy and Poultry Market News-USDA-APril 26, 1968. PAGENO="0459" 4899 MILK PRODUCTION 1 [In millions of poundsj . Average, 1956-60 1965 1966 1967 Belgium Denmark 8,320 11,633 46,037 13,833 39,604 8,689 11,832 59,020 15,745 46,854 8,823 11,704 61,971 15,950 47, 544 8,853 11,484 63,933 16,479 48,390 France Netherlands West Germany Total 119,427 142,140 145,992 149,139 I Foreign Agriculture Circular, USDA, January 1968. Thus, the 1967 aggregate milk production of the five countries indicated exceeds by almost 25% the total U.S. milk production of approximately 120 billion pounds. The aggregate milk production in these countries has increased in 1966 and again in 1967 at an annual rate in excess of the total quantity of milk used in the U.S. for evaporated milk production. EFFECT ON PRICE SUPPORTS-DOLLAR DRAIN The total production of evaporated milk in the United States in 1967 was 34 million cases; for sweetened condensed milk it was approximately 3 million cases. If this total milk supply was converted to products under the price support pro- gram of the United States Department of Agriculture, the cost to the government and hence to the taxpayers would be well over 160 million dollars. In addition, the potential loss to the U.S. in the form of a drain on the balance of payments would be over 200 million dollars in the event that the domestic pro- duction of canned milk was replaced completely by imports. PRESIDENT TAKES ACTION UNDER SECTION 22 In view of the cricumstances facing the domestic canned milk industry, Presi- dent Lyndon B. Johnson on June 10, 1958 issued a Proclamation1 establishing emergency import quotas on evaporated milk and sweetened condensed milk. The action was taken under Section 22 of the Agricultural Adjustment Act of 1937, as. amended, which provides that whenever the Secretary of Agriculture has reason to believe that any article or articles are being or are practically certain to be imported into the United States under such conditions and in such quan- tities as to render or tend to render ineffective or materially interfere with any program or operation undertaken under this Title Or any loan, purchase, or other program of operation undertaken by the Department, he shall so advise the Presi- dent, and, if the President agrees that there is reason for such belief, the Presi- dent shall cause an immediate investigation to be made by the United States Tariff Commission. The Act further states that in any case where the Secretary of Agriculture de- termines that a condition exists requiring emergency treatment, the President may take immediate emergency action and simultaneously direct the Tariff Com- mission to investigate and make recommendations. Needless to say, this segment of .the domestic agriclltural economy is gratified at the actions .taken by the President in saving the industry from literal destruc- tion by cheap foreign imports. PREVIOUS ACTIONS OF USDA Despite our gratification at the recent actions taken in behalf of the industry, it should be pointed out that the setting of quotas under Section 22 is no with- out problems in terms of product classification. In his recommendation to the President of March 30, 1967, the Secretary of Agriculture asked that the U.S. Tariff Commission investigate the need for im- port restrictions on articles containing not over 45 percent by weight of butterfat, °Presidentlal Proclamation 3856-June 10, 1968. PAGENO="0460" 4900 etc. and specifically ea'cepted "articles packaged for distribution in the retail trade and ready for use by the purchaser at retail for an edible purpose or in preparation of an edible article." The President, in his April 3, 1967 letter to the U.S. Tariff Commission, used the same language in outlining the articles or products to be considered in the investigation to be made by the Tariff Commission. Thus, the request of USDA and the President to the Tariff Commission in late March and early April, 1967 covered bulk goods but did not cover imports of canned evaporated milk or sweetened condensed milk for retail distribution. At that time (14 April 1967) the evaporated milk industry directed a letter to the Secretary of Agriculture vigorously protesting any possible retail exemption. It was pointed out on that occasion that imports of evaporated milk into Puerto Rico increased almost 300% during the period 1965 through 1966 and were run- ning at a rate of almost a million pounds a year, from practically no imports in 1963. All of these imports were replacing sales in Puerto Rico that have been made traditionally by U.S. suppliers. Thus, at that time the pattern of imports of these products into the United States was clear and concise. It was not until the Industry was poised on the brink of disaster in the spring of 1968 that the Secretary of Agriculture took the necessary measures under Section 22 to head off imports. It should be noted that the quotas that are estab- lished by the Presidential Proclamation of June 10, 1968 set the rate of imports for evaporated milk and sweetened condensed milk at their highest level, i.e., 1967. Thus, it is obvious that importers of foreign evaporated milk or sweetened condensed milk are being given more than their fair share, on a historical basis, of the U.S. market. IMPORT MILK ACT IMPLICATIONS At the time of the Presidential Proclamation, June, 1967, any country wishing to export evaporated milk or sweetened condensed milk to the United States had to comply with the Import Milk Act. Briefly, this Act states that the export- ing country must apply for a permit and meet certain farm or plant standards before their products will be acceptable in the United States. In September, 1966, the Food and Drug Administration ruled that evaporated milk and sweetened condensed milk were covered by the Act.6 However, on March 22, 1968, a Justice Department opinion prompted the Food and Drug Administration to reverse its ruling by revoking Section 3.56 of the Food and Drug regulation. Thus evaporated milk and sweetened condensed milk no longer came under the jurisdiction of the Import Milk Act.7 On May 10 the Federal Food and Drug Adfninistration again changed its posi- tion and announced that while sterilized evaporated milk in cans continues to remain outside the coverage of the Federal Import Milk Act, all other milks and creams, including canned sweetened condensed milk, would from that date re- quire permits. A calm appraisal of the requirements of the Import Milk Act, however, re- veals that they afford only minimal protection against importation of foreign products. The Act puts forth simple health requirements that can be complied with easily by any foreign plant and should not and cannot be confused with a quota limitation. This is dramatically emphasized by the fact that imports of canned milk reached an all time high in 1.967 when the provision~s of the Import Milk Act applied to both canned evaporated milk and canned sweetened condensed milk. Furthermore, since Food and Drug has waived the right to make necessary in- spections with U.S. personnel and allowed such certification to be made by an agency of the exporting government, the import permits under the Act do not provide the protection for U.S. consumers we believe was intended by the Congress. It should also be pointed out that the~ Federal Import Milk Act does not apply to Puerto Rico-the major target for evaporated milk imports through 1967 and in early 1968. 6 31 P.R. 11935, September 10, 1966. 33 P.R. 4881, March 22, 1968. PAGENO="0461" 4901 SUMMARY Several factors have combined to give grave concern to the domestic evaporated milk and sweetened condensed milk industries. These are: (1) A gradual and steady increase in European surplus milk causing this milk to look for an outlet in the world market place; (2) A steady increase in the U.S. price support level with commensurate in- creases in prices in the retail market place. Thus, the U.S. market becomes more attractive to European suppliers; (3) U.S. quota restrictions on other major imported dairy products caused potential European marketers to export canned milks which were nonquota items in the U.S. (4) Previous pleadings of the industry to the Tariff Commission prior to June, 1968 had been to no avail. It was not until substantial quantities of prod- ucts were imported into the United States and the industry was on the brink of disaster that appropriate action was taken. While the industry welcomes and sincerely appreciates the action of the President in establishing emergency quotas on canned milks, we have no as- surance that the Tariff Commission will subsequently make the canned milk quota permanent. Even if the quotas are made permanent, we become deeply concerned that importers will find devious ways to evade quotas, and the intent of the Secretary of Agriculture, as they have in the past. We conclude that a long range solution to the problem of retaining a fair share of the total U.S. domestic dairy market for imported products that will be equitable and reasonable for all segments of the domestic industry would be additional legislation. Proposed legislation such as H.R. 3816, Sisk (D-Calif.) and cosponsored by over 200 members of the House of Representatives would assure that the intent of the Secretary of Agriculture relative to dairy imports would be carried out quickly and efficiently. We urge that this Committee give serious consideration to expediting this type of dairy import legislation. KOLB-LENA CHEESE Co., Lena, Ill., May 23, 1968. Hon. WILBUR P. MILLs, House of Representatives, Washington, D.C. DEAR MR. MILLS: We have learned of the forth-coming hearings on tariffs and trade and would like to advise our position. We have manufactured foreign type cheese for forty-three years and have recently noticed a sharp decline (ranging from 12 to 83% in our New York City sales due to the increased amounts of French and Danish cheese entering the American market. NEW YORK CITY SHIPMENT OF CHEESE 1964 1965 1966 1967 1st- quarter sales 1967 1968 Decrease (percent) Rexoli-lunch Camembert whole Camernbert3 port 687 1, 728 155 513 1, 676 184 379 735 26 294 38 10 102 24 50 4 50 86 Camembert6 port K Brie wholes 659 436 677 501 420 327 425 10 119 6 64 4 4 Delico Brie Delico5wiss 14,628 6,520 16, 995 6,280 15, 035 7,360 345 16,968 5,860 90 4,360 1,600 76 3,329 1,400 13 20 12 As you may know, Europe is currently faced with an over-production of milk and is~ trying through every media to find a profitable outlet which means the U.S Market. Now, not only to assist the American Dairy farmers' position, the Amer- ican Dairy plant employees' position, but the American dollar drain, we urge you to place a strict quota or tariff on all imported Dairy Products. I)airy import standards should also be checked as we are continually improving our quality regulations. PAGENO="0462" 4902 Please give the above matter your consideration and help our domestic dairy- men and manufacturers by stopping additional dairy products from entering our markets. Very truly yours, DOROTHY DEMETER, Mrs. James Demeter. Mr. BURKE. Our next witness is Mr. William M. Hannon. We welcome you to the committee, Mr. Hannon, and if you will identify yourself, you may proceed. Also identify your associate. STATEMENT OF WILLIAM M. HAI~ON, CHAIRMAN, WASHINGTON AFFAIRS COMMITTEE, BICYCLE MANUFACTURERS ASSOCIATION; ACCOMPANIED BY THOMAS F. SHAI~NON, GENERAL COUNSEL Mr. HANNON. Mr. Chairman, my name is William M. Hannon. I am president of the Murray Ohio Manufacturin~ Co., of Nashville, Tenn., and I appear today as chairman of the Washington Affairs Committee of the Bicycle Manufacturers Association, Inc. The Bicycle Manufac- turers Association is a nonprofit trade association with headquarters in New York City. A list of members of the association appears as an appendix to this statement. These members produce virtually all the bicycles made in the United States. I have with me tod.ay our general counsel, Thomas F. Shannon. We are here today because we are deeply concerned about the future of our industry in the light of certain recent trends in U.S. foreign trade and trade policy. Our industry knows something of import injury. In 1948 imports were less than 1 percent of our market. In 1955 over 40 percent of bicycles sold in the United States were produced abroad. We survived that injury, and today I am happy to tell you that our sales are i~p. However, imports are over 20 percent of the domestic consumption for the first 4 months of 1968, and we have a healthy respect for what imports can do to our industry in a very short period of time. We see some disturbing similarities between the circumstances of the late 1940's and the late 1960's. The GATT negotiations of 1947 cut the duty on lightweight bicycles from 15 to 7½ percent. This cut became effective on January 1, 1948, and began to make itself felt almost immediately. By 1955 imported bicycles had captured 41.2 percent of the American market. The American bicycle manufacturers were in serious trouble. We saw it coming early. The tariff cuts of 1947 brought import penetration of 1 percent in 1949 and 3 percent in 1950. In 1951, with imports holding 8.5 percent of our market, we drew attention to this rising rate and applied for escape clause relief, which was refused by the Tariff Commission. In 1954 we tried again, with 38 percent of our market lost to imports. On March 14, 1955, the Tariff Commission found that bicycle producers as a group were in major distresses as to profits, market share, employment, and production, and that massive increases in imports were to blame. The Commission said: The principal cause of the increase in imports has been the reduced rates of duty reflecting the trade agreement concessions made on bicycles. The Commission recommended substantial increase in duty rates on imported bicycles, to 221/2 percent. The President acceded on all but PAGENO="0463" 4903 the lightweight bicycles which by then were accounting for over 60 percent of all imports. The lightweight duty was raised from 71/2 percent to 111% percent. At that point, Mr. Chairman, we began to recover. A principal element in our recovery was this tariff increase. A second important factor was an extensive reorganization of our entire industry. All of us cut our costs and prices in every conceivable way in order to remain as competitive as possible. We invested inten- sively in new facilities and equipment. The average price of a U.S.- produced bicycle today is lower than the 1956 average price. That is, a bicycle with comparable specifications costs less today than it did in 1956. All of us were forced to turn to imported parts, such as tires, brakes, and chains. By these drastic measures, our industry survived. Imports dropped to 750,000 bikes, or 28 percent of the market in 1957. From then until 1963 they increased very slowly to 1.3 million bicycles, or 30 percent of the U.S. market, and in 1963 we brought out the first high-rise bicycle. The high-rise bicycle, shown in appendix II, photograph No. 3, was our ultimate answer to the imported bicycle. It was designed and de- veloped and built and marketed in the United States by U.S. manu- facturers specifically and especially for the U.S. market. I think the figures will show how successful the design and marketing of this model was. In 1964 the high-rise bicycle cut imports by 250,000 bi- cycles, and reduced the import market share by one-third, from 29 to 19 percent. Since then our sales have continued to increase, principally because of our energetic marketing of this machine. Well, Mr. Chairman, it took the foreign manufacturers just 2 years to catch. Table 2 in appendix I shows the rapid shift in import em- phasis from lightweights to high-rise, copied bolt for bolt from U.S. models. The oversea producers are now in full high-rise production, with startup problems and costs behind them. Their shipments to the United States of this U.S. designed and developed bicycle has enabled them to reserve their declining market share trend from 16.1 percent in 1966 to 17.7 percent in 1967, and over 20 percent for the first 4 months of 1968. With the Kennedy round duty reductions of 50 per- cent now scheduled by 1972, we anticipate a further sharp increase in imports. This situation worries us in the bicycle industry. The two principal factors which combined to permit the sharp rise in imports in the 1948-55 period were the GATT tariff cuts and domestic interest in the lightweight bicycle which the foreigners could produce cheaper than we could. We see those same factors at work today, in the Ken- nedy round cuts and the massive import concentration in the high- rise bicycle, which the importers are landing in this country and sell- mg at prices considerably below our costs. Foreign manufacturers also receive the benefit of various subsidies and rebates which help them in the exportation of products. We have once before fought and recovered from massive import injury, but this time we see the circumstances as more restricting and the injury as more serious. The parallels to the import challenge of the early 1950's are easy to find, Mr. Chairman, but as an industry we are less able to respond to this challenge than we were in 1955. We expended all our ammunition in that fight. We are already using foreign-made parts to maximum PAGENO="0464" 4904 economic advantage. We have streamlined and modernized our plants and manufacturing equipment and innovated new bicycle designs. Our next step must be exportation of jobs and importation of finished and assembled bicycles. When that happens millions of dollars of equip- ment and thousands of American jobs must be discarded. It is easy to say, "Why not do what you did in 1964? Why not develop a brand new kind of bicycle that can repeat the success of the high-rise?" Mr. Chairman, and members of this committee, we will continue to use all the ingenuity, technology, and marketing skill of the industry to combat this problem but the acceptance of a new prod- uct rests solely with the American public. Even if we were guaranteed such a success, the foreigners have shown that they can copy our designs and start shipping the new products into the country in a rela- tively short period of time. Mr. Chairman, we see that the bicycle industry stands to suffer serious injury within a very few years and we are in a position to speak with some authority on this subject. We also see that our survival of another 40 percent penetration of our markets by imports will be difficult. So we need and ask for your help, Mr. Chairman. We don't claim that we are today in an extreme condition, although our market loss is twice that of other industries appearing here. We say we are threatened by imports, that unless some relief can be provided when we need it we will suffer serious harm, and that present avenues of relief are wholly inadequate. We need objective standards established by Congress which will re- quire the imposition of effective relief measures when imports reach a certain level. To us, effective measures mean quantitative limitations on the importation of bicycles into this country. We recognize that the foreigners have established a share in our market and in the growth of our market. However, it is not in our interest or the national interest to see the destruction of an industry and its employees through a flood of imported bicycles coming into this country. Mr. B1JRKE. Thank you. The appendixes that you have included here will be included with your statement. Mr. HANNON. Yes. (The appendixes follow PAGENO="0465" 1931-39 average 1947 1948 1949 1946-49 average 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 (2) 11,400 1.3 2, 875, 000 19,758 2, 894,758 . 7 2,794,516 16,774 2,811,290 .6 1,483,009 15,935 1,498,944 1.1 2, 201, 362 24, 826 2,226, 188 1. 1 1,963,716 67,789 2,031,505 3.3 1,918,923 176,644 2,095,567 8.5 1,930,307 245,763 2,176,070 11.3 2,083,439 592,999 2,676,438 22.2 1, 554,233 963,667 2, 517,900 38. 3 1,749,322 1,223,990 2,973,312 41.2 1,761,702 1,174,214 2,935,916 40.0 1,906,973 749, 780 2,656,753 28. 0 2,104,549 823,914 2,928,463 28.0 2, 562, 325 1, 013, 794 3, 576, 119 28. 0 2,584,622 1,186,596 3,771,218 31.5 2, 579, 093 1, 085,239 3,664, 332 29. 7 2,954,215 1,266,790 4,221, 005 30.0 3, 116,263 - 1, 398,900 4, 464,263 31. 3 4,082,563 1,010,035 5,092,596 19.8 4,618, 743 1, 038, 884 5,657,627 18. 3 4, 829, 122 927,223 5, 756, 345 16. 1 5,180,352 1,117,246 6,297,598 17.7 1 Imports plus production. U.S. exports of bicycles are negligible, averaging 0.1 percent of production since 1963. 2 Not available. TABLE 2.-U.S. IMPORTS OF BICYCLES (In thousandsi Lightweights Hig h rise Quantity Percent of total Quantity Percent of total 1964 843 83 130 13 1965 737 71 260 22 1966 484 52 390 45 1967 417 37 649 58 1st quarter, 1968 54 26 146 71 4905 APPENDIX I TABLE 1.-U.S. PRODUCTION AND IMPORTS (Number of bicyclesi Domestic Apparent 1 Year production Imports consumption Percentage ratio of imports to apparent consumption 95-159 O-68---pt. 1O-30 PAGENO="0466" 4906 APPENDIX II AMERICAN BICYCLES. 9-230 Middleweight 8-120 Lightweight High-rise PAGENO="0467" 4907 APPENDIX III MEMBERSHIP OF BICTCLE MANUFACTURERS AssocrATIoN AMF Wheel Goods Division, P.O. Box 344, Olney, Illinois 62450 Chain Bike Corporation, 350 Beach 79th Street, Rockaway Beach, New York 11693 Columbia Manufacturing Co., Inc., Westfield, Massachusetts 01085. Excelsior Manufacturing Co., Inc., Kentucky and Williams Streets, Michigan City, Indiana 46360 Huffman Manufacturing Company, P.O. Box 1036, Dayton, Ohio 45401 Huffman Manufacturing Company of California, 1120 West Foothill Boulevard, Azusa, California 91702 MTD Products, Inc., 5389 West 130th Street, Cleveland, Ohio 4411 Murray Ohio Manufacturing Company, 635 Thompson Lane, Nashville, Ten- nessee 37204 Schwinn Bicycle Company, 1856 North Kostner Avenue, Chicago, Illinois 60639. H. P. Snyder Manufacturing Co., Inc., Little Falls, New York 13365 Stelber Cycle Corporation, 91-31 Queens Boulevard, Elmhurst, New York 11373 Mr. Buniu~. Are there any questions? Mr. CONABLE. Mr. Chairman. Where are most of these bicycles coming from, from Austria, Ger- many, and Japan? Mr. HANNON. And England. Those four countries are the principal importers. Mr. BURKE. Thank you very much, Mr. Hannon. That concludes the witnesses for today, and the committee will stand adjourned now to meet at 10 a.m. tomorrow morning. (Whereupon, at 3:10 p.m., the committee adjourned, to reconvene at 10 a.m., Tuesday, July 2, 1968). PAGENO="0468" PAGENO="0469" FOREIGN TRADE AND TARIFF PROPOSALS * TUESDAY, JULY 2, 1968 HousE OF REPRESENTATIVES, COMMIrrEE ON WAYS AND MEANS, Wa~shington, D.C. The committee met at 10 a.rn., pursuant to notice, in the committee room, Longworth House Office Building, Hon. A. S. Herlong presiding. Mr. HERLONG. The committee will be in order. Mr. TJtt. Mr. Urr. Mr. Chairman, I would like to have unanimous consent that a statement I have here from the Young Americans for Freedom, with reference to East-West trade, be placed in the record. They would like to file the statement for the record. Mr. HERLONG. Without objection it will be included in the record. (The statement referred to follows:) STATEMENT OF RANDAL CORNELL TEAGUE, DIREcTOR OF REGIONAL AND STATE ACflVITIES, YOUNG AMERICANS FOR FREEDOM, INC. THE YOUNG AMERICAN'S VIEW OF EAST-WEST TRADE-PHILOSOpHy AND ACTION Mr. Chairman and Members of the Committee: Young Americans for Free- dom-YAF--was founded in September 1960 in Sharon, Connecticut, by college students and young adults Who were deeply concerned over the foreign and domestic policies of our government and over various trends on our nation's campuses. During the last eight years, YAP has grown into an organization of several tens of thousands of high school and college students and young adults and has organized chapters on nearly three hundred college campuses. Our na- tional advisory board now consists of nearly fifty Members of Congress and of several hundred of our nation's leading business, professional, civic, educational, literary, and religious leaders. Criteria for policy evaluations The philosophical foundationa for all considerations of policy issues by the officers and members of YAP is the Sharon Statement. Adopted in 1960 at our founding meeting, this Statement outlines our overall viewpoint of today's cri- tical issues. The Statement reads: In this time of moral and political crisis, it is the responsibility of the youth of America to affirm certain eternal truths. We as young conservatives, believe- That foremost among the transcendent values is the individual's use of his God-given free will, whence derives his right to be free from the restrictions of arbitrary force; That liberty is indivisible, and that political freedom cannot long exist without economic freedom; That the purposes of government are to protect these freedoms through the preservation of internal order, the provision of national defense, and the administration of justice; That when government ventures beyond these rightful functions, it accu- mulates power which tends to diminish order and liberty; That the Constitution of the United States is the best arrangement yet de- vised for empowering government to fulfill its proper role, while restraining it from the concentration and abuse of power; That the genius of the Constitution-the division of powers-is summed up in the clause which reserves primacy to the several states, or to the (4909) PAGENO="0470" 4910 people, in those spheres not specifically delegated to the Federal Government; That the market economy, allocating resources by the free play of supply and demand, is the single economic system compatible with the requirements of personal freedom and constitutional government, and that it is at the same time the most productive supplier of human needs; That when government interferes with the work of the market economy, it tends to reduce the moral and physical strength of the nation; that when it takes from one man to bestow on another, it diminishes the incentive of the first, the integrity of the second, and the moral autonomy of both; That we will be free only so long as the national sovereignty of the United States is secure; that history shows periods of freedom are rare, and can exist only when free citizens concertedly defend their rights against all enemies; That the forces of international Communism are, at present, the greatest single threat to these liberties; That the United States should stress victory over, rather than coexistence with, this menace; and That American foreign policy must be judged by this criterion: does it serve the just interests of the United States? Mr. Chairman, the review by this Committee on this nation's overall trade policies is commendable. Young Am~ricans for Freedom is interested in the products of this Committee's careful deliberations on what statutory and admin- istrative revisions need to be made with respect to our foreign trade policies. We are, however, particularly concerned about one aspect of our trade policies- East-West trade. As all members of this distinguished Committee are aware, East-West trade, since the Administration's recent proposals for the `~building of bridges" with the East, ha.s become a matter of increasing debate and to many groups and individuals a matter of increasing concern. Any comprehensive overhaul of our nation's trade policies will probably necessitate amendments to statutory provisions relating to trade with Communist countries, particularly those of Eastern Europe. It is our intent here today to give to this Committee our view of what con- siderations ought to be weighed in any revisions of our nation's East-West trade policies and what we feel ought to `be the outcome of this Committee's deliberations. Why opposition to East-West trade? Mr. Chairman, based on the criteria of the Sharon Statement, the members of Young Americans for Freedom are opposed to trade of a strategic nature with Communist nations. Generally speaking, it is our view that the struggle between freedom and Oommunism is a total one, not by our own choice, but rather by the nature of the Communist adversary. We feel this struggle encompasses all means of competition, including military, economic, and political competition, and we also feel that it should be the policy of the United States to win this struggle with a minimum of overt military conflict. To some degree this can be achieved by the United States regulating its economic policies with other nations with full consideration of the likely effects those policies will `have upon the capaibili- ties of the Communist governments to compete against the Free World. Why do we oppose the East-West trade proposals of the present Administration? As long as twenty-five centuries ago, the Greek dramatist Aeschylus wrote- So in the Libyan fable it is told That once an eagle, stricken with a dart, Said,when he saw the fashion of the shaft, "With our own feathers, not by others' hands, Are we now smitten" The East-West trade posture of this Administration looks strikingly as if it could become the eagle of that drama. Less than half a century ago, Nikolai Lenin wrote- On the basis of observations gathered during my years of exile, the "cul- tured" class of the capitalist countries of Western Europe and America, i.e., PAGENO="0471" 4911 the ruling classes, the financial aristocracy, the bourgeoisie and the idealistic democrats should be regarded as deaf-mutes and treated accordingly The deaf-mute capitalist *hoarders, their governments, the Chambers of Commerce, the federations of industry, bank groups, steel kings, rubber kings, aluminum kings and others will close their eyes to the above-mentioned truth and so become blind, deaf, and dumb. They will grant us credits, which will fill the coffers of the Communist organizations in their countries while they enlarge and improve our armament industry by supplying `all kinds of wares, which we shall need for future and successful attacks against our sup- pliers. Lenin's comments are, to us, a reflective commentary on the strategy which underlies both the long-range and the short term positions of the Communists in support of East-West trade. Mr. Chairman, there are certain realities rtbout Ea'st-West trade which cannot be overlooked. Communists carry out trade only through the officials of political regimes. Their motives, even in the area of trade, are political and, as the Republican Task Force on East-West Trade h'as so well put it, power-oriented. `Communist regimes are committed to a policy of hostility to the Free World. particularly the United States, and this policy is aimed at our entire society. Communist nations have very little that we need, not only in commodities, but more importantly in technology, while the Free World has much to offer in both categories. Some of our national policy-making leadership appears to often look at Commu- nism as a system which does not constitute a vital threat to the Free World, that will and must somehow soon pass away, and which will eventually yield to normalcy. We must also remember that the amount of private consumption is effectively controlled by the `state in Communist countries and that their governing regimes are committed to give first economic priority to their power purposes. Western trade representatives would enjoy contact only with a few government officials appointed by the Communist elite, which officials are tested for their political reliability, as well as administrative competence and which are Subject to removal at the whim of the regime. These Communist regimes have the capac- i:ty and the will to decide what the consumers share of the nation's material goods sh'a'll be, which, in the past, have remained on a very low priority. As all of us are aware, recent Administrations, particularly this one, have adopted policies described as "building bridges to the East." While this concept of lessening tensions `between East and West may sound good on its face, the bridges which the present Administration proposes to build are, in reality, one- way avenues carrying benefit to the Communist nations with little, if any, benefit to the Free World. Of the greatest concern to our members is the Hypocrisy of `68-the waging of a war `against the Ooinmunists in Southeast Asia by the United States, while, at the same time, the present Administration seeks to trade with Oommunist gov- erninents providing war materials to our adversary in Asia. At a time when the Soviets boast of supplying North Vietnam with eighty-five percent of its war materials, and at a time when American soldiers are dying because of the use of that war material, it is incomprehensible to us as to why our government seeks to bolster the countries of Eastern Europe. Young Americans for Freedom has also been disturbed at the policy of the Department of State of encouraging businessmen to participate in the develop- ment of industrial capacities of Communist countries, which devlopment can oniy increase the Oommunist capability to compete with the West in economic, as well as military, means. We are also alarmed at the increasing number of items which our government deems as non-strategic, despite the Congressional ex- posure of many of these so-called non-strategic items as strategic indeed. Wivit is "strategic"? Young Americans for Freedom, as I have indicated, is opposed to trade of a strategic nature. Of course, whether a particular good is strategic or non- strategic depends, to some extent, on the need of the purchasing Communist country for the product as an instrument of state control, planning, or corn- PAGENO="0472" 4912 initment, and its potential military or pam-military capabilitiea There are~ how- ever, items which there would probably be some consensus toward as being of a non-strategic mature, e.g., tooth brushes and golf bails. Nonetheless, even trade in tooth brushes and golf balls should be coupled with several considerations. Will the purchase of the item by the Communist country permit that country to divert natural and manpower resources which would otherwise have been re- quired for the manufacture of the item to military or related purposes? Will the Free World obtain some type of definite concession from the Communist gov- ernment as a part of the trade deal? Will the items be used by the Communists as a prototype? Will the items help them overcome a shortage which it is to the advantage of the West that we do not help them repair? Will the payment for the items be in such a way as to give the Oomniuntst financial advantages? These questions must be posed and satisfactorily resolved as to any trade pro- posal. If the answer is, "Yes", to any one of them, it should be considered a strategic good and therefore, not traded. If our nation is to participate in any trade with Communist countries, such trade should clearly be non-strategic by the foregoing analysis. Furthermore, our East-West trade policies should rest upon the concept of an incremental, re- ciprocal trade policy, i.e., we do not trade with the Communist governments un- less we are given something in return which we can reasonably determine will. result in the long-range enhancement of liberty within the country we are sup- posedly trying to wean away from the Soviet Union. An incremental, reciprocal trade policy would require a step-by-step, cautious approach to East-West trade. It would require a quid pro quo trade relationship between the United States and the purchasing country, rather than the present one~way avenue of benefit to the Communist country. If effectively and reliably implemented, it could success- fully result in the weaning away of at least a few of the Eastern European countries from total dependency upon the Soviet Union, something which must eventually be done if these countries are to be salvaged for the West. A trade policy of this type would necessarily have to be based upon the return of gold for the purchase of our goods, rather than unstable currencies or long-term credits. Y.A.F. policy statements on East-We8t trade As I indicated earlier, YAF members have been concerned about the overall bridge-building policies of our government and about certain trade deals. The official policy positions of Yonug Americans for Freedom on East-West trade have been expressed in several publications which have received wide distribution. Most notable among these items are the 1965 and 19fi7 resolutions on East-West trade of our national conventions, a statement of policy in the August 1965 issue of our national magazine, our East-West trade issues paper, an editorial in our national publication of April 1968, and the remarks of our National Chairman before the annual stockholders meeting of the International Business Machines Corporation this year. I respectfully submit these to the Chair for its consideration of them at this point in the record, for inclusion therein. This statement is, to a great degree, buttressed `by these statements of policy, and would, therefore, be incomplete without their inclusion. (Statements of policy.) TRADE WITH COMMUNIST NATIONS RESOLUTION ADOPTED BY DELEGATES TO THIRD NATIONAL CONVENTION, YOUNG AMERICANS FOR FREEDOM, INC., AUGUST 1965 Whereas: The struggle between freedom and Communism is total, not by our choice, but by the nature of our adversary, and encompasses all means' of com- petition, including military, political, and economic; and, Whereas: It should be the policy of the United States to win this struggle with a minimum of overt military conflict and, therefore the United States should regulate its economic policies with full consideration of the likely effect upon the Communist capabilities for competition; and, PAGENO="0473" 4913 Whereas: The Administration has adopted a policy described as "building bridges to the East," which are in reality one-way avenues carrying benefit to the Communist nations with no benefit to the Free World; and, Whereas: Most serious is the policy of the State Department of encouraging Western Businessmen to participate in the development of a strong industrial capacity in Communist countries which can only increase the Communist ability to compete with the West in either economic or military ways; Therefore Be It Resolved, that Young Americans for Freedom, Inc. opposes all trade of a strategic nature with any communist nation, and, Be It Further Resolved; that we will employ all our rights under the Con- stitution and all our efforts as a political action organization *to inform the American people of any proposed deals of a strategic nature, and toward this end we recommend the creation of a special YAF advisory committee of prom- inent citizens, businessmen and experts in the field of foreign trade to advise us in each instance as to whether a trade deal proposed by an American Com- pany would further the political, economic or military potential of the Corn- inunists. EAST-WEST TRADE RESOLUTION ADOPTED BY THE CHAPTERS, AS REPORTED BY THE COMMITTEE ON RESOLUTIONS OF THE NATIONAL CONVENTION OF YOUNG AMERICANS FOR FREEDOM, 1967 Whereas, the struggle between freedom and communism is total, not by our choice, but by the nature of our adversary, and encompasses all means of com- petition, including military, political and economic; and Whereas, it should be the policy of the United States to win this struggle with a minimum of overt military conflict, and therefore the United States should regulate its economic policies with full consideration of the likely effect upon the Communist capabilities for competition; Therefore be it resolved that Young Americans for Freedom, Inc. opposes all trade of a strategic nature with any CommuniSt nation SO long as they wage war against us though we support the use of trade in non-strategic items as a weapon of cold war policy. Be it further resolved that we condemn the policy of the present administra- tion of extending credits to Communist countries. Be it further resolved that we will employ all our rights under the Constitu- ~ion and all our efforts as a political action organization to inform the American people of any proposed deals of a strategic nature. [From the New Guard, August 19651 A STATEMENT OF POLICY-TRADING WITH THE ENEMY Early this Spring our Philadelphia YAF organization learned that the Fire- stone Tire and Rubber Co. was negotiating with the government of Communist Rumania to build an entire synthetic rubber plant in that country. Few needed an explanation of the vital and strategic role which synthetic rubber plays in any war effort or the buildup of military power. What was started by Philadelphia YAP sparked a wave of protest demonstra- tions around the nation. As a climax of the campaign to inform the public of the Firestone negotiations, which were fully approved by the State Department, YAF planned an appropriate demonstration at the Memorial Day "Indianapolis 500" race. It is at this annual auto racing classic that the major tire and rubber com- panies stage their most intensive promotion. Abruptly, on April 20, 1965, Firestone announced that it was cancelling all negotiations with the Rumanians. It was obvious that Firestone feared economic losses at home because of their participation in a trade deal with the Reds. The Fuibright speech The incident appeared closed until July 26. On that day Senator William Ful- bright (D-Ark.) took the Senate Floor to denounce YAP, Firestone, the State PAGENO="0474" 4914 Department, and the Goodyear Tire and Rubber Co., the latter company having refused to build a rubber plant in Rumania because it felt that such a plant would have materially aided the Communist military potential. Sen. Fulbright's speech was given in pontifical tones, castigating all those with the temerity to disagree with his own ideas on foreign policy. He characterized YAP as "extremist" and a "vigilante group," and referred to our educational campaign about the Firestone deal as "nuisance activities." That same afternoon in the Senate, Senator Strom Thurmond of South Carolina answered Sen. Fuibright and documented YAF's history and aims. Sen. Thurmond enumerated YAP activities which have gained the endorsement of such leading Americans as former Presidents Hoover and Eisenhower, former Vice President Richard Nixon, and even the Democratic Leader of the Senate, Mike Mansfield of Montana. He placed in the Congressional Record the Sharon Statement and the long list of Members of the House and Senate who serve on YAP's Advisory Board. Sen. Thurmond emphatically denied a Fulbright insinuation that there had been collusion between YAP and Goodyear against the Firestone deal. Congressmen John Ashbrook, James Utt, and E. Ross Adair also defended YAP and opposed Fulbright and the Firestone deal. The (JMcago Tribune sided with YAP and skillfully destroyed the faulty Fuibright logic. Sen. Fulbright's speech brought a tremendous expression of support to na- tional YAP headquarters. The logical question has been posed and we as a politi- cal action organization must answer it-where do we go from here? In response, the Policy Committee of the national Board of Directors has unanimously agreed upon the following guide lines for future YAP action on proposed trade deals with Communist nations which will aid the Red military potential: First, we intend to mount a national citizens' crusade to prevent, if possible, any future ti~ade deals with the Reds which will h'~lp them advance the day when they can, as Khrushchev has said, "bury us." In principle we oppose all trade with Communist nations, but as an organization limited in funds and membership, we will concentrate our efforts against those trade deals which plainly give aid and comfort to the Communist enemy by building up their military power. In doing this we fully realize that we must oppose the stand our government has taken and its official designation of what is "strategic." Already, in response to the Fuibright speech, President Johnson has ordered a State Department investi- gation to find oust why the Firestone deal fell through. The President has also stated his support of the Firestone deal and such trade in general. Secondly, we will document our charges adequately, and do not intend to make generalized, or indiscriminate accusations against U.S. business concerns which trade with Soviet bloc nations. Neither do we intend to sit idly by while the big businessmen who fawned over LBJ during last year's election campaign reap profits with official govermnent approval by trading with the enemy. YAP will form an official advisory committee of noted experts on the matter of strategic trade and with its advice will inform the nation about proposed trade deals which are against America's best interests. Thirdly, we will use all responsible means of free speech and assembly per- mitted by the Constitution. We will not engage in boycotts, but we will mount massive informational campaigns so that the American public can have the facts and decide for themselves if they approve of American businesses trading with the enemy. National YAP will provide factual information and research materials to our chapters and members. Wlz~y YAF must act Only twenty-four hours prior to Sen. Fulbright's attack on YAP, the Rumanian Communist Party Congress meeting in Bucharest, together with representatives of Soviet Russia and Red China, attacked the United States for its defense of freedom in Vietnam and pledged its full supi~ort to the Communist Viet Cong. One can only suppose that, were the Firestone-built rubber plant now in operation in Rumania, its products might be used to kill American fighting men in Vietnam. We applauded the President for his firmness in Vietnam. But, we find it sheer absurdity to undermine this stand by trading with the enemy through the back door of Rumania or any other Red nation. We have information that other American firms now plan to profit by Red trade deals at the expense of our national interest and our fighting men stationed around the world. We may be only one small voice, but our conscience and beliefs would forever be empty and meaningless if we refused to act now. PAGENO="0475" The Sharon Statement Adopted at the Founding Conference of Young Amen- cues for Freedom at Sharon, Connecticut, September9-l1, 1960. IN THIS TIME of moral and political crisis, It In the responsibility of the youth of America to affirm certain eternal trutho. WE an youngconnervatlves, believe: THAT foremost among the lranncendent values is the individual'suse of bin God-givenfree will, whence derives his right to be free from the restrictionsof arbitrary force; THAT liberty is indivisible, and that political freedom cannot long esist without economic freedom; THAT the purposes of government are to protect these freedoms through the preservation of Internal order, the provision of national defense, and the administration of justice; THATschen government ventures beyond these rightful functions, It accumulates sower winch tends to diminish order and liberty; THAT the Constitution of the United States Is the bent arrangement yet devised for empowering government to fulfill its proper role, while restraining it from the con- centration and abuse of power, THAT the genius of the Constitution-the dIvIsIon of powers-is summed up in the riaune which reserves pri- macy to the several states, or to the pen ic Is those spheres not specifically delegated to the federal Gov- THAT the marhet economy, allocating resources by the free play of supply and demand, In the single economic system compatible with the requiremento of personal freedom and co,,stltutlonal government, and thatit Is at the same time the most productive supplIer of human needs; THAT when government Interferes with the work of the market economy, It tends to reduce the moral and physi- cal strength of the nation; that when it takes from one man to bestow on another, It diminishes the Incentive of the first, the Integrity of the second, and the moral au- tonomy of both; THAT we will be free oniy no long as the national sov- ereignty of the United States in secure; that history stows periods of freedom are rare, and can exist oniy whes free citizens concertedly defend their rights against all enemies; THATthe forces of International Communismare, atpres- rot, the greatest single threat to thme liberties; THATthe United States shouldsiressvlctoryover, rather than coexistence with, this menace; end THAT American foreign policy must be judged by this crilerios: does It nerve the lust interests of the United States? PAGENO="0476" "In the present epoch, the struggle for (Commu- nism) and the fight to gain time depend above all on an unremitting Increase In Soviet militarypower and that of the entire socialist camp, based on the developmentofproductiveforces aixithecontinuous growth of its material and technological base."- V. D. Sokolovaky, "Soviet Military Strategy," 1963. YOUNG PEOPLE WITH KNOWLEDGE of interna- tional affairs are generally aware that the 1960s saw a shift in American vs Soviet policy from the "containment" or "defense of the status quo" ap- preach of Eisenhower to the "convergence" "detente" "bridges-to-the-East" policy ofKennedy- Johnson. They also know that the l96ilshaveseeo: the establishment of a Soviet base for the proxy subversion of Latin America in Cuba; the de facto establishment of a Soviet base in the Arab Middle East; the establishment of a Soviet base for the proxy subversion,of sub-Saharan Africa in Tan- zania; the attempted establishment of a Soviet base for the proxy subversion of Southeast Asia in Vietnam. - all modeled after their successful pre-World War II establishment of a base for the proxy subversion of China in the northern, Yenan province of that country. In other words, most politically hip young people are aware that the Cold War is not "over"; that the USSR (with its colonies) is 5tH expanding, just like all of the other imperialist powers of world history. YOUNG AMERICANS TODAY DO NOT have a very clear idea of what the future holds for them. But they do know that the SovietUnion-when they were born only a war-ravaged Russia heldtogether by $11 billion of American Lend-Lease aid-cow has nuclear parity with the United States, and threatens superiority. Consequently, American youth may be somewhat confused by the massive effort by theU.S. Governmentand Europeanpowers In the mid-1960s to supply the SovietUnionand its Eastern European colonies-on credit, with repay- ment ranging from 5 to 30 years-with every kind of good short of actual military hardware. (The fact that the Soviets have defaulted on the bulk of credits extended to them in the 1920s, 1930s, and 1940s probably adds totheirconfusion.) ONLY YOUNG AMERICANS FOR FREEDOM, among the youth of today, hasbeenactivein object- ing to this aspect of our foreign policy-on the grounds that it amounts to committing national suicide. YAF was instrumental in recent years In (1) forcing cancellation of a projected Firestone synthetic rubber plant planned for Communist Ru- mania (a supplier of North Vietnam), (2) forcing cancellation of an American Motors deal with the Soviet Union to supply automobiles in return for steel ( the Soviets supply more than 80% of North Vietnam's war material; almost all of North Viet- nam's motor transport of supplies is on civilian vehicles), (3) testifying before Congressional hear- ings on East-West trade, and (4) educating YAF's membership on the peril of balling out the economy of the Communist Empire and -in effect-sustain- ingits dictatorial controlovertheoppressednations that comprise the Soviet bloc. The fact that the Soviets also routinely demand that our trading companies (sometimes unwittingly) kick back 5%- 10% of the purchase price toaninternalCommunist Party in our own countries, makes East-West trade even less palatable to YAF. IT SHOULD BE SELF-EVIDENT that aid to the USSR Is inimical to U.S. interests: by selling wheat to the Soviet Union, we subsidize their armies (who "travel on their stomachs", after all) at home and abroad; by selling them other goods we have made the Soviets more powerful, not more friendly; Communist sources reveal that the Sovieteconomy haslowered the percentage of consumergoodsfrom 13.1% in the last Seven Year Plan to 11.9% in the current Five Year Plan, while trade with the West has allowed them to plan an is~rease in industrial productionof 55%; since 1963 the U.S. hasbuilt 15 fertilizer plants in the USSR, and now Soviet fer- tilizer is a major item of war aldto North Vietnam; computers are vital to Soviet ballistic missiles, yet the U.S. is sending a stream of licenses for up-to- date computers to the Red bloc. . .the list is end- less. BUT, WHAT ABOUT TRADE with the satellite countries of Eastern Europe-in the hope that ex- posure to our products and ideas will draw them away from the Soviets? The experience-especially of the last ten years-hasbeenthereverse: whether the country be Poland, Yugoslavia, Czechoslovakia or another, all American trade and military and economic aid has resulted in has been to cement shaky Communist leaders in power (many of these countries are occupied by the Red Army, as well) and ease the pressure on the Soviet Union to fuel the world Communist enterprise. AND THIS LEADS TO THECRUXoftheEast-West trade issue: the failure of American foreign policy generally, to realize that the governments of the USSR and its colonies are not synonymous with "their" peoples. The people are "another country" in James Baldwin's phrase, "the most dependable andimportant allieswehave" inthewordsof Walter Judd. And most especially the young people! Yet American policy-in all areas, including that of East-West trade-has been to deal with Communist governments as if they were of the people.. .never extracting concessions from them for their peoples (as we have attempted to do elsewhere; e.g., in South Africa and in Latin America). WHAT ABOUT THE RUSSIAN PEOPLE?Héarthe words of Russian poet Valery Tarsis (Bluebottle, Ward 7) writing in THE NEW GUARD, the maga- zine of YOUNG AMERICANS FOR FREEDOM, in June 1966 after his escape from the USSR: "No family in Russia is without some horrible wound, Inflicted by Communists: a father shot, a son vanished in a camp, a wife raped by a local party official. Allthesepeoplehate theCommunists and are your allies. - After the war the people's discontent with the Communist system grew ever stronger and stronger. In recent years this resis- tence has expressed itself in mass riots, strikes, and demonstrations. . as In the demonstrations of youth last April and December; as in the circula- tion of anti-Communist writings and magazines... The Russian people are now squaring their shoulders in battle. They are becoming ever more determined to shake off the shackles of a half century of slavery. . .Perhaps I will best express the feelings which animate the young generation in Russia today (by quoting) four lines from a verse written by one of my young friends: `Wehad scarcelyopenedourmouths, Coughing quietly into our handker- chiefs: We have used up and ruined half of Russia, Let us now bury the Bolsheviks!" WILL AMERICAN YOUTH BETRAY RUSSIAN youth? To allow East-West trade to occur unpro- tested, unchecked, is to endanger theUnitedStates militarily. . and to encourage oppression and misery in both the Soviet bloc and theThlrd Worid, YOUNG AMERICANS FOR FREEDOM urges American youth to study the foreign policy issues raised by East-West trade, assess their effects on our generation, and participate in political action that will bring about their end. The Soviet View of Trade The "cultured" classes sf the capitalist countries of westers Escape sad Ao,eclca, i.e., the ruling classes, the financial aristocracy, the bsurgeoiste sad the idealistic demserats should be regarded as deal-mutes asd treated accordingly... The Chambers of Commerce, the federations of indastry, bank groups and others will close their eyes to the aboee.menloned truth sad so become blind, deal and dumb. They oil grant us credit,, which wil fill the mifers of the Communist orguni- nations in their countries while they enlarge and improve our armaments Industry by nupplytog all kinds of wares, which we ahail need for future and sucressfui attach, against our suppliers. -V. I. LENIN I. ci PAGENO="0477" 4917 STOP IBM's Czechoslovakia, Poland, Hungary and Bulgaria have purchased IBM's 1400 series data processing systems. Now IBM is in the process of selling its most advanced system, the 360 series,, to these countries as welt as East Germany. Although IBM has not yet sold these systems to the Soviet Union, it is only a matter of time. It should be pointed out that these Communist nations share technological information. Especially revealing was a news item in The Washington Post of March 4, 1968: `The American firm IBM has taken the unusual step of hiring a local man in a Sociutistcountry to be its representative there. He is Marjan Dermastija, 58, formerly head of the Yugoslav railways and governor of the National Bank. He's also a current member of the Yugoslav Federal Assembly, presenting an unssuat conflict-of-interest situation for Yugoslavia." (Also poses an "unusual conflict-of-interest situation" for IBM, not to mention a further compromise of American security.) IBM refuses to accept responsibility for its actions, but directs alt who question its Communist trade to the State Department. Here is what the State Department might say: I. "IBM's computer sales wilt help `woo' the satellites away from the Soviet Union." But the U.S. has tried, through foreign aid and trade, to implement such a policy. Satellite nations continue to adhere to the international Communist line, whether in the United Nations, the Middle East, or Vietnam. 2. "IBM Communist trade witl help demonstrate the superiority of capitalism to the Communists." Obviously the Communists reatize that IBM products are superior, or they wouldn't buy them. The best way to make the Communists realize the inefficiency of their system is to have them suffer the consequences of that system, not to make up its deficiencies. The Wisconsin, Washington, D.C., Massachusetts, and Missouri state YAF organizations joined the STOP-IBM campaign in February. The STOP-IBM campaign has become a major national YAF project. Is your state organization or chapter doing its part? AID TO COMMUNIST COUNTRIES "The Soviet Union is experiencing great difficulty in the field of automatic data processing. This situation exists despite the fact that it is welt publicized that the Soviet Union is second rank in the world in production of computers. Why is this so? An explanation is given by M. Glushkov, Head of Cybernetics of the Economy of Science, USSR: Of special concern are the tow retiability of computers and aocitaey devices and the sub-standard quality of magnetic tapes.. the best computers made in the Soviet Union operate only a less hundred hours between failures, white ancillary devices break down practically daily, and the inlormation stored on tape cannot be stored without some toss for more than a month. Magnetic tapes are not interchangeable, e.g., the mass of information recorded on tape forone cornputerc0000t be used by another unit. He also says that foreign made computers offer an important advantage to the USSR in that they come equipped with programming much superior to that available to users of Soviet computers. In recmt years, millions of dollars of Western computers have flowed to the Soviet Union and East European states. Because many of these computers are exported from the United Kingdom and France it often goes unnoticed how much these computers incorporate component parts constructed in the United States. For instance, a $915,000 British computer installed at Bratistava, Czechoslovakia recently required some $96,000 worth of American parts for continued operation. This computer, interestingly enough, was purchsed by the Czechs to optimize production in a petroleum refinery which it appears processes Rumanian and Soviet crude oil." - Rep. Glenard P. Lipscomb, March 8, 1967 "The heart of research here is the computer. Here the Russians admit they're behind the United States by 5, even 10 years. But Soviet scientists have come a long way from the days when Stalin decreed that computers were a wicked, capitalist invention. Without the computer, there would be no Soviet space program. - Frank McGee on NBC, January 7, 1968 Reprinted, with changes, from THE NEW GUARD, April 1968 The Case Against East-West Trade power, rather than a victory policy in theory and practice, it iu not surprising to see greater Communist - V. I, Lenin trade advocated by the adminintration, - - True, there in a war going on. Yet our determination and our mobilization of resources for winning that war are questionable. Since the administration seems to view Communist. initiatives as unrelated and uncoordinated, it is not illogical, given this absurd assumption, to follow both a policy of military stalemate in Southeast Auia and economic assistance for the Soviet Union and Eastern European Communist nations, A Detente With Communism? In other words, as Dr, Richard Allen of Stanford University has pointed out, given the assumptions of a detente with Communism, the pursuit of Communist trade is a logical corollary. Given that a detente does not exist (examples: Southeast Asia and the Vietnam conflict, the Middle East and the Soviet role in the Arab- Israeli conflict, Latin America and Cuban subversion), it follows that East-West trade is folly. The arguments against Communist trade do not hinge on the Vietnam conflict, Although it is foolish to supply nations which provide moral and material support to an enemy in wartime, if the Vietnam conflict "The capitalist countries of Western Europe and America will grant us credits, which will fill the cof- fers of the Communist organizations in their coun- tries while they enlarge and improve our armaments industry by supplying all kinds of wares, which we shall heed for future and successful attacks against our suppliers." Ti-rn issue of East-West trade, or, more bluntly, trading with the Communists, is a simple and yet challenging one for Americans. It is simple because the questionn involved and the overriding considerations of policy lead to the conclusion that such trade is not in the best interests of the United States. The insue is complex for several reasons: The arguments for Communist trade are stated in emotional terms. Proponents of such trade are said to be for peace. Opponents are said to be militating for war, The proponents are in power, and Congressional opponents must watch the administration closely. The Commerce Department continues to authorize shipments of strategic materials, and Congressman Glenard Lipacomb of California spoke for many when he questioned the way in which the Export Control Act is administered, The issue is further complicated in that it is related to other administration programs. When war policy in Vietnam continues to stress limited use of American PAGENO="0478" U.S. DEPARTMENT OF COMMERCE BUREAU OF INTERNATIONAL COMMERCE OFFICE OF EXPORT CONTROL Washingtofl, D.C., April 28, 1967 MEMORANDUM To: All OEC Personnel From: Rauer H. Meyer Subject: Licensing of scientific laboratory equipment to Eastern Europe The President's Scientific Advisor, Dr. Horning, is concerned over reported delays in our licensing of research instruments for scientific laboratories in Eastern Europe. He is especially desirous of expanding personal contacts between scientists in the United States and those in Eastern Europe, and he believes that expeditious handling of export license applications for scientific instruments to Eastern Europe will assist materially in attaining this objective. 4918 ended tomorrow, the "timeless" arguments against Communist trade remain. The general arguments recognize, first, that the goal of communism is inherently imperialistic, whether piecemeal - country-by-country, or, over the long- term, the entire world. Second, the success of that goal is a function of power of various sorts - all related to each other. Thus a Soviet Union having internal problems, political or economic, is less likely to engage in international subversion than a Soviet Union internally secure. Similarly, the Soviet military capability, as well as that of its Communist allies, obviously depends, first, on total economic resources available and, second, on allocation of those resources to the military sector. While the question of total economic resources is important, the allocation of resources within the Soviet economy is of more immediate concern. If we roughly divide the Soviet economy into two types of spending, production of consumer-oriented goods and production of goods for the military sector, it follows that given fixed resources, increased allocation for either type of spending results in decreased allocation for the other. Put another way, if the Soviet economy is increasing its total output and total resources available for allocation, it must increase allocation to both consumer and military spending, in order to maintain the same percentage allocation of each. Thus, if the Soviet Union were allocating half its resources to each type of spending, and experienced a $50 billion increase in output, it would devote $25 billion of the increased output to each type of spending to maintain the same ratio of 50 percent consumer/military spending. But, after fifty years of starving the consumer sector in favor of the industrial and military sectors in the Soviet Union, the pressure is slowly mounting for a greater emphasis on goods for the people. It should be pointed out that analagous situations exist in the other Communist nations in Eastern Europe. Guns Vs. Butter Communist nations have been pursuing heavy investment spending and arms spending at the cost of a higher standard of living for the people. The West should take advantage of this allocation problem. The West should not help the Communist extricate themselves. We should not readily bail Communists out of situations caused by their own mismanagement. Why should the Communists allocate more resources to wheat production, if the West stands ready to sell the Communists wheat - at bargain rates? If Communist trade is to be used at all, it should be conditional. Thus, the Communists should accept certain conditions as prerequisites to such trade, such as pressuring the North Vietnamese to dc-escalate, or tearing down the Berlin Wall, or whatever goal is deemed both desirable and practical by qualified American Cold War strategists. Serious humanitarians should oppose Communist trade because it often permits the Communists to continue diverting resources from peaceful uses and consumer goods for the people to military hardware. What incentive does the Soviet Union have to invest in resources to secure higher wheat production, when it can always count on the West? To oppose Communist trade now is not to oppose it forever. But under present conditions, even trade does not appear desirable. If this country were to consider economic warfare, as well as diplomatic and military initiatives, then, given an enlightened national leadership in the U.S., Communist trade might be used as a weapon to extract concessions from the other side. At present, the best form of economic warfare appears to be not trading with the Communists at all. Trading with the Communists means increasing their capability to wage war. This may be in the form of strategic trading, such as the Fiat auto plant deal (automotive products are supplied by the Soviet Union to Hanoi). This may be in the form of providing goods to the Communists at costs lower than such production would have cost them. We may aid Communists in diverting resourcesto military uses. Free Trade Argument Discounted It is argued that American corporations can profit from Communist trade and that our balance of payments problem will be helped. Helping those American corporations with the political connections and size to engage in Communist trade is not so desirable as to take precedence over national security. Our balance of payments problem is due to many causes, If you are interested in learning more about the issue of Communist trade, you should consider the book, Trading With the Communists, by Samuel F. Clabaugh and Edwin J. Feulner, Jr. This 254 page survey of the topic features an 85 page annotated bibliography of suggested reading. To order a copy send two dollars to: The Center for Strategic Studies, Georgetown University, Washington, D.C. PAGENO="0479" not the least of which are administration taxing `tnd spending policies in the United States. Hence the balance of payments problem argument is hardly relevant, for its primary causes and remedies lie elsewhere. It is argued that this nation should be for free trade. Libertarians argue that this is desirable in itself. Yet free trade, like any other freedom, assumes certain prerequisites. Just as freedom assumes order, and the exercise of certain specific freedoms have other prerequisites, so should free trade have the one qualification of national security. Those who oppose Communist trade do not do so on the basis of supporting tariffs, price controls, or other restraints. The opposition is based on reasons of national security, which seems a fair qualification to free trade. If the free trade advocates who condone Communist trade would study the record of that trade, including the wheat deals, they would note that the trade is not "free" at all, but government encouraged and supported, Thanks to Rep. Paul Fino, Republican of New York, Congress has approved revised Export-Import Bank legislation that would prevent the bank from subsidizing trade transactions with Communist countries. In 1967 the Export-Import Bank granted dollar credits to Communist nations (including Hungary and Czechoslovakia) which furnished industrial equipment to North Vietnam. The Fino amendments, which passed despite administration opposition, would prohibit the bank from participating in trade transactions with any nation whose government by "direct. . .action" is furnishing supplies to a country openly warring against the United States. through grants, credits and loans. Hence we are not speaking of laissez-faire trade at all, but government financed trade. "Nothing Is Strategic" Edwin J. Feulner, Jr., who co-authored with Samuel F. Clabaugh Trading with the Communists (Georgetown U.), argues that in the Cold War "nothing is strategic." Inevitably, the question is one of diverting resources. Mr. Feulner, who has devoted a great deal of time to studying the issues of Communist trade, has noted that Communists are interested in "leap-frogging" our technology and in getting "our most advanced products." In other words, the Communists embark on trade programs in areas in which they find themselves deficient. They take advantage of the huge sums spent in this nation on private investment and research and development, and the fantastic amounts of man-hours spent developing and perfecting products and techniques. They then reap the rewards of our huge spending and our many man-hours spent by well- planned trade coups. If the Soviet Union is the key to peace in Vietnam, as 4919 It is evident to me from the nature of many U.S. exports, for which licenses are granted by the Office of Export Control of the Department of Commerce, that their clearance for shipment to the USSR or East Euro- pean countries contradicts the intent of Congress as expressed in the Export Control Act. When one looks into these transactions, as I regularly do, the Depart- ment often dismisses these approvals with the pat state- ments such as that they are "consistent with the Presi- dent's desire to `build bridges' to Eastern Europe by encouraging trade - - " and ". - - comparable goods are available from foreign sources." If that is the case one certainly wonders why the orders are not placed elsewhere. According to responsible wit- nesses who have testified before Congress it is because the U.S. supplier often offers superior quality, earlier delivery, better prices, greater durability, and better service. Last year when Secretary of Agriculture Freeman re- turned from a visit to South Vietnam he reported "There is a strong demand for fertilizer chemicals and improved seeds. Fertilizer is as important as bullets." I certainly agree with that assessment. But why was this not recog- nized when the USSR came to us to buy fertilizer tech- nology and equipment? Because the bloc economies depend heavily on export of cereals and grains to acquire hard currencies with which to purchase Western machinery, it was imperative from their point of view that the bloc economy increase the yield per acre far above the levels realized from the disasterous short crops of 1963. If you suspect that they turned to the U.S. for help you are absolutely right. In 1964, the Commerce Department issued licenses authorizing shipment to Russia of $9.5 million worth of highly automated machinery to mine potash for use in manufacturing fertilizer. Many other licenses have been issued since that time directly relating to increasing crop yields, including fumigants, herbicides, and insecticides. Moreover, a wealth of technical data relating to construction, operation of plants to produce fertilizers have been released. In light of these contributions to the Soviet economy, it is not at all surprising that the 1966 crop yield was a bountiful 170 million tons. In fact, a news report in December, 1966, when the record yield was revealed, states that this reflects ` a heavy emphasis on the use of chemical fertilizers begun in the early 1960's under former Soviet Premier Nikita S. Khrushchev." Incidentally, analysis of Soviet and bloc aid to North Vietnam underscores the fact that a. great quantity of the shipments made to Hanoi include fertilizers, which sus- tain the war effort. -Rep. Glenard P. Lipscomb, March 8, 1967 PAGENO="0480" 4920 some suggest, said Fuelner, then the United States should not expand trade with the Soviet Union, but curtail trade and thereby exert pressure. In responding to the argument that if we don't sell given items to the Communists, other nations will, Feulner pointed out that this argument overlooks the policy considerations of Communist trade: Is it desirable? Is it in the interests of United States national security? Those who use the "other nations will trade with them" argument do not deal with the issues involved. In addition, they fail to see that if Communist trade is undesirable and not in the best interests of the United States and/or the West, we should attempt to convince other nations to cease such trade. We should hardly trade ourselves. In the case of trade affecting the Vietnam war and going through Haiphong Harbor, a blockade in time of war is appropriate. Dr. Richard Allen of Stanford University has categorized the Communist objective as "trade to end trade." In other words, the Communists place their own goals of imperialism and domination first, and trade as a means of reaching these goals. Communists, according to Dr. Allen, are interested in picking-off countries bilaterally. Dr. Allen was critical of the argument by Communist trade advocates that we could cause the Communists to rely on trade, and then threaten to stop trading with them. Not only is the argument open to question, but we would be building the Communists up in the meantime. Communist trade advocatç~ in the past have, shown no inclination to use trade as a weapon, and there is no reason to believe they will use trade as a weapon in the future. Current Communist trade seems to be done on terms entirely satisfactory to the other side. It is difficult to imagine Dean Rusk or Wayne Morse or William Fulbright using trade as a weapon against the Communists. A Moral Question The question of trading with the Communists during the Vietnam war has caused many Americans to ponder the effect on American fighting forces and morale. This subject opens a whole Pandora's box of Communist trade implications. What is the effect of such trade on anti-Communist exile groups? On anti-Communist defectors? On anti-Communist resistance groups, within Communist nations, and outside of Communist nations? What is the effect on people within the Captive Nations who may someday hope to reclaim their destiny?. Recently the talk of "building-bridges" has lessened. But the day-to-day granting of licenses for exports of goods to Communist nations continues at the Department of Commerce. Although the adminstration realizes the opposition of the electorate to continued Communist trade, the policy is a firm one within the Departments of State and Commerce. The question of Communist trade must consider all the issues raised on these pages, as well as the underlying assumptions of the administration relative to a detente and a "thawing" (a favorite term) of the Cold War. But in the end, there are serious moral issues involved. These moral issues include our obligation to those behind the Iron Curtain, to provide some incentive for their governments to give these people a higher standard of living. We owe something to those who resist communism inside and outside the Captive Nations. If this nation's leadership refuses to support our soldiers in Vietnam with complete military support and a call for victory, the least the administration can do is provide some moral support for those called upon to give the ultimate sacrifice for their nation. Such moral support would preclude trading with the nations which supply funds, armaments, and supplies to North Vietnam. Of course, the settlement of these moral issues involves acceptance of an assumption unpleasant to Communist trade advocates. That assumption is that the people in a Communist country are not the same as the government in that Communist country. If our current planners accepted this assumption, they would necessarily have to accept its corollary: that one must differentiate between aiding a Communist government of a nation and aiding the people of a nation. Thus, we may morally feel disposed to aid the people of a Communist nation, but Communist trade aids the Communist governments and not the people. Communist trade helps keep unjust Communist governments in power, and it spares these governments the option of allocating more resources toward improving the standard of living of these people. Communist trade may well have anti-humanitarian effects. Rep. H. R. Gross, Republican of Iowa, and Rep. Paul Findley, Republican of Illinois, proposed amendments to~ the foreign aid bill last year. The Gross amendment would have banned U.S. aid to nations trading with North Vietnam and prohibited U.S. purchases or sales of defense equipment with such nations. The Findley amendment would have suspended "most-favored-nation". (i.e., low tariff) privileges for Poland - because Polish officials have been boasting of the weapons that they are sending to North Vietnam. The Gross-Findley amendments lost on a 200-196 rollcall vote on November 8, 1967. Human Events printed. the rollcall on the amendments in its Nov. 25,1967 issue. Many Congressmen who voted against the amendments were upset at the newspaper's disclosure. The reason such Congressmen asRobert Taft of Ohio, Clement Zablocki of Wisconsin, Bradford Morse of Mass. and others were upset is understandable. Their constituents, like the American people as a whole, oppose Communist trade. Such Congressmen - like the administration, should be held accountable for their actions. PAGENO="0481" 4921 STATEMENT BY ALAN MACKAY, NATIONAL CHAIRMAN OF YAF TO IBM STOCKHOLDERS MEETING, BOSTON, MASS., APRIL 29, 1968 Mr. Chairman, my name is Alan MacKay. I am National Chairman of Young Americans for Freedom. We are stockholders in IBM. For some time, we have been conducting an educational campaign raising questions about IBM's policy of trading with Communist countries. It seems to me especially appropriate that this question should be considered here, as the management and stockholders of this company come together. The question of East-West trade is not an everyday matter of business policy, but one with vast political significance, and is consequently one in which all the stockholders should be interested. Indeed, when the company involved is IBM, an institution in the business world, and globally recognized as a symbol of American enterprise, the general public has an interest in the decision made by IB1~f's management. It is precisely because IBM possesses such stature and in- fluence that we chose it for the focus of our campaign. Let me briefly outline the arguments against trade with the Communist bloc. The most sweeping argument would call for the cessation of all trade, on the ground that, by trading with the Communist nations, we save them from their own economic failures, thus perpetuating regimes that are repressive and form part~ of a system which, taken as a whole, poses the greatest threat to human freedom in our time. But it is not necessary to go so far to be skeptical about East-West trade. At a time when our country is at war, North Viet Nam is receiving economic aid from countries with whom IBM is trading. Surely when we are fighting a Com- munist enemy in Southeast Asia, serious questions can be raised about trading with Communist countries that are aiding our enemy. Since Young Americans for Freedom began its campaign, we have met several times with representatives of IBM management, and have received some very helpful clarifying information. I think it would be useful for all IBM stock- holders to have their company's policies in this area clearly defined and ex- plained. For example, the Government advocates bridge-building to the Commu- nist world, not excepting the Soviet Union. We know that IBM has not traded with Russia; and I expect that if it were communicated to your stockholders that IBM has a policy against trading with Russia, they would be glad to hear it. I think, too, that the stockholders should be made aware of any limitations imposed by the company on trade which are more rigorous than those imposed by the Government. I think, in short, that this company, which has such excellent stockholder relations, should make a special effort in this area. Its significance is obvious; we have received tens of thousands of communications since our campaign be- gan, and we know that IBM has received a great many inquiries on the subject. I am certain this policy has been carefully reviewed by IBM's Board of Di- rectors. I would ask that the Board reevaluate that decision with great care, that it consider seriously the argumouts for ceasing all trade with the Communist world; that it very seriously weigh the possibility of a moratorium, at least, on trade with the East for the duration of the war in Viet Nam; and, that, having deliberated and formulated its policy, it communicate that policy and the rea- sons for it to all IBM stockholders. Thank you. In summary Mr. Chairman, the building of bridges to Eastern Europe and/or the Soviet Union is particularly distributing at a time when we are so deeply engaged in a war against a Communist aggressor in Southeast Asia. The Soviets boast that eighty-five percent of North Vietnam's war materials are supplied by the U.S.S.R. and its Eastern European satellites. Practically every day, we hear of new equipment being used in the war against Southeast Asia which is being furnished by Communist nations. Trading with these countries and thereby bolstering their industrial and military capabilities while at the same time their military equipment is killing American fighting men in Vietnam is u-hat we call the Hypocrisy of `68. It is almost unbelievable to us that our Admini- stration, at this time, would want to trade with these Communist nations. Only when the war in Vietnam, and all other wars against the Free World which are instigated and carried out by the Communists, have passed should we even consider the enhancement of trade in non-strategic goods, even as we have outlined non-strategic goods. 95-l59---88---pt. 1O-31 PAGENO="0482" 4922 We feel that the building of bridges can be a dangeous policy if not carefully employed by our policy makers. Any building of bridges must be for the benefit of the United States and the Free World. Our specific remarks have addressed themselves to what constitutes strategic goods, the best interests of the United States, and an effective trade policy. We urge the members of this distinguished Committee to carefully evaluate our recommendations and to enact whatever statutory amendments are needed to embody them in the laws of our Nation. Mr. HERLONG. We are very happy to have with us this morning our distmgmshed colleague from South Carolina, the chairman of the House Committee on Armed Services, whom we know so well and favorably. Thank you so much, Mr. Rivers, for being here. We will be interested to hear you. STATEMENT OP HON. L. MENDEL RIVERS, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP SOUTH CAROLINA Mr. RIvERs. Thank you very much, Mr. Chairman. I want to thank this distinguished committee for permitting me to speak out of order on the textile problem. We have got to find some way to save what is left of the textile industry. In South Carolina our profit is 33 percent below what it was in 1966. It can't continue to go downhill. Just yesterday or the day before we saw in the public press where our balance of payments had a deficit of $25 or $30 billion. Something is happening to our ex- ports. Our imports are far exceeding our exports and if you keep on dwindling away drop by drop,sand by sand, rock by rock, our economic structures, that will be the end, and I don't see many important gains having been attained by the so-called Kennedy round at Geneva, and that is another subject. Back to the textile industry, Mr. Chairman, it is even more im- portant basically than its employees and its wages because it is an industry that reaches into every home in the Nation, to every farm, and to every business. No matter what work you do or where you live you will come in contact with dozens, perhaps hundreds of textile items every day you live. Thousands of cotton farmers and ranchers from California across to the East depend on this industry as a major customer. Woodpulp from the American forests is manufactured into rayon and other syn- thetics. Chemicals from New York, wool from Wyoming, cotton from California, wood and pulp from Georgia-all of these go into the gigantic market of the textile industry and all of these products, plus many others, depend on textiles. In short, Mr. Chairman, this is an industry that is embedded in the heart of America, that is important to the economic health of this Na- tion, and it is vital to our economy. All of us know that textiles are second only to steel in essentiality to the military, and this is where I come in. Today we are calling upon textile manufacturers to supply our troops all over the world. Just some time ago here we had a shortage of a certain kind of poplin, four thread I think, and there wasn't any. The Defense Department was permitted under another Secretary to lrocure certain textiles. We had none and we needed some cotton un- derwear and other wearables for the Far East. PAGENO="0483" 4923 One of our giant textile manufacturers offered to build a mill spe- cially to furnish our troops in the Far East. This is a patriotic indus- try and it shouldn't be permitted to go down the drain because of the incompetence, the inability, and the indifference of any administration. I don't care who it is. But I am concerned about the effect of textile im- ports on the industry's capacity to meet all other military, and medical, and substantial civilian requirements in an all-out emergency. For example, since world textile imports now account for about one- fourth of our domestic consumption and are even higher in certain product lines, would the industry have the capacity to meet our demand for woolen and worsted products if the war in Vietnam were fought in a colder climate, for instance, such as Korea? But textiles are in trouble. We are flooded with imports of all types, and in 1961 when our Government determined that imports must be controlled cotton product imports were 720 million square yards. Today they are running-listen to this-over 3 billion square yards. One textile manufacturer the other day showed me a towel he had made and in a week or 10 days or a month this same towel, the same print, the same thing, came out of Hong Kong, a little smaller, smaller dimen- sions, undersold him, undercut him, the identical pattern he had, the same color, the same everything, and flooding this market, and the same thing applies to Japan. Gentlemen, this is serious. This is serious. Out in California the other day a fellow who alleged to be an economist-he said it, he was an economist. I don't know what he was-while I was out at the Tjniver- sity of Southern California in Mr. TJtt's country said, "Our concept of a worldwide economy and my concept of world government is let each nation do what it is best fitted to do." I said, "What would you assign to America?" He said, "The best thing it can do." I said, "What can it do better than anybody else, in your opinion?" We are getting the Sony radio from Japan, and people get used to these things. Japan can lead the world almost in electronics. Germany can do something. I said, "Wimen are you going to get to America?" He said, "We will find something for Americans to do." I said, "When she is gone." I said, "Take the shipbuilding indus- try." My committee, right now, is trying to save a sick maritime in- dustry because people are not watching them, grain by grain, drip by drip, element by element, and it is all falling off. And you see what has happened to our currency balances. Now, I am going to support any legislation, Mr. Chairman, de- signed to help this industry, the Mills bill, and I am going to ask permission to put the rest of my statement in the record. The Mills bill is different from the bill that came over from the Senate. Once the President decides what he is going to do at a given period on the imports, the Mills bill, which I am for and I introduced a companion bill, puts the higher year of the textile industry and assigns that period. It can't be below that. This is a good way to do it, and you have to protect this industry. I know the gentleman from Florida knows all about textiles. He knows all about cotton, and the gentleman from California, in Imperial Valley one of your friends, a mutual friend, PAGENO="0484" 4924 is getting between six and seven bales of cotton to the acre and our gigantic industry is requiring this for the American consumption and for this Nation. With the currency balances abroad, not with indifference can we send somebody over to Geneva to peddle this industry away, and he knows about as much about it as flying upside down on a wheelbarrow. This is the crowd representing us and this is the crowd plundering the American industry. This is why I am here, for which I make no apology, and I ask you in your wisdom, and you have it-you have demonstrated your great concern for what makes the American way of life operate-please, for God's sake, find some way to get these people home. Just here the other day I found one of these experimenters down here in the Defense Department telling the textile industry whom they could hire to run the industry, what they could do, the organic makeup and telling them about an imbalance of a certain minority group they had to hire. They brought a certificate, an agreement of compliance, and you agreed that you would put even in your supervisory personnel certain people whether or not you liked them, and if you didn't do it you agreed to set up a school to train them. Everybody is taking that attitude in textile after textile. I don't see how it is going to survive unless somebody is going to try to save it. I am not going to take any more time, Mr. Chairman. When I start talking textiles I never know when to stop because I know something about them. I know where they are domiciled. I know what they have done for New England. I do know what they have done for the textile east. I know what they have done for the American people. I have nothing else to say, Mr. Chairman. I am very grateful for this opportunity at the last moment to testify. You are very kind and I know you will do what is right. Mr. HIIRLONG. Thank you very much, Mr. Rivers, for your forthright statement. Your entire statement without objection will appear in the record. (The statement referred to follows:) STATEMENT OF Hox. L. MENDEL RIVERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA Mr. Chairman, I appreciate your giving me the opportunity to discuss the tex- tile import situation and its effect on our domestic industry. I shall make a few brief comments and ask that my statement be included in the record. By any conceivable yardstick, the textile industry is one of the great industries of this country, and this importance has already been defined by other witnesses. However, I do want to remind members of the Committee that this great industry is much larger, actually, than the approximately one million people it employs, and the millions of dollars it pays out each year in wages. The importance of this industry Is even more basic than its employees and its wages, because it is an industry that reaches into every home in this nation, into every farm, Into every business. No matter what work you do nor where you live, you will come in contact with dozens, perhaps hundreds, of textile items each day. Thousands of cotton farms and ranches, from California across the country to the East, depend upon this industry as their major customer. Wood pulp from American forests is manufactured Into rayon and other syn- thetics. Chemicals from New York, wool from Wyoming, cotton from California, wood pulp from Georgia-all of these go into the gigantic maw of the textile industry. All of these products, plus many others, depend upon textiles. No other state in the Union has a greater stake In the future of the textile industry than does South Carolina. The textile industry employs 149,000 people PAGENO="0485" 4925 in South Carolina with an annual payroll of well over $700 million. A quarter of the nation's production of cotton, silk and synthetic fabrics comes from South Carolina. Our state produces just under one-half of all the cotton cloth in the nation on an annual basis. In short, Mr. Chairman, this is an industry that is imbedded in the heart of America. It is important to the economic health of this nation, and it is vital to our national security. All of us know that textiles are second only to steel in essentiality to the mili- tary. Today we are calling upon textile manufacturers to supply our troops all over the world. I compliment the leaders of the textile industry for the manner in which they have met military requirements. This is something for the textile industry to be proud of, because it demonstrates the fine working relationship that the industry has with military procurement. But I am concerned about the effect of textile imports on the industry's capacity to meet military, medical and substantial civilian requirements in an afl-ov~t emergency. For example, since wool textile imports now account for about one- fourth of our domestic consumption and are even higher in certain product lines, would the industry have the capacity to meet demands for woolen and worsted products if a war on the magnitude of Vietnam were fought in a colder climate, such as Korea? You have heard it said that restraints on textile imports are not necessary. The industry's profit position is frequently discussed. The fact is, Mr. Chairman, the wide gap between textile earnings and average earnings for all manu- facturing industries was narrowed somewhat by 1965. Textiles earned 3.8 cents per sales dollar versus the industrial average of 5.6 cents. Rising costs and a sluggish market widened the gap in 1967 when textiles dropped to 2.9 cents vetsus a 5.0 cent industrial average. The South Carolina industry recorded a 33 percent decline in profits from 1966 to 1967. Textiles are in trouble. We are flooded with imports of all types. The United States is t;he largest producer, importer, and consumer of textiles in the world. Except for liberal import controls on cotton textiles, the United States main- tains no impediment to textile imports other than low tariff rates which were reduced again last January 1 as a result of the GATT's Kennedy Round of tariff negotiations of 193-67. U.S. imports of cotton textiles-including yarn, fabrics, madeup goods, and apparel-doubled over the last six years despite the existence of import quota controls. Wool textile imports went up by 50 percent and man-made fiber textile imports increased from 164 to 934 million square yards, over the same period. In the first quarter of 1968, textile imports of cotton, man-made fiber, wool and blends thereof reached an all-time high annual rate of 3.1 billion square yards. The most rapid rate of increase continues to be in the man-made fiber division of the industry. Man-made fiber textile imports jumped 22 percent from the first quarter of 1967 to the first quarter of 1968. Over the past five years exports of cotton piece goods have declined from 370 million square yards in 1963 to 288 million in 1967. Exports of man-made fiber piece goods over this period show a mixed trend changing from 156 million square yards in 1963 to 154 million in 1967. The dollar value of textile manufactures and clothing imports of all fibers was $1,461 million in 1967. Exports were $695 million, and the textile trade deficit was $768 million. Five years earlier this deficit was $450 million. Gentlemen, this is serious business for our fighting men all over the world. It is serious business for our nation. In May we recorded a deficit in our balance of trade of more than $32 million. We must not permit an industry as basic to the economic strength of this nation as is the textile industry to have its future growth and vitality undermined solely because of low-wage textile imports. Imports must be controlled. 1, for one, am going to support in every way possible the efforts of the textile industry to control imports. The industry's approach to the problem of textile imports as embodied in the legislation introduced by the distinguished Chairman of this Committee, Mr. Mili~, is both reasonable and workable. This legislation seeks not to cut off all imports, but rather to simply restrain their future growth in order that the do- mestic industry may remain strong. PAGENO="0486" 4926 The industry's sense of responsibility is evidenced by the fact that it is willing to accept a large volume of textile imports and to permit their future growth as the domestic market for textiles grows. This legislation cannot be termed, "protectionist". It is designed purely and simply to fully implement the Administration's textile program. It would permit this nation to do what most other developed countries are doing, and that is, control the unlimited flow of low-wage textile imports. By, any comparison, it is generous in its treatment of foreign textile producers as compared with almost all other developed nations. The pending legislation recognizes the trends in fiber consumption within the United States and the foreign world; it recognizes the rapidly developing capa- bilities of other nations of the world to produce a growing volume of textile articles of man-made fiber as well as of cotton and of wool textile products for export to the United States and other developed markets. This legislation has as its central concept the spirit of equity and justice to both domestic and foreign interests. The United States textile industry is the most efficient in the world, with huge annual expenditures for new machinery and research. Modern textile technology is available, however, over all of the world, and hence, the United States indus- try cannot be competitive in its home market with low-wage producers overseas, unless the United States Government takes substantive action as provided in the pending legislation to regulate access to this highly competitive market by beneficiaries of the jet age local anachronism that it is perfectly proper to violate the Fair Labor Standards Act beyond the 12-mile limit. Thank you, Mr. Chairman. Mr. HERLONG. Are there any questions? `Mr. Betts would like to inquire. Mr. BETr5. Just more or less a comment. You are acquainted with the adjustment assistance section in this trade expansion bill whereby an industry or business which is hurt by imports can get financial assistance with cheap loans and tax considerations. Do you think there is any such adjustment assistance that would help an industry as big as the textile industry? Mr. RIVERS. Let me answer you this way. There are plenty of laws on the books now that can `help this industry. A law is no better than its administration. There are laws, and in the last trade act we passed, where if the `President elected to he could call a hearing and be shown where these people had been hurt and do something. We found out that these people don't administer the laws the way they are written. They administer the law the way they want to. They experiment with our economy. I want to say unequivocably I am tired of giving these people dis- cretionary authority. They have proven they are not worthy of this consideration. Mr. Burrs. In other words, the future has little to offer and this sec- tion probably won't help the textile industry one bit. Mr. RIVERS. I found this out in the military. They said, "Give us the authority to do so," and they don't do it. We have to spell it out letter by letter and, as the late John Rankin used to say, jump at them. `That is all I ask you to do, and it is the only language they understand. The Bible says you have to talk to people the way they understand. They don't understand anything. I thank you gentlemen very much. Mr. HEItr~oNa. Thank you again, Mr. Rivers. Our colleague from Maryland, the Honorable Clarence D. Long, is our next witness. Welcome, sir. PAGENO="0487" 4927 STATEMENT OP HON. CLARENCE D. LONG, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP MARYLAND Mr. LONG. Mr. Chairman and members of this committee, as a former economics professor and a longtime advocate of free trade, I am pleased to have this opportunity to submit to you a statement regarding the future direction of U.S. foreign trade policy. I am proud of U.S. leadership in the reduction of trade barriers in the years since World War II, and I hope that this country will con- tinue to work toward free trade among nations by taking the mitia- tive in joining with Canada, tihe United Kingdom, and other free world nations in the formation of a broad-based Free Trade Association. In a recent speech before a trade policy conference sponsored by the Atlantic Study Group in London, I outlined my views on the form which such a Free Trade Association should take, and described my bill, H.R. 18194, which would encourage U.S. participation in a Free Trade Association. I should like to submit the text of my speech for inclusion in the record and for the consideration of the members of this committee. (The text follows:) A BILL FOR TJ.S. PARTICIPATION IN A FREE TRADE ASSOCIATION AND ITS POLITICAL PROSPECTS (By Clarence P. Long, Member of Congress) As an economist-turned-politician, I shall not conceal from you that the finer points of my economic training have long since faded from memory. But perhaps my years in Congress-which have brought such heavy erosion in whatever I once knew about economics-have at least replaced it with some feeling for the political process. I am happy to have been invited to share with you today some of my thoughts on the feasibility of a Free Trade Association, because the ques- tion of whether we ever form such an Association is dependent, not on its economic desirability, but on its political acceptability. Let me say at the outset that I am optimistic about the outlook for free trade and for a Free Trade Area. In the years Since World War Two, United States leadership in the reduction of trade barriers-from the formation of GATT to the Kennedy Round-has given me as an American much of which to be proud and, I might say, agreeably surprised. And it has made me hopeful that the present cultural lag of about two centuries between what the economists know about the desirability of free trade and what the public will accept may not extend for more than another decade or two. In analyzing the political framework within which the Free Trade Association would be considered in the United States, I was somewhat astonished to discover that not one of the bills in the legislative hopper of this Congress addresses itself to American participation in a Free Trade Association. I have therefore attempted to fill this vacuum by introducing a bill, H.R. 18194, and I should like, first, to describe its major provisions, and then to proceed to a brief evaluation of its chances for political success. My bill, the Free Trade Association Act of 1968, sets forth, as statements of principle, that the United States should work toward free trade among nations as the goal of its foreign trade policy, and that United States participation in a Free Trade Association is the most workable method for negotiating free trade among as many nations as possible. My legislation would encourage the President to initiate negotiations for a multilateral agreement to establish a Free Trade Association. Prior to formal negotiations, the President is directed: First, to launch an intensive one-year study of the consequences for the United States of participation in a Free Trade Area, and PAGENO="0488" 4928 Second, to initiate preliminary discussions with Canada, with the United Kingdom and its partners in the European Free Trade Association, and with other individual members of GATT, or groups of trading nations, such as the Common Market, to explore their interest in establishing a broad free trade association. Great Britain and Canada may very well be the only two nations initially willing to join with the United States in free trade area negotiations. These three would form a sound nucleus: three nations with more similarities than differ- ences in heritage; speaking each other's language, more or less; enjoying high living standards, and possessing ties of friendship, trade and political background which stretch to all reaches of the globe. America's international commitments, as do those of Britain and Canada, oblige her to be outward looking and never exciuSivist. In fact, these very world-wide commitments make American participation in a Free Trade Area the more insistent. America has pledged to help the nations of the Free World achieve a better life for th~ir peoples and defend their poiftical independence. How better to strengthen our friends than through free trade on a nondiscrim- inatory basis? Thus it is not contemplated that the Free Trade Association would be an Anglo-American diub, but rather that it ~hou1d look to a far broader scope, eventually including at least the nations of Western Europe, Japan, Australia, New Zealand and the le~s developed nations such as Latin America. in the underdeveloped world, the United States has tried to win friends and influence people, in part by dispensing large sums in aid and cheap loans. The most cheerful do-gooder can scarcely claim that the results of this outpouring have lived up to exp~ctation. I am sorry to report that, as a praeti:cal political matter, we may be moving toward the end of grant-in-aid and cheap loans as the majOr instrument of for~ign development policy. Dismayed by the cost and waste of foreign aid, disillusioned with its results, puzzled by the ill will it hais evoked, and beset by mounting needs at home, the American taxpayer is becoming increasingly restive. The possibility that expansion of for~ign trade would be icss costly than aid, `and could accomiplish the far sounder purpose of encouraging poor nations to hel~p themselves, would add greatly to its sale- ability in the American political grass-roc~ts. In setting forth guidelines for the President in negotiations for the Free Trade Association, H.R. 18194 states that membership in the Free Trade Asso- ciation would be open automatically to all nations or group of nations willing to assume the obligations and adhere to the rules of membership-with the exception that less developed nations may be given preferential, non-recipro- cal tariff treatment to enable them to develop their infant industries without fear of their being smothered in their cribs by the powerful competition of the developed nations. My bill provides for this preferential treatment with grave misgivings, because I know of no conclusive evidence relating tariff levels to rates of economic growth, even for nations struggling to develop infant industries. I have inserted this provision with the clear understanding that these dis- criminatory arrangements would be temporary. The protected industrial infant has a habit of not growing up. About the only strength often developed is the political muscle to fight against giving up its crutches. I will briefly touch upon the remaining guidelines in my bill. Negotiations to remove trade barriers should initially include industrial goods, with specifically negotiated exemptions, but provide for the eventual inclusion of agricultural commodities as well. Rules of competition should be negotiated to prevent nontariff barriers-offi- cial procurement policies, border taxes, and government aids to production and exports, for example-from frustrating the benefits of a Free Trade Area. The phase-out period for tariffs and quotas would be up to 15 years, to allow time for readjustment of marginally efficient production. The governing institutions of the Association should not be vested with any supranational authority or political decisionmaking power, and substantive deci- sions are to be made by unanimous agreement. This is the Free Trade Area concept, as illustrated by my bill. Now let us look at its political prospects. At first glance these are not bright. We in Congress are currently under a heavy protectionist assault. Pending before us are more protectionist hills than we have seen in the last five or six years. Legislation has been introduced to impose quotas or other trade restric- PAGENO="0489" 4929 tions on the imports of. over 20 industries-from steel, chemicals, textiles and oil to. mink skins, strawberries and baseball gloves. These measures would cover about $7 billion of United States imports-close to half of all imports subject to duty. To this must be added the continuing pressures from already heavily protected industries-both firms and unions. The political strength of producers of such items as woolens, glassware, carpet's and rugs, petroleum and watches, is mdi- cated by the number of relatively high tariffs-some of them over 25 per cent, and a number of them over 50 per cent-that still prevail in the United States. The duty on woolen hosiery, for example, ranges as high as 50 per cent, brandy and rum is dutiable at from 50 to 64 per cent, and cigarettes at 55 per cent. The sources of this groundswell of protectionism are many and complex. They include inflation, the growing capacity of other nations to produce sophisticated products at competitive prices, balance of payments deficit.s and gold losses, and the relatively high rate of U.S. unemployment, which, though largely due to poor training or feeble urge to work, rather than lack of jobs, makes it difficult for the politician to resist the protectionist argument. Preferential tariff treatment for less developed countries of the kind provided for in my bill would not, moreover, simplify the job of those who must sell the free trade area concept in the United `States, because American infa'nt indus- tries-of whatever age-are likely to seize upon this excuse to demand prefer- ences, too. But if the political outlook for free trade has its dark `side, grounds for opti- misin can be found both in prospects for general improvement in the American oconomic balance `sheet, and in the specific advantages of a Free Trade Associa- tion for meeting the `trade needs of the future. First, the tax increase-spending cut package ju'st voted by Congress should slow the rate of inflation, `thus helping to increase American exports, improve our bal- ance of payments, and make the prospect of a flood of imports somewhat less immediate and horrifying. Secondly, despite my strictures concerning general economic literacy, I do be- lieve that it is on the rise. In the United States, for the last two generations at least, the academic economist has been able to `inject the doctrine of comparative advantage into the trusting skulls of million's of captive undergraduates in train- ing to become the nation's business and political leaders. The view that freer trade is somehow a threat to national well-being seems `destined for not too distant fade-out, at least `at the leadership level. Third, the more meaningful, workable program of Federal assistance the President requested from Congress, to help businessmen and workers adjust to new lines of activity in the face of competitive challenge from increased imports, should help deflect the demands of the quota~seekers. When Congress authorizes this program-and there is every reason to believe it will-there will be an outlet, currently denied, to relieve the frustrations of marginal or inefficient industries. If chances for blunting the protectionist attack `look good, will the Free Trade Association `concept be the beneficiary? If so, how soon can we expect the United States to launch its initiative? On this matter there are two schools of thought. The first view applauds the Free Trade Area as a bold, new approach for the future, but too ambitious a counterattack against protectionism to use now. A more moderate offensive-involving a steady, deliberate push toward further trade liberalization, together with meaningful negotiations for the elimination of nontariff barriers-but With/out ringing manifestoes for completely free trade-might be more effective and acceptable to Congressmen beset by constitu- ent pressures and concerned about the decline in America's competitive position. According to this school of thought, serious discussion of a Free Trade Asso- ciation should not come until at least another five years, after another Trade Expansion Act is passed and another round of negotiations to reduce tariff and nontariff barriers has been completed. The second school of thought favors a stronger and more immediate free trade offensive. According to this view, a shift in favor of Free Trade Area participa- tion should come within the next five years. Instead of waiting until after non- tariff barriers are reduced before a Free Trade Area is initiated, this view holds that the Free Trade Association has a good chance of acceptance because it is precisely the vehicle to bulldoze nontariff barriers. The Free Trade Association provides the best means for gathering the proliferating number of regional trade organizations into meaningful nontariff barrier negotiations with the United PAGENO="0490" 4930 States. And American business wants nontariff barriers in other nations lowered in order to equalize the effects of taxes, antitrust and minimum wage laws, and food and drug laws, to name just a few-all of which are not covered by GATT rules. I shall not predict at present which estimate is the more accurate one, but I hope that my bill will stimulate the public discussion that is needed to mobilize support for American participation in a Free Trade Association. Two other factors militate toward acceptance of the Free Trade Area concept in the United States. First, it is less easy for the protectionist opposition to pinpoint its attacks against a broadranging approach to free trade that holds out the prospect of more exports to counter the seeming disadvantages of more imports, and elicits a broad base of popular `support to counteract the determined lobbying of narrow sectors. Second, the Free Trade Area will appeal to those in the United States who view with alarm the large quantities of American capital invested abroad- and, I might also add, it will appeal, for the same reason, to those in Europe who similarly fear the invasion of American capital. American companies set up subsidiaries or buy out already existing companies in a foreign country largely to get around that country's trade barriers. The result-a growing migration of American capital and American business executives, and a rising tide of American economic influence. If tariff walls are knocked down, American companies could compete in foreign markets without having to own plants in those areas, thus providing employment and investment opportunity in the United States. Thus, while the outlook for a Free Trade Association in the immediate future is far from clear, I do not believe that, in spite of protectionist pressures, the United States will halt the march toward free trade that it began during the Roosevelt era. I do believe that the time is now for the Free Trade Area ad- vocates to go on the offensive, or at least to begin to plan the offensive. The campaign will be tough, but I think it can be won, and I am happy, as a true believer, to help carry the standard of free trade into battle. Mr. HERLONG. Thank you, Mr. Long. Are there any questions? The next witness is the Honorable M. Gene Snyder of Kentucky. Mr. Snyder, please come forward and proceed as you see fit. STATEMENT OP RON. M. GENE SNYDER, A REPRESENTATIVE `IN CONGRESS PROM THE STATE OP KENTUCKY Mr. SNYDER. Mr. Chairman and members of the committee, thank you for the opportunity of appearing here today to express on behalf of the Governor of Kentucky the views of the Commonwealth in re- gard to legislation to effectively limit the importation of foreign oil. The Governor is unable to be here because of other pressing busi- ness, and he has requested that I read his statement to the committee. The Governor's statement follows: "STATEMENT BY HON. LOUIE B. NUNN, GOVERNOR OP THE COMMONWEALTH `OP KENTUCKY "My name is Louie B. Nunn. I am Governor of the Commonwealth of Ken'tucky. I appreciate the opportunity to present, for considera- tion by the committee and the Congress, my feelings with respect for the need to effectively limit the importation of foreign oil. I am con- vinced that import limits are required if we are to maintain adequate fuel supplies for our growing economy and our Nation's security. "Without adequate liquid fuels, readily accessible, the United States could no longer deal with world problems from a position of strength. From whatever means and by whatever Government policies required, PAGENO="0491" 4931 including import controls, we must see to it that we do not lose our capability to fuel our industrial plants, our vast transportation sys- tems, and our military. "An overextension of our dependence on foreign oil could unde- niably thwart our efforts to maintain a strong position as to these basic fuel supplies. I choose to discuss this issue in terms of fuel sup- plies as opposed to oil because I am convinced that within a shorter time than any of us suspect, the liquid fuels for our 90 million family automobiles, for our public transportation system, and for our Armed Forces, will be commingled from a nuthber of so-called synthetic sources as well as from conventional petroleum liquids. "We will be fueling the economy, in the not too distant future, with supplementary supplies of liquid fuels from the great shale beds of "the Rocky Mountains and from the coalbeds of Kentucky and Appa- lachia. The technology for extraction of such fuels already is in standby. Their development awaits two things: (1) the need, plus (2) economic incentive. Both the need `and the incentive could be post- poned for years if not decades should we choose the disastrous course of purposely expanding our use `of and dependence upon foreign oil. "Should this Nation ever find its dependence on a day-by-day basis, upon the tenuous oil supply lines which stretch those thousands of miles from the Middle East and north Africa, it will be by design and by choice and by folly. It will not be by necessity. "Beyond our presently adequate, but unfortunately declining re- serves of conventional oil, the United States has combined sources of liquid fuels adequate to last hundreds of years. "The estimation for shale oil alone is 1.8 trillion barrels. The poten- tial for liquid fuels through hydrogenation of coal is virtually inesti- mable. We need not ever find ourselves short of energy, but just as a search for crude oil is made more expensive, it will take much costly research and highly sophisticated technology to bring to reality the production of synthetic fuels. "As Governor of a State where coal is our primary resource, Mr. Chairman, I am highly concerned with maintaining Government poli- cies that will not frustrate the potential of liquid fuel's extraction from coals, with immeasurable benefits to Kentucky and t'o the Nation. And, I am convinced that the piece-by-piece growth in imports which has been permitted under the present mandatory oil import program could frustrate our oil-from-coal hopes not just for a few years but for the foreseeable future. "This fear and this conclusion is based upon simple arithmetic. It happens that the Commonwealth of Kentucky has an oil-producing industry of which we are justifiably proud. Synthetic oils cannot yet compete with conventional oil production. And, our conventional oil production cannot compete with foreign oil. The oil-producing indus- try in the Commonwealth of Kentucky is not healthy, is n'ot expand- ing; in fact, it is declining. "In the past 10 years, the number of producing wells in Kentucky has declined from 17,702 to 16,000; it simply means we are abandoning more wells than we are `adding. In this same period, Kentucky's crude oil reserves have declined 32 percent. I am told that this is the dis- turbing trend for the Nation as a whole. We have found, in the United States, less oil than we have produced in 4 of the 10 years. PAGENO="0492" 4932 "As an active and interested member of the Interstate Oil Compact Commission, authorized by the Congress `as a forum for the encourage- ment and sound and proper conservation of our petroleum resources, I find that-in discussing with officials from other producing States- what is happening to the oil-producing industry in Kentucky is not the exception, but the rule. Our domestic industry is exploring less, drillmg less; and finding less and less oil and gas. Demands for oil and gas, on the other hand, continue to rise sharply. "Yet, in this situation, we find the mandatory oil import program, improvised only for the purpose of maintaining a climate conducive to finding adequate defense fuel supplies, is being systematically dis- mantled to serve all sorts of purposes which in no way serve that security purpose. "Mr. Chairman, the Commonwealth of Kentucky is but one of 33 States which produce petroleum. In the overall scheme of keep- ing our country supplied with oil, nobody would be particularly impressed with Kentucky oil production except Kentuckians. Our daily production is only about 40,000 barrels. Kentucky is the least of the small industries in the oil business. Some 800 to 1,000 individuals and small companies drill the bulk of the wells, and find and produce the bulk of the oil in Kentucky. "The small oilmen are not only making important contributions to our economy, but they make important contributions to our State government through tax payments, to the State as well as to the counties where oil is produced. In 1968, based on production taxes paid in the first quarter, the Commonwealth of Kentucky will realize approximately $210,000 from oil-production taxes; county govern- ments will collect directly $416,000 in production taxes. In addition, the industry is assessed for ad valorem taxes based on the value of oil produced in each county. "The oil-producing industry is local in character in Kentucky, Mr. Chairman. Because the industry is dominated in our State by small independent producers, they live where they work. That employs thousands of workers, and they pay taxes. For that reason, the Com- monwealth of Kentucky is striving to create a favorable climate for oil exploration and development. "Kentucky, like many other States, has hundreds of millions of bar- rels of oil that could be recovered only by water flooding and by the more costly situ system, which is a fire flooding means of coaxing additional oil from old reservoirs. Several such projects are now contemplated in the State, and many others are sure to grow if we can maintain a favorable climate including a dependable system of limitations on oil imports. "These secondary recovery projects, just as the eventual and hopeful development of oil from coal and shales, depend upon a system of rational and workable Federal policies. With surpluses of oil now existent throughout the free world, an effective oil import `program is a vital element in such policies. Without reasonable and stable limits on imports, we are, in my opinion, headed on a serious course toward an American oil famine. "We become aroused about certain `gaps' Mr. Chairman, and I say one `gap' we do not want-and one we could avoid if we are wise- is a ~uel `gap.' I am pleased that among 46 sponsors in the House of PAGENO="0493" 4933 Representatives who have sponsored or proposed identical bills to prevent further erosion in the oil import program, four are from Kentucky. And the other members of our congressional delegation are in favor of this legislation. I urge, in conclusion, that this com- mittee give serious consideration to these bills." Mr. HERLONG. Thank you, Mr. Snyder, for bringing to us Governor Nunn's statement. Our next witness is our colleague from Wyoming, the Honorable William H. Harrison. Please proceed as you see fit, sir. STATKMENT OP HON. WILLIAM H. HARRISON, A REPRESENTATIVE IN CONGRESS PROM THE STATE OF WYOMING Mr. HxnRIsoN. Mr. Chairman, in presenting my statement to this dis- tinguished committee I speak not a*s a "free trader" but rather as a "fair trader." I sincerely feel that the Johnson administration has permitted Americ&s maj or trading partners to expioit~ concessions given them in trade negotiations to turn international commerce into a foreign aid tool that has American industry with its back to the wall waiting for relief in November. In my judgment, the President's Special Representative for Trade Negotiations, William M. Roth, is either naive or tragically misin- formed if he believes, as he asserted in a press interview, that "I know of no industry that is in danger because of foreign imports." If Mr. Roth feels this way he ought to look long and hard at the livestock, steel, dairy, wool, and mink industries in Wyoming and at these and other industries across the Nation for a*n indication of the debilitating effect of foreign imports. In at least one industry, the administration has had cause to become so alarmed at possible political repercussions that the Tariff Com- mission has been ordered to begin a quiet investigation. I refer to the dairy industry where there has been a blatant disregard for import quotas on cheeses and butterfat substitutes which should, but don't come under the butterfat quotas. I'm advised that hearings will open before the Tariff Commission on July 22, but the administration has not yet made the formal announcement. I think there could be no better preface to the discussion of imports than the lead paragraph of a Wall Street Journal news article which appeared Friday, June 28. The article began: The U.S. last month sustained its second merchandise trade deficit of the year, deepening official concern over the deterioration of the nation's international trade position. The article went on to say that- Exports last month fell 5.8% from April to a seasonally adjusted $2.72 billion, while imports rose 4.2% to a record of $2.75 billion. The bulk of the import rise was in steel . . . there has also been a general rise in imports of consumer goods . . . imports are running 18% ahead of last year's $26.82 billion. The article goes on also to point out that the administration has been striving for a $500-million gain in the trade surplus this year th $4.6 billion, while officials now freely acknowledge that such a gam-part of President Johnson's program to improve the balance- of -payments deficit this year by $3 billion-is practically unobtainable. PAGENO="0494" 4934 Mr. Chairman, I ask that the Wall Street Journal editorial and the interview with Trade Representative William Roth be printed in the record of this hearing. During the past 4 weeks we have heard much of the injurious effect extensive imports of certain commodities are having on indus- tries producing like or competitive products. This is particularly true of meat, textiles, steel imports, shoes, and other commodities such as glass, milk, skins, electronic equipment, oil, and even strawberries. In some instances we are being confronted by the impact of such large quantities being made available on our domestic markets as to be in the nature of dumping. It is true that our Customs Bureau has very specific remedies against such commodities that seem to be dumped here at less than fair value. Total quotas can be imposed or countervailing duties to offset the advantages gained from low- cost exports to the United States, but this procedure is at times cum- bersome and not frequently invoked. What concerns me more is the prevalence of so many instances where an ever-increasing share of our domestic market is being superseded by foreign imports. The effect is very insidious because it is spread over several years, the theory being that no industry can justly claim being ruined by excessive imports in any one year. It is the gradual progression of imports increasing year after year that is undercutting the viability of our American industries. What is frightening is the sudden realization that imports from any one coun- try have increased enormously over a long period. A few examples, namely beef, steel, and dairy products, textiles, and miuk skins bespeak the percentage increase of imports and the rela- tive importance to our balance-of-payments deficit. LIVESTOCK IMPORTS In my 10 years of Congress I have supported probably ~ dozen or more beef import bills, and each time I have been accused of opposing free trade. I support such legislation again this year and will gladly acknowledge that I am not a free trader, but a fair trader. The policies of this administration that increased imports of boneless beef of 13 percent between 1966 and 1967 and increased red meat imports by 7 percent in the same period may amount to what the administration regards as free trade, but they certainly do not impose what American meat producers regard as fair trade. Fairness means that the industries at home have as fair a shake in trading as have foreign industries and that today is definitely not the case in the cattle or sheep industries. The administration has triggered a Johnson-county war, Texas style-the Johnson `administration against the livestock counties. Not even the most avid advocate of unchecked imports would deny that a pound of foreign beef consumed means that a pound of domestic beef will not be eaten. But under the policies of the present administra- t~on, foreign beef has been on many American tables. The average price for choice steers at Omaha is lower at $26.42 per hundredweight as of prior of this year than it was in 1962. PAGENO="0495" 4935 STEEL IMPORTS I hark back to the Wall Street Journal article to which I referred to in my opening comments that "the bulk of the import rise (last month) was in steel." In 1959 we imported 1.3 million tons of steel products, only 1.7 per- cent of our total domestic market. By 1967 imports had risen to 12 million tons or 12.7 percent of domestic consumption. Thus in only a decade we had swung from our role as a net exporter of steel to become a net importer of steel. Largely because of transportation problems, Wyoming steel plants are operating on a very thin margin which is being steadily eroded by imports. Wyoming does not mill steel but it mines and beneficiates iron. The Colorado Fuel & Iron `benefication mill near Sunrise, Wyo., has a 600,000-ton-a-year capacity and employs some 200 men. The Atlantic City project of the United States Steel Corp., in Fremont County, has a 1.5-million-ton-per-year capacity and employs between 550 and 600 steelworkers. This means a payroll for Wyoming of some $4 million annually, which to a State with only 330,000 people is a large and im- portant economic element. Iron mined in Wyoming is expensive in that it must be transported to Provo, Utah, or Pueblo, Cob., after beneficiation and then on to west coast steel markets. Japanese competitors, on the other hand, ship their steel by water, the least expensive method, thereby gaining a massive competitive edge. When this competitive `edge is added to the low wages and living conditions associated with those who create foreign pro- duction, this gives Japanese and other foreign-produced steel a dis- tinct price advantage over the American product. Projections of avail- able statistics indicate that the staggering total of 17 million tons of foreign steel may find its way to our shores, adding over $1 `billion to our international transaction deficits for 1968. DAIRY In dairy imports, we find a score of nations making end runs around our `import laws simply by renaming or altering slightly the com- position of certain items. Imports of cheese in 1967 were 152 million pounds, or 8 percent of U.S. production. Of this 152 million pounds, 60.3 million was in Colby cheese, which, for all practical purposes, is American cheese. It gets around our import laws by changing its name, which is reminiscent of the old adage: "A skunk by any other name is a poor picnic partner." The Commodity Credit Corporation purchased 180.5 million pounds of Cheddar cheese in 1967, in a price-support program whi'ch had the U.S. Government on one hand buying excess American production and at the same time allowing the substitute for that American pro- duction to enter tile country in massive quantities. Accordingly, we have been subsidizing a substitute for American production. The administration has ignored the fact that items containing butter- `fat should be included in the 707 pounds per annum quota on butterfat PAGENO="0496" 4936 by refusing to debit such imports in their proper categories; the ad- ministration has, in effect, "paid to evade." It has granted quotas in addition to the butterfat quota and permitted enormous extra quota quantities of butterfat items to enter the United States in disguise. These products substitutes contributed $75 million to our international trade deficit in 1967. Western European countries which have a surplus in exportable dairy products are subsidizing the selling price to get these stocks off their hands. They are subsidizing some products which have a domestic price of 80 cents to the tune of a 30-cent selling price. This is particularly true of France and the Netherlands. Nonfat dry milk from Western Europe countries is exported at 12 cents a pound, a price with which our domestic producers cannot begin to compete. Import laws under section 22 of the Agriculture Trade Act of 1949 are notoriously easy to circumvent, a weakness which I believe will be corrected by dairy legislation such as H.R. 4529, which I am sup- porting. TEXTILES Mr. Chairman, my State has no textile mills as such, but again we are the producer of the fine ingredients of woolen sweaters and top- coats and other items that contain some of the finest domestic wool. * Wool producers in the West are well aware that in 1957 the United States imported less than 1 billion square yards of all types of textiles at a value of under $300 million. However, by 1967, only 10 years later, we imported around 2.5 billion square yards at a value of around $900 million. This year, we will probably expend around $1 million, which will add appreciably to our balance-of-payments deficit. We have thrown wide our doors to texliles which are produced overseas at wages one-fourth of ours. In other words, we are giving employment to overseas workers at the expense of our own working- man and thereby increasing our dollar headache. Wyoming ranks second among the States in wool output with fleece regarded among the best in the Nation. Wyoming's shorn wool pro- duction for 1967 totaled 18,867,000 pounds, with an average market price of about 40 cents a pound. Continued imports will have the effect of diminishing the market for this Wyoming wool and other homegrown products and further damaging economy of Wyoming and other States which could stand a boost rather than a knock from their Federal Government. MINK Mr. Chairman, Wyoming is not one of the larger mink-producing States, but I have been advised by the National Board of Fur Farm Organizations that, of the 24 ranches we had in January of 1967, five have gone out of business in the past year because of imports. That is roughly a 20-percent deterioration in a single industry because of imports. I am also advised by the national board that in 1962 there were 7,200 ranchers on record in the United States, and as of June 1, 1968,~ there were only 3,159 remaining; fewer than half of the ranches and less than half of the industry, after 6 years of battling for imports~ PAGENO="0497" 4937 I have introduced bills which would provide some degree of relief for domestic mink ranchers from the influx of imports, particularly from the Scandinavian countries. The mink industry has been to the Tariff Commission twice seeking relief. Despite the fact that they have lost over 50 percent of their domestic market, and despite the fact over 50 percent of the ranchers have been forced out of business because of imports, no relief has been granted. Here, perhaps, is one more industry to which Mr. Roth could look before he again reports to the press that "I know of no industry that is in danger because of foreign imports." The Tariff Commission found that in 1967 the apparent domestic consumption of mink pelts was 10,200,000, with 5,300,000 imported: 51 percent of domestic consumption. It is obvious from these figures why the domestic rancher has had great difficulty just trying to stay in business and why more than half have, in fact, not been able to stay in business. To give the mink industry at least a modicum of protective cover, I introduced H.R. 10670, which provides that up to 40 percent of do- mestic consumption can be imported duty free and thereafter there must be a 50-percent ad valorem assessed. This would provide foreign mink ranchers access to the American market, but would preserve 60 percent of the American market for the American rancher. Mr. Chairman, I have tried to draw attention to just a few instances in which our domestic industries are in jeopardy by virtue of ever- growing imports. As you know, under our Trade Agreement Act of 1962 we gave the administration the power to cut tariffs by ~Q percent for reciprocal tariff concessions from our GATT (General Agreements on Tariff and Trade) partners. Tinder the tariffs that went into effect on January 1, 1968, we are now beginning to see how our major trading partners are exploiting the concessions we gave them. Already the trend shows that in most instances where we cut our tariffs our free world friends are literally swamping our markets. I say swamping because that means driving out our own production. By and large, most foreign goods are produced at labor rates far lower than ours. Our low tariffs do not provide an equalizer on a real competitive basis. Mr. Chairman, the record shows that since 1934 the United States has led the way in abolishing artificial tariff barriers and initiating lower tariff rates, all on the basis of fairness in international com- petition. We have tried not only to be free traders but fair traders as well. ~Jet, most foreign countries who are members of GATT feel free to add all imaginable types of taxes to our export goods so as to protect their domestic industries. We are appalled by the array of border taxes, turnover taxes, use taxes, subsidy payments, and other protection devices that enhance their own exports, but prove to be extremely onerous for our exports to them. Congress is being importuned from all sides for at least a variable quota based on annual consumption totals or we should institute similar border taxes as other countries are doing. We already know what the inevitable result will be. Our ostensible trading partners will invoke GATT rules against us by asking for extensive waivers not to grant tariff cuts to us, or 95-l59-68-pt. 1O-32 PAGENO="0498" 4938 they will ask for tariff penalties because a quota imposed by us will contravene the GATT charter or retaliation on an individual basis will come into effect against our most profitable exports. All in all, we can foresee that the result of imposing a variable quota on imports will be a shrinkage of our export trade. On the other hand, if foreign countries are so eager to invoke the GATT legalities, why are our own trade negotiators so slow in invok- ing the penalties prescribed in the GATT charter? I am all for re- ciprocal recessions. We have shown our good will in cutting tariffs. We do not hide extra tariffs under the guise of new taxes in all types of devious forms. My own. view is that we should give the variable import quota a testing period of at least 3 years and make our trading partners honorable trading partners. This matter is crucial to us. This is not merely a matter of offsetting payments deficits but the actual prosperity of our manufacturing industries here at home and the economic welfare of a large segment of the American laboring man. The sooner we initiate the new system the sooner will we be able to pro- tect our own industrial viability. It is not enough to be a free trader. One must also be a fair trader, and the actions of this administration as well as our trading partners do not contribute to an affirmative answer to the question: "Is your trade policy fair as well as free?" (The articles referred to follow:) [From the Wall Street Journal, June 28, 1968] UNITED STATES HAD DEFICIT OF TRADE fl~ MAY; SECOND Tuis YEAR EXPORTS FELL 5.8 PERCENT FROM APRIL AS IMPORTS, LED BY STEEl., INCREASED 4.2 PERCENT TO RECORD-OFFICIAL QUARTERS DISTURBED (By a Wall Street Journal Staff Reporter) WA5HINGTON.-Tbe U.S. last month sustained its second merchandise trade deficit of the year, deepening official concern over the deterioration of. the na- tion's international trade position. Last month's seasonally adjusted deficit was $32.2 million, the Commerce De- partment said, and followed a $248 million surplus in April. The April surplus had been especially welcome after a $157.7 million March deficit, the first in five years. Exports last month fell 5.8% from April to a seasonally adjusted $2.72 billion, while imports rose 4.2% to a record $2.75 billion. The bulk of the import rise was in steel bought as a hedge against a possible steel strike, and in autos, said William H. Chartener, Assistant Commerce Secretary for Economic Affairs. There has also been a "general rise" in imports of consumer goods, Mr. Char- tener added. Inflation and rising purchasing power here, he said, impairs the U.S. trade position by strengthening demand in the U.S. and causing U.S. products to be somewhat less competitive abroad. He said be hopes the recently passed 10% income-tax surcharge will help improve this situation. In April exports had soared 17.7% while, imports rose 1.1%. But, the depart- ment cautioned, the April increases probably reflected "above normal export and import activity" following an 11-day longshoreman's strike in New York at the end of March. Traditionally, the merchandise trade surplus has been the strongest element in the overall U.S. balance of payments, helping offset outflows for travel and mili- tary investment activities. The payments deficit, which last year totaled $.3.57 billion, occurs when foreigners acquire more dollars than they return in all trans- actions. The cumulative trade surplus of $405 million for the first five months of PAGENO="0499" 4939 1968 is significantly below the $1.92 billion cumulative surplus for the like 1967 period. The Administration has been striving for a $500 million gain in the trade sur- plus this year to $4.6 billion. But officials now freely acknowledge that such a gain-part of President Johnson's program to improve the balance-of-payments deficit this year $3 billion-is practically unattainable. Andrew F. Brimmer, a Federal Reserve Board member, earlier this week said there appears to be "no prospect" of achieving the $500 million expansion. So far this year, the Commerce Department said, the annual rate of exports is running 6% higher than last year's $30.94 billion total. But imports are running 18% ahead of last year's $26.82 billion. This indicates that the trade surplus for the first five months was at an annual rate of only $972 million. [From the Washington Post, June 23, 1968] U.S. TRADE POLICY PLANS AND FUTURE (By James Srodes, United Press International) On July 1, 52 free-world nations will cut tariffs on about $8.5-billion of United States goods as part of a three-year plan to expand world trade. One architect of that plan covering tariff concessions on $40-billion of world trade is William Matson Roth, the President's special representative for trade negotiations. A former director of the Matson Navigation Company and execu- tive of a near-dozen other enterprises, Roth guided the U.S. team that concluded the "Kennedy Round" of tariff talks which agreed to cut import duties by an average of 35 per cent. Those talks and agreements by 53 nations representing 80 per cent of all world trade are part of the General Agreements on Tariff and Trade (G-ATT), a series of conferences conducted since 1947 and aimed at promot- ing world trade. In recent months, Roth has appeared before Congressional groups to answer questions brought on by a strong protectionist drive by some segments of Ameri- can industry. In the following questions and answers, Roth outlined for UPI the IL S. trade policy, its problems and its future: Q. How important is trade with other countries to the U.S.? A. Very important; perhaps more important than statistics would indicate. Our exports in 1967 accounted for less than 4 percent of our output of goods and services but that 4 percent had a great impact on our economy. U.S. exports totaled $31.5 billion during the first three months of this year and gave our industries added markets to serve. The $26-billion of imports bring in a wider variety of products for our consumers and needed material for American businesses. Q. Does expanded trade help our partners more than it helps the United States? A. It benefits everybody concerned. Expanded trade certainly helps those na- tions like the Dutch and Great Britain who have a higher dependency on trade than we do because it increases the strength of their economy. But it helps our country too. As our partners sell more to us, the more they buy from us. And what they buy from us comes from very key parts of our economy. Agriculture is one of the top export areas in our economy and so are highly technical industries like steel, machinery, electronics and chemicals. And what they sell us is impor- tant because it gives us things we don't have and can't produce on our own- from bauxite for our aluminum to the cheaper grades of meat for our hamburger. And finally, since we have consistently sold more goods than we have bought, the resulting flow of money into the United States has helped us in our efforts to im- prove our overall balance of payments pc~sitiom Q. Couldn't we help the balance of payments problem even more by raising duties on foreign imports and bring even more money back to the United States? A. We tried that approach once. And what happened to us was one of the reasons GATT was formed after World War II. During the late 1920's and early 1930's-what we call the Smoot-Hawley high tariff era-congress log-rolled higher tariffs for one American industry after another. Our trading partners had to protect their own interest so they raised the tariffs they charged on American exports. The result was that trade fell off heavily and with this, American indus- tries suffered and unemployment increased as the foreign markets dried up. PAGENO="0500" 4940 Since the war we have seen a phenomenal growth in world trade as tariffs were reduced. In 1948 total free world exports were less than $60 billion. Q. What did the U.S. and other nations agree to at the Kennedy Round conference? A. Basically, the agreement called for our trading partners-52 of them to be exact-to match us in reductions on specific tariffs, a step at a time, over the next four years. The reductions average about 35 percent of the duties imposed but some products will have tariffs c~t in half. According to the original agreement, we took the first step this past January by reducing our tariffs by 20 percent of the agreed amount. This gave the other nations the advantage over the first six months. But since they will be taking two 20 percent cuts on July 1, we will have the advantage for the rest of the year. Then on January 1, 1969, we are supposed to even things with a 20 percent reduc- tion and then all of us will match steps in 1970 and 1971 until January 1, 1972, when we reach 10 percent of the agreed reductions. Q. What about the charges that we ware out-bargained at the Kennedy Round? A. That's just not so. We got as much as we gave and most businesses feel we did well there. There are some in the chemical industry who feel we should not abandon the American Selling Price method which assesses certain imported chemicals at their sale price here and not on their export value like other products. But I took the position throughout the negotiations that I would rather have no agreement than a lopsided one because I was looking to the future of trade legislation in this country. On one occasion I left the table pre- pared to come home without any agreement at all. Q. Have the Kennedy Round terms changed since the balance of payments crisis has developed? A. There has been an offer by some nations to take a step in January to 60 per cent and allow us to remain at 20 per cent to give us a chance to improve our payments position. This offer is conditioned, however, on our not passing any protectionist legislation raising tariffs on imports and on our removing the American Selling Price system from chemical imports. Q. How widespread is the so-called protectionist movement in Congress ~ A. At last count there were bills raising tariffs or setting import quotas on 42 per cent of our dutiable imports. Q. Don't high tariffs or import quota laws protect American jobs in industries which are threatened by foreign goods made by low-wage workers. A. There are two answers to that line of argument. First, it is a simplification to talk only about labor costs and cost gaps. We have all heard about the labor cost gap between the U.S. and Japan, and now Japan is beginning to develop a gap of its own with the other nations of southeast Asia such as Korea. There will always be areas in the U.S. where we are not as competitive. When you talk about competition, you have to talk about not only the cost of labor, but the cost of capital, technological development, the educational and research backups for an industry, the transportation costs and everything. The second point is that we have an escape clause in the GATT which allows an industry special protection if they are being injured by imports. Where an industry is being undermined by imports it not only can use the escape clause and request either tariffs or quotas, but there is also the Office of Emergency Planning available for assistance. Q. Are there any American industries now being threatened by foreign imports? A. I know of no industry that is in danger. Q. What future do you see for U.S. trade policy? A. The President has asked us to do a study on trade policy, and we are working on that now. There are groups which feel we should go into immediate negotiations to free trade entirely but it isn't that easy. As tariffs come down, other problems arise, problems of non-tariff barriers, the relationship between American investments in foreign plants, the balance of payment problems, regional trade blocs. All these will have to be dealt with before we can start thinking about truly free trade. The present danger however, is in going backwards, under political pressure. There is a concerted drive by major American industries who don't want free trade. We have often been export lazy, and I feel there is a real danger of slipping back. Mr. HERLONG. Any questions? Thank you for coming, Mr. Har- rison. PAGENO="0501" 4941 Mr. HARRISON. Thank you, Mr. Chairman. Mr. HERLONG. The next witness is the Honorable Santiago Polanco- Abreu, our distinguished Resident Commissioner from Puerto Rico. We are happy to have you with us. STATEMENT OP HON. SANTIAGO POLANCO-ABREU, RESIDENT COMMISSIONER OP PUERTO RICO Mr. POLANCO-ABREU. Mr. Chairman, members of the committee, I regret that I was unable to be here last Thursday when the oil import legislation was under consideration and I appreciate your courtesy in hearing my statement at this time. On Thursday, Sergio Camero, Administrator of Puerto Rico's Economic Development Administration-"Fomento" as it is called in Puerto Rico-explained what we feel are the extremely serious economic consequences this legislation would have for Puerto Rico. I would like to present another aspect of the Commonwealth's objec- tions to these bills. The language of these proposals runs counter to the entire concept of Puerto Rico's Commonwealth relationship with the United States. With the committee's permission and in the interests of time, I will submit, rather than read, a legal memorandum covering this point which I submitted to the Senate Finance Conimittee last year. The legislation in question was 5. 2332 but the principle applies to the oil import legislation before this committee. I think that the best way of outlining Puerto Rico's objections to this facet of the bills is to trace their legislative history. By my last count the committee had before it some 47 of these oil quota bills. All are generally similar in objective and language and sub- stantially similar to S. 2332 by Chairman Long of the Senate Finance Committee. Their effect, insofar as Puerto Rico is concerned, would be to re- ~iuce or eliminate entirely the movement of controlled petroleum prod- ucts from insular refineries to the U.S. mainland. The specific means to do this and as embodied in the S. 2332 type bill is by the addition of a new section to the national security provision o:f the Trade Ex- pansion Act of 1962. This new wording would define as "imports" the onshore move- ment of these petroleum products. In effect, these products would be classified as if they were "imports" from a foreign country. Mr. Chairman, when I first read the language of S. 2332 I was naturally concerned. I was also a little puzzled. Never in three-quar- ters of a century has Congress seriously considered erecting an arti- ficial barrier to the free flow of products between Puerto Rico and the U.S. mainland. Such a restriction would be entirely contrary to the "free trade" concept embodied in the Puerto Rico Organic Act of 1900 by which civil government was established for the island following its cession to the United States by Spain. The same free trade relationships were reenacted in the Jones Act of 1917. And these specific provisions were again reenacted in Public Law 600 of the 81st Congress which provided for the compact estab- lishing the Commonwealth of Puerto Rico. PAGENO="0502" 4942 Conversations with many Senate and House sponsors of this type of legislation made it clear to me that the language in question resulted from oversight and did not represent an intent of Congress to abcilish the free trade relationship. Corrective action was taken in the Senate. On December 15, 1967, Senators Mansfield and Metcalf, two of the original sponsors of 5. 2332, introduced amendments that would elim- inate both the political and economic threats posed by this type of leg- islation for Puerto Rico. I say both the political and economic, because in reality we are deal- ing with a dual problem. It hardly matters what words one uses if the result is to curtail the necessary flow of products from insular refineries. As Mr. Camero pointed out, the petrochemical industry, the back- bone of Puerto Rico's modern industrial effort would suffer and this would be a severe blow to our hopes of raising living standards and reducing unemployment throughout the island. I believe that the Mansfield-Metcalf amendments offer a practical solution to the S. 2332 bill problem. They would neither expand nor contract Puerto Rico's present position under the oil import program. They would permit Congress to write the 12.2 percent formula into law, which, I understand, is a major objective of S. 2332 and similar bills. But under these proposed amendments this could be accom- plished without threatening Puerto Rico's economic life. To go beyond this and revise Puerto Rico's position in the program would be to turn back the clock and impose a retroactive and sub- stantial burden on what is already a $400 million industry. As I stated earlier, I am convinced the use of the term "import" to designate the onshore movement of petroleum products from Puerto Rico was an error. It is an easy error to correct. But I hope that if the committee takes action on this type of legis- lation it will consider the broader implications of these bills. They deal in a very real sense with the well-being of nearly 3 million U.S. citizens in Puerto Rico. (The information referred to follows:) SUPPLEMENTARY STATEMENT SUBMITTED BY HON. SANTIAGO POLANCO-ABREU, RESI- DENT COMMISSIONER OF PUERTO Rico, TO THE SENATE FINANCE COMMITTEE ON IMPORT QUOTA LEGISLATIoN-OCTOBER 26, 1967 S. 2332 AND COMMONWEALTH STATUS 1. S. 2332 proposes, inter alia, to add a new section (h) (2) to the national security provisioi of the Trade Expansion Act of 1962 (19 U.S.C.A. 1862) which would define as "imports" the shipment of petroleum products from Puerto Rico to the continental United States. These "imports" from Puerto Rico would, under S. 2332 as written, be treated the same as imports into the United States from foreign countries. The proposed limitation on commerce between Puerto Rico and the continental United States would represent the first time in more than two-thirds of a century that Congress has attempted to restrict in any way the free trade relationship between Puerto Rico and the States. This free trade relationship was first embodied in the Puerto Rico Organic Act of 1900 through which a civil government was established for Puerto Rico after its cession to the United States by Spain. (31 Stat. 77 (1900), 48 U.S.C. 748) The Compact of 1952. which created the Commonwealth of Puerto Rico specifically re-enacted those pro- visions relating to the free trade relationship. (64 Stat. 319 (1959), 48 U.S.C. 731b) 2. The 1950 enabling legislation which led to the Compact of 1952 specifically recognized the principal of Puerto Rico's "government by consent" arranged "in the nature of a compact." (Ibid.) Subsequent to the Compact, Congress has PAGENO="0503" 4943 respected and preserved the bilateral relationship by providing in each case for Puerto Rican consent to the application of federal statutes which would not otherwise extend to Puerto Rico by virtue of the compact. (E.g., Narcotic Con- trol Act of 1956, 70 Stat. 567, 572 (1956), 26 U.S.C. 4774; Excise Tax Technical Changes Act of 1958, 72 Stat. 1375-76 (1958), 26 U.S.C. 5414(a) (1)) As stated at pages 12-13 of the 1966 Report of the United States-Puerto Rico Commission on the Status of Puerto Rico: "A solemn undertaking (the compact) of such profound character be- tween the federal government and a community of United States citizens is incompatible with the concept of unilateral revocation. It is inconceivable that either the United States or Puerto Rico would, by an act of unilateral revocation, undermine the very foundation of their common progress: the fundamental political and economic relationships which were established in the basis of mutuality." 3. Since the establishment of the Mandatory Oil Import Program in 1959, the Government of the Commonwealth of Puerto Rico has taken steps to insure that the island's petroleum and petrochemical development would not, by virtue of Puerto Rico's free trade relationship with the States, be used as a vehicle for frustrating or evading national policy relating to the level of oil imports into the mainland. Thus, in the case of oil import quota applications endorsed by the Commonwealth Government subsequent to 1959, the Commonwealth Gov- ernment, before approving a project, has itself arranged that each applicant limit its petroleum product shipment to the States. It has been, and remains, the policy of the Commonwealth Government that new oil import quotas granted for refineries in Puerto Rico should be granted only on the condition of fulfill- ment by the applicant of its commitments to the Commonwealth Government- including the commitments as to product shipment to the mainland. Mr. HERLONG. Thank you very much for appearing before us. We appreciate your doing so. Mr. POLANOO-ABREU. Thank you, Mr. Chairman. Mr. HERLONG. Our next witness is Hon. Odin Langen, of Minnesota. Mr. Langen, you are recognized. STATEMENT OP HON. ODIN LANGEN, A REPRESENTATIVE IN CONGRESS PROM THE STATE OF MII~NESOTA Mr. LANGEN. Mr. Chairman, I am indeed grateful for the privilege of submitting a statement relative to various tariff and trade pro- posals introduced by the administration, myself, and other Mem- bers of Congress, tying them into the general subject of the balance of trade between the United States and foreign nations. The coin- mittee is to be commended for proceeding on a broad basis that en- compasses a variety of thought, fact, and opinion. AGRICULTURAL TRADE Mr. Chairman, being aware of the scope of these hearings and the large number of statements being presented, I will forgo the tempta- tion of covering the total trade area. Instead, I will confine my re- marks to agricultural commodities and will deal mainly with such imports. In looking at the effects of agricultural imports, it is necessary to look beyond the simple relationship to exports or the narrower field of international trade. We need to look at the overall picture of our national economy, and the effects of such imports on all aspects of that economy. It is not merely foreign trade at stake here. There is the relationship of that trade to our balance of payments, the gross national product, our farm programs, and even the cost of living. At times the Federal Government works at cross purposes, with programs that contradict each other, in the field of agriculture. This PAGENO="0504" 4944 can be illustrated by comparing rising imports with the amount of money spent to stabilize agricultural commodity prices after the im- ports have depressed the markets. For the sake `of comparison, let us look at the aggregate imports of dairy products, beef, veal, lamb, eggs and egg products from 1960 through 1967. During that period of time we imported $2,810,894 worth of those `commodities with the sole justification of opening our doors to so-called free trade. The effects of such quantities of com- modity imports was, of course, price depressing for the American farmer. In an effort to hold the line on domestic prices, another de- partment of our national Government spent $3,286,806,672 in Com- modity Credit Corporation and section 32 funds in order to support the price of those very same products from 1960 through 1967. Even such a combination, costly as it was, proved completely inadequate as a means of stenmiin'g the tide that has seen American agriculture -fall still further behind the rest of the Nation's economy during those same years. It seems ironic that it took even more Federal moneys to keep the bottom from falling out entirely on domestic agricutural commodities than the dollar value of the imports. The combination of the two, with the resulting effects on the economy in general, is alarming. The $3.3 billion used to support the prices didn't serve the well-being of American agriculture, since our farmers are worse off now than before when compared to the rest of the economy, and the American taxpayer certainly didn't benefit, since he assumed the extra burden of buying these same products on the domestic scene in order to keep our whole agricultural economy from collapsing. Taking this a step further, with imports increasing and the f arm- er's income depressed, one would expect that the consumer would somehow be the beneficiary of the price-depressing imports. But the price `of food went up anyway, along with all other commodities in the Consumer Price Index. When 19~0 began, the Consumer Price Index was at 101.5. When 1967 ended, however, the Consumer Price Index was at 118.2, an increase of 16.7 points. Food prices went right along, increasing 15.9 points on the Consumer Price Index scale dur- ing the same period. The upward spiral, has continued during the first five months of 1968. The consumer, or taxpayer, not `only paid more for what he bought, but he also paid the $3.3-billion tax burden on top of it, caused by the price-depressing agricultural imports. Mr. Chairman, it also disturbs me to hear people point with such pride at the contribution `being made by American agriculture to lower the U.S. balance-of-payments deficit while at the same time supporting programs that endanger the very existence of American agriculture. I am certainly happy that our total agricultural dollar earnings were greater than our agricultural dollar expenditures so that we contributed over $3.7 billion to the plus side of the balance- of-payments ledger from 1960 through 1967. But this was done by sacrificing a fair price for the American farmer. During the same period of years, the total U.S. balance of payments experienced a deficit of over $20 billion, even with the plus help of agricultural trade. These deficits, along with the deficit-caused inflationary trends at home, merely added to the woes of U.S. farmers and rural America by devaluing the dollar, tightening the cost-price squeeze that threat- ens to make the American farmer an extinct specie. PAGENO="0505" 4945 This is fiscal folly at its worst. Even while the balance-of-payments ledger has shown deficits, there are those who have still pointed with pride that our overall merchan- dise trade for dollars has been on the plus side, with exports exceed- ing imports. But even this argument is no longer holdmg water. It was sad to learn that this Nation suffered its first merchandise trade deficit in 5 years during the month `of March. The reversal was re- peated in May. Many of us have been concerned that this would even- tually happen, and thus have warned through the years that un- controlled or unfair import policies might lead not only to such a deficit, but also to unfair hardships on American businesses. I have had various bills `before the Congress during the past 10 years relatmg to international trade and imports, and have a number of them before this committee right now. One is H.R. 17329, the fair international trade bill, `based on the idea of sharing the domestic market with imports and allowing such imports to grow as domestic consumption of the product grows, but not allowing them to take over our market at will, driving the competing domestic industry to the wall. The bill would apply to a number of industries in my native Minnesota, such as the iron ore industry, the makers `of building materials such as hardboard, and many other concerns that have experienced hardship due to the disproportionate growth of imports compared with do- mestic consumption. But I am attempting to confine these remarks to agriculture, and I also have a number of bills before this committee relative `thereto. DAIRY IMPORTS One of my specific concerns over the past number of years has been the steady rise in dairy imports, and I have made public statements to that effect from time to time, including introduction of my dairy import control bill. I recall a statement I submitted to the U.S. Tariff Commission over 4 years ago. I paid particular attention to the subject of dairy imports because many of us saw a situation developing that was not in the best interest.s of the American dairy industry or the American con- sumer. Cream imports had been increasing, and 11 was urging the tightening of section 22 provisions. It was recalled at that time that since the imposition of initial import quotas on dairy products pro- darned by the President in 1953, there were many instances where im- porters, in effect, were able to avoid import quotas on dairy products. Many of us could see the problems ahead for the U.S. `dairy industry as the result of imports and the failure to use section 22 as an effective tool in protecting our own policies. Thousands of our farmers have been forced out of business, and foreign suppliers continue to bypass our quota system by many devious methods such as repackaging, slic- ing their products into different shapes and sizes, changing butterfat content, and the like. On June 10 of this year, the day these hearings opened, the Presi- dent imposed temporary import quota~s on condensed and evaporated milk and cream and called for a Tariff Commission investigation into the need for import quotas on those products plus others such as chocolate milk crumb, butterfat-sugar mixtures in retail packages, and most types of cow's milk cheese. The reason for this belated action is clear. Our laws do not properly provide for the limitation of agri- cultural products that are hurting our own producers. This latest action PAGENO="0506" 4946 by the President follows action last year of a similar nature. It was all intended to plug t.he loopholes through which foreign producers bypass our quotas. But the evasive tactics will undoubtedly continue. MEAT, MINK, AND HONEY Our dairy industry does not stand alone in the path of threatened imports. Our cattle raisers have felt the pinch throughout much of the sixties, as European and other countries closed the doors on beef through rigid quota systems and variable import levies. In 1960 we received 512 million pounds of imported beef, according to the Ag- riculture Secretary's testimony before this committee. But in fiscal 1967 we imported over 1.2 billion pounds of beef, even though the meat import law of 1964 was enacted. Our controls still do not nearly match those imposed by other nations. The American mink industry is another example of what has hap- pened on the farm and ranch scene as imports rose to such a level as to damage a domestic market. Through the years the mink industry, like other farmers, invested its own money to create a market for its product, only to see their effort usurped by foreign suppliers who then got on the band wagon at the expense of our own farmers. Mink ranchers across the Nation lost nearly $40 million on the 1966 crops, due to the greatly reduced average prices at the auction houses. This had a great economic effect on an industry that normally has a return of some $160 million annually. There has been a sustained up- ward trend in U.S. imports of mink fur skins that began back in the late 1940s. In recent years, imports have averaged 53 percent of the U.S. consumption. The recent Tariff Commission report on the U.S. mink industry shows conclusively that rising foreign imports of mink fur skins `have seriously depressed prices in the United States, forcing our ranchers to the brink of bankruptcy, but unfortunately, the Tariff Commission all but ignored the imports in its conclusions. Similar problems exist on other agricultural commodities, includ- ing honey. Many of these problems have been brought to your atten- tion by others who have appeared before this committee. IMPORT CONTROLS, OURS AND THEIRS Mr. Chairman, the pendulum has swung entirely too far in the direc- tion that offers little or no protection for American agricultural prod- ucts while foreign nations offer `a host of protectionist devices to control our exports. We have consistently relaxed controls over com- petitive imports over the years while other nations have imposed not only tariffs but all kinds of nontariff barriers such as quotas, licensing systems, variable import fees and the like. Other countries just don't buy anything they don't need. We have never learned this simple lesson. The Secretary of Agriculture in his June 10 testimony before this committee inadvertently admitted this premise. In discussing the ac- tion to invoke section 22 last year on dairy products, he said: I use the word "evasions" because the supplying countries were sending us products, such as butter in the form of butterfat/sugar mixtures, in circum- vention of then existing controls. This butter could not have gone to other poten- tial markets, such as Japan, or the United Kingdom, or Canada; they had tight controls on imported butter. It came to the United States. PAGENO="0507" 4947 That's exactly what we are trying to say in our various import- control bills before this committee. We are saying that we, as the Sec- retary says, are striking "a blow against foreign protectionism." Yet, we are not suggesting a return to complete protectionism at home in retaliation. The essence of my legislation before this committee is to effectively fight foreign protectionism. I am really saying that trade ought to be encouraged and expanded, but not entirely at the expense of the American economy, particularly the American agricultural economy. I am not `suggesting `that the foreign producer be cut off entirely. In fact, under my proposals, he will fare fairly well, fully participating in the growth of the American market. Mr. HERLONG. Any questions? If not, then, thank you, Mr. Langen, for sharing your views with us today. Our colleague from Wisconsin, Mr. Vernon Thomson, is our next witness. Please proceed as you see fit, sir. STATEMENT OP HON. VERNON THOMSON, A REPRESENTATIVE IN CONG~RESS PROM THE STATE OP WISCONSIN Mr. THo~rsoN. Mr. Chairman and members of this distinguished committee, I appreciate very much the opportunity to present this statement in regard to the very serious problems facing our domestic agricultural economy as a result of current import and export policies. I also want to express my appreciation to the committee and to you, Mr. Chairman, for devoting your time and energy to these very diffi- cult and complex problems. Certainly all of us `who have experienced the difficulty and the corn- plexi'ty that seems mate in any import legislation recognize the facts of international economic and trade policy. None of us are, I believe, blind to the advantages of mutually beneficial trade with friendly nations `throughout the world or to the necessity for providing a truly reciprocal market in the United States for the goods and services of our world neighbors. Yet that arrangement must truly be reciprocal if the U.S. economy in general, and our `agricultural economy in particular, is going to survive and prosper. Unfortunately in recent times the reciprocity upon which many of our trade agreements have been based has become illusory. We have seen our access to large agricultural markets in Europe shrink. Even our concessional sales have dropped. For example let me qu'ote from House Report No. 1297, 90th Con- gress, as `submitted to the House on April 23, 1968, by the `Committee on Agriculture when it approved H.R. 16165, a `bill to `extend and `amend Public Law 83-480. AGRICULTURAL EXPORTS' During 1967 commercial exports dropped $468 million below 1966. (See table 3.) The committee is concerned about this decline, and the decline in governmental sponsored exports as well, which caused our total exports to drop from $6,881 billion in 1966 to $6.386 billion in 1967. (See table 3.) A `high level of agricultural exports is an `absolute necessity for the maintenance of a `strong domestic farm economy. The committee, of course, hopes that this recent decline will `be of a temporary n'ature, but feels that it is a situation which demands continuing attention by the Congress. The appropriate table which documents this statement is as follows: PAGENO="0508" 4948 ==~~ ~. ~ coc 0 = ~ co ~ >- C - C C, CC) 0 0 C)' ~ (~) o >( o - = = C,Oo ~- C) ~ CC) 0 o CC) C, = E.9~E2~ - O~ ````C, = -~ E C. ```C,,, -~ -D `C,',, 0) ~ ~ ~or- r~r-. 0)00 0)- 0-4 0)00 ~ 0) o E C,, ~ C,) ~ C) -~ C.) ,``,,,`,,,,`,,., = 0) C0 0) o ~ ::::::~:::~ ~ 0~ ::::~:::::H~ ~ 0 ~ ~ I ~ -~`::~~ .~ C ~ooo~.00 cC) 0).~ 0-4 0C)~ ~C)0b0~ ~ PAGENO="0509" 4949 Furthermore, I would like to submit, for the record of these hear- ings, a news article summarizing the general trade picture which appeared in this week's New York Journal of Commerce, entitled "Import Acceptances TJpTo Peak Level in May." (The article referred to follows:) [From the Journal of Commerce, Wednesday, June 19, 19681 IMPORT ACCEPTANCES U~ To PEAK LEVEL IN MAY (By Ed Tyng) Bankers acceptance to finance TJ.S. import trade last month rose for the fourth month in a row to an all-time record of $1,266 million, up $38 million, while bills to finance U. S. export trade declined by a further $19 million to $1,007 million, lowest of the year. The figures `suggested a further deterioration in U.S. foreign trade positions, since acceptance financing usually foreshadows future exports and imports. The acceptance figures, issued by the Federal Reserve Bank of New York yes- terday, revealed that total acceptance financing volume last month declined $70 million to a total of $4,359 miffion. STORAGE BILLS DECLINE Aside from the decline in acceptances to finance u.S. exports, a major factor in the May decline in bill volume was a drop of $49 million to $1,992 million in acceptances created to finance goods stored in or shipped between foreign coun- tries. This was the largest decline in all categories of bills. Acceptances to finance the domestic storage of readily marketable commodi- ties dropped to $39 million to an almost nominal figure of $69 million. This re- flected a runoff of bills financing cotton storage and offset an increase of a similar amount recorded last December. BANKS 5ELL BILLS The Federal Reserve monthly statistics on acceptance volume also revealed that banks which do the "accepting" of these foreign trade instruments reduced their holdings of bills in May by $154 million. This was an unusually large amount, making a total of $1,624 million, which was 7 per cent of all acceptances outstanding and which compared with bank holdings equal to 34 per cent of the total supply in May of last year and 40 per cent in April of this year. At that time when holdings were $1,778,071,000 or 40 per cent of all outstandings. Banks usually sell acceptances when faced with increased demand for loans. During the past month, the New York Fed reported, dealers in acceptances raised their yield rates on such bills by one-eighth of a percentage point to 6~ per cent bid, 6 per cent asked, which was the net result of five successive rate changes. During the current month they lowered their rates by one-eighth of 1 per cent but rescinded this reduction on June 12. Dealers since have been playing the market by ear and have made changes in relation to their portfolios of ac- ceptances, which lately have fluctuated around $200 million. Mr. THOMSON. Yes, Mr. Chairman, our agricultural exports dropped nearly a half billion dollars in 1967. This is a most disturbing fact, particularly when it is coupled with the rising volume of agricultural imports. In the July 1968 publication of the U.S. Department of Agriculture entitled "Foreign Agricultural Trade of the United States," there appears a thorough discussion of our import-export picture at the present time. This report shows, for example, that U.S. agricultural exports to a number of Communist States of Europe dropped in 1967 (Czecho- slovakia, Hungary, Rumania, and the U.S.S.R.). Yet imports from Bulgaria, Czechoslovakia, Hungary, Poland, Ru- mania, and Russia all increased. PAGENO="0510" 4950 In all, U.S. farm exports to these Communist States declined to $109 million in 1967 from $137 million the previous year. At the same time imports from these same nations increased from $49 million in 196~ to $60 million in 1967. This same report; (p. 34) gives this assessment of the overall agri- cultural trade picture for 1967: U.S. exports of agricultural products in 1967 totaled $6.4 billion, 10 percent below those of a year earlier. Agricultural imports also fell slightly to $4.5 billion. Thus `the United States had a favorable balance of exports of agricul- tural products over imports by $1.9 billion in 1967, compared with $2.4 billion in 1966. Put another way, Mr. Chairman, during 1967 our farm exports dropped about half a billion dollars, our imports stayed about the same, and the result was a further half-billion-dollar blow to our shaky balance-of-payments position. What about the most recent trends? This same report highlights the July 1967 to April 1968 period and makes these points: Total U.S. farm exports down 6 percent from the same period a year earlier. Also: Exports of animals and animal products, down 13 percent; exports of cotton, down 14 percent; exports of fruits and vegetables, down 7 percent; exports of grains, down 4 percent; exports of wheat. and flour, down 1 percent; exports of oilseeds and products, down slightly; and exports of tobacco, down 12 percent. Total exports to the European Common Market (EEC), down ~ percent. WHAT ABOUT IMPORTS? During this same July 1967 to April 1968 period, here's what's been happening to imports: Total agricultural imports, up 2 percent, with principal increases in meat, cotton, fruits, nuts, copra, sugar, tobacco, vegetables, and wines. In brief, Mr. Chairman, the overall picture at the present time is not a pretty one-with exports down and going down further, and with imports up and going up further, the American farmer is caught in a vicious economic scissors. Farmers in my district in southwestern Wisconsin are particularly hurt by using imports of the "three M's"-milk, meat, and mink. I know you have received and will receive a great deal more informa- tion on these commodities so I shall not burden you with any further statistical material. I do, however, want to leave you with these thoughts. How can American agriculture survive in an economic atmosphere of declining exports and increasing imports? What has gone wrong in practice with the theory of "recil?rOCal trade" when we see an increase in imports from the Communist States of Eastern Europe and no compara~bie trade balance (much less any political concessions) for our Nation? Isn't this the time to afford our dometsic agricultural economy some legislative relief, the only means at our disposal? Thank you. Mr. HERLONG. We appreciate your thoughts on this matter Mr. Thomson, and we thank you. PAGENO="0511" 4951 Mr. THOMSON. Thank you, Mr. Chairman. Mr. HERLONG. The next witnesses are the representatives of the Florida Fruit and Vegetable Association. I am happy to welcome them here. Our distinguished colleague, Paul Rogers, is here with them. Paul, would you like to present these gentlemen, who are all personal friends of mine and some of them former constituents. STATEMENT OP HON. PAUL G. ROGERS, A REPRESENTATIVE IN CONGRESS PROM THE STATE OP FLORIDA Mr. ROGERS. Thank you, Mr. Chairman. I won't take that honor away from you. I know you would like to say something kind about these gentlemen as I would too. I did want to appear and ask permis- sion to file a statement of more detail. We do have a very serious pr~blem, as you know, in Florida. I think this committee is well aware of it. These gentlemen have come to tell you the story. I won't preempt them in their statements. A distinguished representative, Mr. Rutledge, from the Florida Citrus Mutual, will be here also to back up their testimony. We hope this committee will give serious consideration to the prthlem we face on the importation of vegetables and fruits. We must have some relief, and of course we have great confidence in this committee and I am sure that after hearing the testimony you will be able to recommend legislation to the Congress to help bring about relief. We are very grateful to you for taking up this subject. Mr. HERLONG. Thank you, Mr. Rogers, and your detailed statement will appear following the statement of these gentlemen in the record. (Seep. 4980.) Mr. ROGERS. Thank you. Mr. HERLONG. As I understand, Mr. J. Abney Cox, past president and the chairman of the Competition and Marketing Agreements Com- mittee of the Florida Fruit & Vegetable Association, will testify first followed by Mr. Buford Council and then Mr. Peters will give us a wrap-up of the testimony. Mr. Cox, if you will identify yourself for the record and proceed we will appreciate it. STATEMENTS OP J. ABNEY COX, PAST PRESIDENT AND CHAIRMAN, COMPETITION AND MARKETING AGREEMENTS COMMITTEE, FLORIDA FRUIT & VEGETABLE ASSOCIATION; ACCOMPANIED BY BUPORD W. COUNCIL, CHAIRMAN, TOMATO COMMITTEE, AND IOHN S. PETERS, MANAGER, MEMBERSHIP AND INDUSTRY RELA- TIONS DIVISION Mr. Cox. Thank you, Mr. Chairman and members of the committee. My name is J. Abney Cox of Princeton, Fla. I am a farmer, past president of the Florida Fruit & Vegetable Association, and current chairman of the Competition and Marketing Agreements Committee of that association. PAGENO="0512" 4952 REASON FOR APPEARANCE As chairman of the association's committee I have just mentioned, I have heard an increasing number of complaints from many growers and other organizations whose producers of fruits and vegetables ~re being adversely affected by the mounting imports of these commodities from low-wage countries. The American farmers who are being hurt, pay American wages to American workers, and support our Government and our economy. Our farmers find it increasingly difficult to continue to do so in compe- tition with unregulated imports of the nature I have just described. This is evidenced by the sharp decline in Florida winter produc- tion of several crops, such as tomatoes and strawberries during the past 2 years. FLORIDA WINTER PRODUCTION OF TOMATOES AND Harvested acres Total pro- duction Tomatoes: 1965 1966 1967 Strawberries: 1965 1966 1967 21,900 19,100 17,800 3, 200 2,300 2,000 `9,273 `8,595 `8,453 2 2, 903 22,042 21,717 `1,000 40-lb. crates. 2 1,000 flats. Source: Florida Agricultural Statistics Vegetable Summary 1967. I formerly grew tomatoes, limes, and avocados as well as some other vegetables in south Florida and employed approximately 375 workers. Now I employ about 75 workers and only grow potatoes, a crop which is highly mechanized and not so vulnerable to foreign competition as are other fruit and vegetable crops which have and will continue to have higher manpower requirements for production and harvesting. SOURCE AND NATURE OF PROBLEM Some years ago the principal foreign competition threat to our fruit and vegetable industries came largely from two countries-Cuba and Mexico. Cuba was one of our most favored nations and the recipient of all the benefits of our liberal trade policies. It went Communist. Since 1955, the total U.S. fresh vegetable imports from Mexico have increased fivefold and are continuing to increase at an even more alarming rate. Imports of some of the fruits from that country which compete with our own domestic production are also not far behind in this trend. Florida, together with other traditionally winter production areas of the United States, has the capacity to supply the needs of our Nation for the fruits and vegetables on which we are now experiencing this foreign competition. We cannot, however, use this capacity since much of our capital and teclrnology is moving to these countries where wages and taxes are lower. Mexico, which is responsible for about 80 percent of this problem, is not a member of GATT (General Agreement on Tariffs and Trade), PAGENO="0513" 4953 and is not bashful about placing whatever restrictions it wants to on its imports. Unregulated foreign imports *of perishable agricultural commod.. ities in direct competition with American producers create over-supply and disorderly marketing, which benefit no one. NEED FOR LEGISLATIVE ACTION The general statement filed by Florida Fruit & Vegetable Associa- tion goes to quite some length in explaining the need for legislative action that will place quantitative regulations on such foreign imports of fruits, and vegetables in a manner that will provide for more or- derly marketing pf `both the foreign and domestic crops which are competing with each other. I will, therefore, close my statement by saying that I am very much in favor of H.R. 16416, introduced by Congressmen A. Sydney Her- long, Jr., and Paul Rogers; 11.11. 16992, an identical bill by Congress- man J. Herbert Burke; and other similar legislation which has `or may be introduced. These bills will provide access to the U.S. market for foreign- produced fresh fruit's an'd vegetables on an equitable, and orderly market-sharing basis consistent with the maintenance of a strong and expanding U.S. production, and are designed to avoid `the disruption of the domestic market and unemployment of domestic workers. Certainly, this type of `legislation would no't offend our good "trading partners," and at the same time would satisfy our American farmers who are quite `offended, to say the least, by the current course of events. Thank you, Mr. Chairman and members of the committee, for the opportunity of expressing my views at this `hearing. (Mr. Cox's prepared statement follows:) A STATEMENT ON THE VIEWS OF THE FRUIT AND VEGETABLE INDUSTRY OF FLORIDA, SUBMITTED BY FLORIDA FRUIT & VEGETABLE ASSOCIATION The purpose of this statement, prepared by the Florida Fruit & Vegetable Association, 4401 East Colonial Drive, Orlando, Florida, a trade association representing growers who prdo'uee more than a majority of the fruit and vegetables grown in the `State of Florida, is to `submit the views of th'e Florida Fruit and Vegetable Industry concerning the balance of trade between the United States and foreign nations. PREFAOE There is a great need for a new U.S. foreign trade po'liey that is reasonable, fair and dynamic. It must not be based on the selfish aspirations of any particular area or industry but, instead, must serve t'o protect the j'~bs of all American's whose source of livelihood is removed or threatened by foreign competition. For many years, the Nation has been experimenting with the strange phi- losophy of inviting progressively greater volumes of assorted alien commodities to be marketed in this country, irrespective of their effect on thi's Nation's employment situation and irrespective of Our balance-of~payments position. The free trade doetrinaires have prevailed because they have been able-through the masquetade of promise and Concession-to divide i'n~dustry against md ustry and section against section e'a'ch time that opportunity for enactment o'f sensible `trade legislation is ia the making. As a consequence, steadily increasing imports have forced domestic producers out of business, taking a steady toll of jobs all across the country, which, in turn, has stunted the growth of new manufacturing and processing businesses that otherwise would hold great potential in communities where unemployment 9a-159-o8-----pt. 1O-3'3 PAGENO="0514" 4954 now abounds. For the sake of this country's present and future economy, a sane foreign trade policy is imperative. It is hoped that this Committee will receive testimony from the representa- tives of all industries detrimentally affected by import competition. Not only agriculture but the coal, domestic petroleum, steel, machine, tool, glass, pottery and the multitude of other industries suffering under the imjYact of cheap foreign competition must unite together if the situation is to be eorr~cted. fRecent tariffs are not sufficient to protect American industry in many in- stances. The United States is the greabest nation in the world, even with all of its foreign *give~away programs. However, it is time th~t con~sideration be given to the American producer. The Florida fruit and vegetable producers cannot compete with imports from countries that have very low wage rates. Unfortunately, the producer cannot operate on a deficit budget, like the Fed- eral Government. He must pay his debts. In order to pay his debts, be must be able to sell his products at a profit. He needs your help in im~plementing an import quota or marketing sharing program that will assure him of a market for his commod;iti~s. INTRODUCTION In December 196~3, witnesses representing the Florida Fruit & Vegetable Assok~iation, Florida Vegetable Oanners Association, the University of F1orid~ atid the Florida Department of Agriculture appeared before the Tariff Corn- mission requesting that a number of fruit and vegetable commodities be re- nioved from the list of negotiable items to be considered in the So-Oalled Ken- nedy Round. Thase statements contained facts and figures of the impact that these various commodities were experiencing due to excessive imports from low- wage foreign countries. At that time, it appotred that a status quo on the present tariff structure would supply the Florida producer with adequate protection to compote with our friendly neighbors to the south. Our efforts were successful to a large degree and the tariffs were reduced on only a few of the fruit and veg~tahle ~ommodities. Since that time, production coSts have increased sharply each year and the agricultural picture has changed rapidly in some of the com- peting countries, primarily Mexico and the Caribbean. The Florida producers now find that the present tariffs are inadequate and consideration should be given to some type of import quota or market-sharing program. Current policies of the Federal Government seem to be inconsistent and therefore place the agricultural producer in an impossible position. On the one band, every attempt seems to be to force the producer to increase his production costs. This phase includes the imposition of higher wages and taxes, stricter laws and administrative policies concerning labor, the payment of more and more welfare and unemployment-which depletes the available work force- and the position taken by the Department of Labor preventing the use of off- shore or bracero workers for harvest purposes. On the other band, attempts are being made to reduce or remove present duties and tariffs, forcing the American producer to compete with foreign countries which have sub-standard levels of living as compared with the United States. In many cases, this will and has forced the American producer to select between two alternatives: He can go out of business or be can take his capital and go to a foreign country and produce his products for export to the United States. (See Appendix No. 2.) Either alternative is undesirable. If he stops producing, the United States could rapidly lose its position as the best-fed nation in the world and citizens could actually starve to death in the "land of plenty." If the American capital is used in other countries, the many people who depend on agriculture for their livelihood will be out of employment, not to mention the serious effects this would have on our balance of payments, or the fact that in due course of time, the American people's dependence on many important food items would be at the mercy of the frivolities or caprice of foreign governments. Cheap labor and relief from high taxes will lure American producers to foreign countries if imports continue to increase from countries that have sub- standard levels of living as compared to the United States. The technological advantages that prevailed in the United States in past years is quickly dimin- ishing, largely due to educational programs sponsored or supported by our own Government, not to mention the United States capital and technicians that have been sent abroad. It is the opinion of the Florida Fruit & Vegetable producer that H.R. 16416, the "Fresh Fruits and Vegetables Market-Sharing Act of 1968," will go a long way toward correcting some of the inequities of foreign competition. This PAGENO="0515" 4955 permits a market-sharing arrangement with other countries. They are allowed to export products to the United States and at the same time the American producer is assured of a share of the market for his commodity. The ultimate goal of this legislation is to assure the American producer of a chance to market his product-which increases the demand for labor-and stimulates the economy. What's wrong with this? NATURE OF FLORIDA AGRICULTURE Florida has a diversified agriculture, including the production of a wide variety of fruit and vegetable crops as well as livestock and sugar cane. In recent years, Florida has become known as "the Nation's Winter Vegetable Bowl," as well as the Nation's Citrus Center, since there are several months of each year, during which Florida is the sole domestic supplier of winter vegetables. It is important to realize that vegetable and fruit producers in Florida claim a share of the produce market in the United States solely because of Florida's geographical location. During any period or season when vegetables can be produced in abundance in areas to the north of Florida, it rapidly becomes unprofitable to produce com- mercial vegetables in Florida. Our farmers, therefore, find themselves with productive seasons based on the climatical limitations of other areas within the United States. To permit an increasing volume of foreign fruits and vegeta- bles to be imported could eliminate the only prodwitive period available to Florida producers and, in turn, cause many people to become unemployed. A large majority of them are unskilled and would experience difficulty in obtaining other employment. The production and marketing costs for our products are relatively high and the risks which include weather hazards are great. Labor is the largest single cost item involved in producing and marketing our crops. Obtaining an adequate supply of capable harvest labor and meeting competition of imports from foreign countries who have an abundance of cheap labor have rapidly become the two greatest problems facing most producers. The availa bility of cheap labor has encouraged foreign producers, primarily producers in Mexico to ship more produce into this country. In July 1966, the Foreign Agricultural Service of the United States Department of Agriculture published a "Survey of Mexican Vegetable and Melon Produc- tion," which contained statistical data concerning United States imports of win- ter vegetables from Mexico for 1963-64, 1964-65 and for the period December 1965-April 1966. This information has been updated by the Foreign Agricultural Service-Fruit and Vegetable Division-to complete the 1965-60 season and also includes the 1900-67 season. (See Appendix No. 1.) This data reflects the tonnage of beans, cucumbers, eggplant, melons, onions, peas, peppers, squash and toma- toes brought into the United States during the winter season in direct competi- tion with Florida producers. This report shows that for the period December 1963-July 1004, the United States imported 517,650,000 pounds of the above commodities. The following season, for the period December 1964-July 1965-a period in which virtually no foreign workers were authorized for the harvest of commodities grown in the United States-and a period when many millions of dollars of crops were aban- doned in the United States because of labor shortages as well as economic pres- sures-the total volume of these commodities imported from Mexico increased to 585,780,000 pounds. The data for the 1965-66 season shows imports of 668,580,000 pounds and 1966-67 climbs to 713,050,000 pounds. It is interesting to note that in only four years time the total imports of the above listed commodities have increased 195,400,000 pounds, or thirty-eight percent (38%), while total production in Florida of these same commodities has remained constant or decreased slightly. Mexican strawberry production continued its sharp upward trend in 1965-06 with output estimated at 55,000 short tons, compared with 42,000 in 1964-65. A new record has been set each year since 1958. (See Appendix No; 3.) Mexican citrus plantings are expanding at an alarming rate. (See Appendix No. 4.) Production for 1065-66 was about 25 million boxes with an increase of more than 100 percent expected within the next five years. Imports of limes have been rather constant for the last five years; however, mango production has increased rapidly since 1961. (See Appendix No. 5.) The importation of these two commodities along with avocados from the Caribbean areas presents a serious problem. PAGENO="0516" 4956 Domestic producers and shippers are subjected to high 1a~oi~ cdsts, including workman's compensation, social security, and other prevailing benefits for laborers which are costly and frequently nonexistent in foreign countries. These items have a "multiplier" effect upon high wages in the United States while for- eign countries compete for the most part free of these obligations and with frac- tional wage levels as compared to our own. It is unreasonable to impose on the domestic producer fixed and escalating labor costs created mainly by govern- mental authority without the benefit of some protection against foreign imports. The American producers and laborers are certain to be the victims of such an inconsistent policy. ECONOMIC SIGNIFICANCE OF FLORIDA AGRiCULTURE Florida's agriculture brings in market receipts of more than one billion dollars per year to agriculture producers. If you consider the total agri-business com- plex, it amounts to more than 4.5 billion dollars annually, which far surpasses tourism, the State's supposedly number one commodity. Thousands of jobs are treated by the production, processing, handling and marketing of Florida agri- cultural products, and this employment figure is multiplied by agri-business firms dealing in services and supplies. Florida's total agricultural picture includes a citrus crop which provides more than 75 percent of the total United States consumption; winter vegetable sup- plies which are vital to the Nation's health and economy; important dairy, beef cattle, poultry and egg industries; producers of field crops and nursery products; a large number of producers of tropical fruits and plants; a dynamic sugar cane industry; as well as other important agricultural industries. Efficient vegetable production in Florida depends upon a more or less con- tinuous operation during the fall, winter and spring seasons with the tropical fruit industry taking up the slack in the summer. Each season or period is an integral and vital factor in the over-all vegetable operation within the State as there is an interdependence of one season upon the other for labor, equipment, marketing specialists and efficient farm operators. If you remove or weaken one season or period in Florida by creating a situation that encourages imports of certain commodities which, in turn, limits our production, it has a direct bearing and influence on the activity and success of the preceding, as well as the succeed- ing, season, the effects being clearly reflected in employment and levels of earnings. IMPORTANCE OF TARIFF PROTECTEON TO FLORIDA CROPS Practically all of Florida's agricultural commodities currently have some tariff protection, although the tariff in most cases is not high enough to provide ade- quate protection. Tariff protection is vital to Florida producers and any further lowering of tariff rates would encourage a greater influx of foreign products which are already undermining the marketing picture at the expense of Florida producers. If further tariff reductions are forthcoming, they should be contingent upon import quotas or some other type of market-sharing program. To reduce or remove tariffs on fruit and vegetable commodities imported from Mexico and the Caribbean would certainly undermine and possibly destroy Florida's leading industry. Unlike agricultural producers in many states, Florida producers have relied very little on Federal assistance in the form of price supports. Instead, the various commodity groups have organized within each specialty field and have raised money from their own ranks to actively expand markets and promote the consumption of their products. These groups have spent large sums of money on advertising and promotional material. Continued foreign imports at present levels undoubtedly will disrupt market channels recently created as a result of these promotional activities. Several commodity groups have used State and Federal marketing agreements or orders as an effective tool in stabilizing the market. In all cases, attempts were made to satisfy the needs of the consumer as well as to assure the producer of a fair price for a quality product. The costs of these programs have been paid entirely by the private groups involved. Continued heavy influx of imports will destroy these successful programs, creating in many cases chaos which could lead to heavy unemployment and abandonment of farming operations by many producers. PAGENO="0517" 4957 We urge the Ways and Means Committee to make recommendations that will consider any future tariff changes on an item-by-item basis. It is difficult to consider perishables with non-perishables, and in many cases, you create prob- lems by lumping all perishables together. For instance, tomatoes and cucumbers are both perishable vegetables but they must be considered separately. PROTECTION IN ADDITION TO TARIFFS There is a definite need for some type of control other than the present tariff structure. The value of fresh winter vegetables and melons imported from Mexico into the United States has increased rapidly since 1960. (See Appendix No. 1.) The present tariff rates are not sufficient to protect the domestic producer. Mexican vegetables and melons produced for export to the United States come mainly from the West Coast, where they have been grown for a number of years. Principally involved are areas in the States of Sonora and Sinaloa as far south as Cullacan. Output of tomatoes, the main vegetable grown, has been gradually moving upward and, in recent years, has decidedly shifted to the stake-grown vine-ripened product. Mexican production continues to increase in other production areas with expansion in crops other than tomatoes. A sharp upward trend has taken place in acreage and production of both cantaloupes and watermelons, while cucumber production is also expected to expand in the next few years. With attempts by Yucatan to produce winter vegetables for export, a new area has been added. The potential increases in citrus, strawberries and tropical fruits have already been pointed out by Appendices Nos. 2,3,4 and 5. Even with the present tariffs, we caimot remain competitive with some of the foreign competition we are receiving today. For instance, the average prevail- ing wage for farm labor in Mexico is approximately $1.56 per day, or $9.36 per six-day week. This compares with an average national farm wage rate of $65.00 per week for July 1967, according to the Statistical Reporting Service of the Department of Agriculture, and it should be borne in mind that this American farm wage rate reflects the earnings of hired workers who work an average of only 32.4 hours. Additionally, foreign employers are not required to carry insurance or supply many more of the so-called fringe benefits that are now considered normal operating procedure in the United States. Broader means of controls must be considered if agriculture is to maintain its economic contribution to Florida. The controls needed cannot be implemented administratively since represent- atives from the Foreign Agriculture Service have informed the Florida Fruit & Vegetable Association that present legislation, such as Section 22 of the Agricultural Adjustment Act and Section 8E of the Agricultural Marketing Agreement Act, are no longer adequate to assist the farmer in many, many cases. Their phrase "no longer adequate" to assist the farmer is rather amusing. If you read the findings and recommendations under the so-called "escape clauses," you will see that they never were "adequate" to assist the farmer. The free trade advocate continually preaches that there are adequate "escape clauses" to protect the American producer from unfair competition. This is a farce. Anyone interested in seeing just how badly the American producer has been "sold down the drain" should find the following publications quite interesting reading: (1) Investigations under Section 332 of the Tariff Act of 1930 (covers 1/1/52 to 7/1/63) TO Publication 97 (2) Investigations Under Section 336 of the Tariff Act of 1930 (covers 1/1/46 to 8/1/63) TC Publication 105 (3) Investigations Under Section 22 of the Agricultural Adjustment Act (all investigations to 5/1/68) TO Publication 246 (4) Investigations Under the Escape Clause of Trade Agreements (1951 to 10/11/62) TO Publication 116 (5) Summary of Investigations Under Section 301 of the Trade Expan- sion Act of 1962. Dated Dec. 1967. Copies of the above listed publications can be obtained from Mr. Donn N. Bent, Secretary, U.S. Tariff Commission, Washington, D.C. 20436. We urge that favorable consideration be given to legislation designed to regu- late the flow-to-market of goods from foreign countries by use of import quotas, PAGENO="0518" 4958 etc. Strong consideration should be given to legislation that will provide for import quotas or market-sharing arrangements that will protect the American producer and consumer. The end result should not be designed to gouge the consumer, but should be designed to assure the American housewife of an ade- quate supply of fruits and vegetables at a reasonable price and give the American producer the right to supply these commodities during our seasons of production. H.R. 16416 "FRESH FRUITS AND VEGETABLES MARKET-SHARING ACT OF 1968" The Florida Fruit & Vegetable Association sincerely feels that H.R. 16416 introduced by Representatives Herlong and Rogers of Florida is legislation that will not only aid the agri-business of our Nation, hut will also protect the con- sumers' welfare. This legislation marks a shift away from rigid protection of domestic industry by recognizing the claim of foreign countries to a fair share of our market. The bill is designed to establish a ceiling over imports while per- mitting them to participate proportionately in the domestic consumption of any product made subject to a ceiling. The authority of the President under the Agricultural Act of 1956 to seek to obtain agreements with other countries-limiting the export from such countries and the importation into the United States of agricultural commodities-has not been exercised with respect to fresh fruits and vegetables. During the taterven- ing years, imports of certain fresh fruits and vegetables into the United States have increased to such extent as to disrupt the market for such commodities produced in the United States. This increase in imports has been caused in large part by lower costs of production in other countries, especially in the wages paid to agricultural employees, which it is the policy of the United States to main- tain at relatively much higher levels than in other countries. Because of this unfair disparity in costs of production which exists in other countries by reason of the payment of substandard wages, it is practically certain that imports of fresh fruits and vegetables will continue to increase and further destroy the market for such commodities produced in the United States. Access to the United States market for foreign produced fresh fruits and vege- tables should be established on an equitable and orderly market-sharing basis consistent with the maintenance of a strong and expanding United States pro- duction of fresh fruits and vegetables and designed to avoid the disruption of United States markets and the unemployment of United States agricultural workers. The Association is aware of the fact that in order to export we must import; however, it does not follow that we must submit our industries to highly destruc- tive imports. The United States is a better market for imports when it is in a prosperous state. A good marketing situation is not created by driving some of our major industries to stagnation by unrestricted imports that undersell our own producers. The standard of living enjoyed by citizens of the United States did not come about by accident. Our economy is geared to high wages, etc., but the chain is broken when you force the American producer to pay high wages and then bring in goods produced in low-wage countries to compete with his commodity on the open market. We have aided the foreign countries by supplying them with technology and education. The Provost for Agriculture of the Institute of Food & Agricultural Sciences at the University of Florida stated recently that at the last count there are students from 45 nations studying agriculture at the University of Florida, and most of them are sponsored or subsidized by our own Government. Many professors from the University of Florida have been sent to foreign lands, again at the expense of our Government, to teach proper methods of produetion and marketing of their commodities. This is fine if the intent is to train them so they can provide some of their own needs in terms of meeting their particular food requirements. But this is not the case. As soon as produc- tion methods are learned, they turn around and flood our markets with the commodities we taught them how to produce. We are hopeful that this Committee will be able to come forth with recom- mendations that will provide the necessary protection to our producers and to the employees whose livelihood is dependent upon industries which are vul nerable to foreign competition from low-wage countries. We feel HR. 16416 will accomplish this objective. PAGENO="0519" 4959 IMPORTS AND AMERICAN LABOR The restrictive foreign labor policy of the Department of Labor since Decem- ber 1964 has been a great stimulant to the foreign competition problem, and the resultant impact on American farm workers' opportunities as well as upon the individual farm producer. National policy concerning imports cannot be totally separated from national policy concerning the amount of agricultural labor, both domestic and foreign, that is available to our industry. According to the Statistical Reporting Service of the Department of Agricul- ture, farm employment in the United States during the week of July 23-29, 1967, was 5,975,000 as compared to 7,516,000 in July, 1904, just prior to the start of the restrictive foreign labor policy. The number of family farm workers during the last week of July of 1967 was 4,012,000 as compared to 4,969,000 in July 1964. The number of hired farm workers during the last week of July 1967 was 1,963,000 as compared to 2,547,000 in July 1964. The foregoing figures reveal that we have lost 957,000 family farm workers from the national farm labor force and 584,000 hired laborers during the three years from July 1964 to July 1967. It is noteworthy, however, that in the total picture we have lost 626.000 of these workers during the 12-month period July 1965-July 1966. Had tl~ e trend of that year prevailed during the last five years, we would have lost over 3,000,000 workers from the farm labor force instead of 1,441,000 workers who by July 1967 had disappeared from the total American farm labor force. Other official government data shows that full employment opportunities have existed for American farm workers throughout the above period. However, heavy losses of farm workers from the domestic labor force have occurred. These losses may not be easily associated with the problem of foreign competition. For example, it is a well-known fact that recent social changes and improved and more accessible training and educational programs have been responsible to some extent for the loss of farm manpower in this country. It may be questioned, therefore, whether the increase in foreign competition has had any effect at all upon the American farm worker. The answer is an emphatic "Yes" and should be readily understood. The American farmer would be able to offer much higher wages and provide a much higher standard of housing and working conditions in general for his farm employees if he did not have to face such tremendous competition from cheap labor countries. The average American farmer would like to offer wages comparable to the highest industrial wage paid in the United States if it were possible for him to do so and continue to operate his farm on a profitable basis. One of the arguments advanced by the Department of Labor in support of their restrictive attitude towards the importation of supplemental agricultural workers was that a part of the wages earned by such workers went to foreign countries and the "flight of gold" probleni was thus aggravated. However, when American production is restricted because of the farmer's inability to obtain sufficient workers to maintain his usual volume of production, many American workers in the agri-business complex are adversely affected. Furthermore, when cutbacks in American production and potential increase in production due to the increased demand are replaced by imported commodities, the American purchaser is send- ing the price of the full wholesale value to the foreign country of origin instead of a minor portion of the wages that might have been paid to produce that com- modity in the United States. Thus, if we paid 150 to a Mexican national to harvest a lug of tomatoes, perhaps one-third of this would ultimately find its way to Mexico. Now that we no longer have Mexican workers in the abundance of previous years, we are sending approximately $3.00 into Mexico for the lug of tomatoes that is being imported in competition with the American product. It is apparent that the "flight of gold" problem is seriously aggravated by the increasing flow of vegetable commodities and fruits from Mexico. We do not have a favorable balance of trade with that country. As a matter of fact, the United States' share of the commodities bought by Mexico from other countries has declined during the last ten years while Mexico's share of the United States market is increasing at an alarming rate. When Mexican imports are undermining our efforts to maintain a favorable balance of payments in international trade, the resulting inflationary effects are felt by every taxpayer in the country. When -such imports undermine the Amer- ican farmer's ability to compete with other American industries for an adequate domestic work force, and when Administration policies `do not allow the Amer- PAGENO="0520" 4960 ~can producer to obtain labor relief in the form of imported supplemental workers, it is apparent that every wage earner whose employment is wholly or partially dependent upon our agricultural output is being adversely affected. It is the sentiment of the Florida grower that as a citizen of the United States he should be entitled to full priority when it comes to domestic marketing opportunities and that he and his employees should not be subjected to the adverse effects of foreign competition when their own productivity is adequate to meet the needs of the American people. The transfer of increasing numbers of farm operations and food processing operations to nearby foreign countries is evidence that we do not have an economic climate conducive to the continued expansion of our agricultural industry even `though the population growth alone warrants and, in fact, will demand an increased production of food- stuffs in the immediate years ahead. EXPORT-IMPORT STATISTICS We have chosen not to fill the record with a lot of bulky testimony concerning the need for a change in our methods of compiling Export and Import statistics. It is a well-known fact that our balance of payments figures are very mislead- ing, since our foreign aid and other give-away programs are considered to be exports. This subject was quite adequately covered by Florida Fruit & Vegetable Association briefs and witnesses' testimony presented to the Trade Informa- tion Committee at its hearing on the Future of U.S. Foreign Trade Policy, April 23, 1968, in Washington, D.C. ADMINISTRATION OF TRADE POLICY `Thee Congress of the United States should resume greater responsibility in the administration of our trade policy. In reviewing the tariff cuts under the Ken- nedy Round of negotiations and seeing the small protection, if any, that remains for many commodities, it is imperative that American businessmen be given an opportunity to present factual information to their representatives in Congress if `and when further reductions are proposed. Giving the authority to the President who, in turn, appoints a special Coin- mittee to receive and evaluate evidence `too often prevents a complete un- biased evaluation of the facts. Politics become involved and it is most difficult for the businessman to present his story to neutral parties. By working with and through his Congressman, he usually is assured that his problems will be heard and evaluated on a fair and equal basis. SUMMARY Realizing that `the world trade picture is currently in a state of flux, and that changes and adjustments in marketing circumstances undoubtedly will occur in future years, the Florida Fruit & Vegetable Association would like to go on record as firmly opposing any action that would encourage more foreign agricultural products being imported into the United States from low-wage countries without adequate protection. Such a move at the present time would be at the direct expense of agricultural interests in Florida and the United States, and any temporary economies which might possibly be realized by the consumer would be more than offset by increased costs of another nature, including the displacement of persons now employed in the agri-business complex. What is needed is a national policy that is comprehensive in its scope and fully coherent-one that does not work against the interests of the American em- ployee or his employer. Adjustments of national policies must be made, both with respect to the importation of foreign goods and with respect to our need to ex- pand our agricultural labor force by one means or another. Our Nation's greatest asset is her agricultural productive capacity. As an PAGENO="0521" 4961 economic segment, agriculture receives less than its fair share of our national wealth. Any program which would encourage increased imports of foreign food items at this time will seriously undermine our national agricultural well-being and the economy of this great Nation. We strongly urge favorable consideration of HR. 16416 and similar legislation. This will assure the domestic producer of a chance to market his product and, at the same time, it will permit foreign countries to share our market. American consumers and domestic labor will benefit, which, in turn, will be beneficial to the total economic position of the United States. APPENDIX I U.S. IMPORTS OF WINTER VEGETABLES FROM MEXICO-1963-64, 1964-65, 1965-66, AND 1966-67 [Hundredweight, in thousandsi Commodity and year Dec. Jan. feb. Mar. Apr. May June July Total 1963-64: Beans 12. 4 17. 0 10. 3 6. 9 17. 2 6. 8 0. 6 0. 7 71. 9 Cucumbers 44. 4 63. 1 43. 7 22. 0 3. 7 . 1 . 1 177. 1 Eggplant 2.0 3.2 8.0 7.5 4.2 4.8 .4 30.1 Melons: Cantaloupes 4. 0 152. 7 278. 3 473. 7 384. 7 3.7 1, 297. 1 Watermelons 5. 6 14. 8 66.9 81. 0 137. 9 251. 1 11. 5 568. 8 Other melons . 5 5. 2 14. 3 1. 3 21. 3 Onions 64. 4 90. 0 53. 1 132. 0 20. 8 360. 3 Peas 5. 4 12. 2 17. 2 14. 2 3. 9 . 2 53. 1 Peppers 11. 1 19. 6 32. 6 32. 9 12. 4 8. 3 2. 7 .7 120. 3 Squash 2.8 4.5 4.9 4.3 4.7 1.5 1.8 1.0 25.5 Tomatoes 103. 5 321. 0 519. 1 528. 3 535. 2 347. 1 89. 9 6. 9 2,451. 0 1964-65: Beans 14. 0 28. 1 22. 9 5. 8 9. 1 3. 8 1. 3 1. 8 86. 8 Cucumbers 37. 3 97. 9 148. 3 4. 5 19. 6 . 8 . 1 . 6 309. 1 Eggplant 5. 6 8. 7 9. 2 8. 6 5. 2 5. 3 . 1 . 1 42. 8 Melons: Cantaloupes 3.3 4.3 7.3 91.9 511.0 641.7 196.9 3.6 1,460.0 Watermelons 4. 1 20. 7 73. 3 142. 8 266. 8 181. 6 . 9 710. 2 Other melons 3. 7 37. 5 . 7 . 6 42. 5 Onions 19. 0 61. 2 100. 5 99. 0 43. 3 21. 2 13. 3 1. 3 358. 8 Peas 3. 1 13. 2 14. 6 13. 8 2. 6 . 7 48. 0 Peppers 15. 7 48. 8 48. 3 32. 3 17. 1 9. 2 2. 5 1. 2 175. 1 Squash 2.6 14.7 19.0 11.8 4.5 1.5 1.5 1.0 56.6 Tomatoes 93. 7 370. 5 445. 6 577. 3 558. 7 409. 4 106. 6 6. 1 2, 567. 9 1965-66: Beans 9.7 17.0 8.0 7.4 5.4 1.2 1.1 .3 50.1 Cucumbers 38. 7 102. 3 156. 8 112. 3 43. 5 6. 1 . 1 459. 8 Eggplant 6.5 11.9 12.7 11.7 5.9 6.2 .7 55.6 Melons: Cantaloupes 1. 5 6. 5 19. 9 156. 1 305. 7 597.9 277. 5 1. 3 1,366. 4 Watermelons 3. 3 16. 9 34. 3 83. 2 123. 3 265. 0 89. 1 615. 1 Other melons 9.3 32.4 2.2 43.9 Onions 35. 9 84. 8 79. 8 117. 7 70. 1 30. 5 5. 4 1. 5 425. 7 Peas - 2. 2 4. 3 20.9 21. 9 6. 4 . 1 55. 8 Peppers 14. 6 43. 3 69. 7 51. 7 39. 8 6. 5 4. 0 . 9 230. 5 Squash 1.1 8.7 14.9 10.1 4.7 2.2 1.5 43.2 Tomatoes 127. 1 403. 2 708. 6 688. 0 807. 6 513. 3 79. 6 12. 3 3, 339. 7 1966-67: Beans 16. 7 12. 6 13. 3 10. 8 5. 0 . 4 2. 2 80. 6 Cucumbers 48.9 128.8 164.4 151.5 98.7 3.0 .1 595.4 Eggplant 7. 7 26. 0 9. 7 6. 9 10. 5 2. 0 75. 7 Melons: Cantaloupes 2. 6 90. 1 384. 0 543. 3 149. 0 2. 9 1, 171. 9 Watermelons 1. 3 12. 6 68. 2 171. 4 229. 8 137. 1 . 8 636. 4 Other melons 5. 2 37. 2 1. 9 . 2 45. 0 Onions 60. 3 92. 6 93. 2 123. 9 17. 1 3. 1 390. 2 Peas 3. 1 22. 6 10. 9 . 7 2 51. 1 Peppers 24. 7 63. 3 70. 0 50. 8 39. 7 14. 3 4. 1 2. 5 269. 4 Squash 8. 1 45. 7 25. 2 8. 0 1. 4 1. 3 . 1 115. 2 Tomatoes 237. 9 519. 6 721. 0 667. 4 690. 1 601. 9 215. 2 46. 5 3, 699. 6 Source: USDA, FAS, Fruit and Vegetable Division, March 1968. PAGENO="0522" 4962 APPENDIX 2 U.S. FOOD PACKERS PICKING U~ MEXICAN EXPANSION ENTHUSIASM The money is looking greener on the other side of the border to U.S. fruit and vegetable packing companies worried by farm labor troubles and generally rising production costs at home. To move or not to move substantial components of the multibillion dollar in- dustry to Mexico is the question being considered. With the Mexican Government offering tax credits, Mexican weather offering an earlier ripening season and Mexican labor offering substantial reductions in production costs, the obvious answer seems to be "Why not?" Eight U.S. companies already have made the move, although their Mexican operations remain relatively small compared to the giant U.S. packing industry- worth $15 billion per year in California alone. Latest company to take the step south of the border is Green Giant, whose headquarters is in Le Seur, Minnesota. The company has made a relatively modest $250,000 start at Huatabampo, in the potentially rich desert state of Sonora. In a joint operation with Hongos de Mexico, Green Giant will pack about 300 tons of mushrooms this year. But this is only a pilot project. If it goes well, Green Giant intends to buy into the Hongos operation and expand the investment to more than $1 million with a new plant at Guaymas, Sonora, 225 miles from the Arizona border. The plant would supply both Mexican and U.S. markets. Other companies already operating in Mexico are H. J. Heinz of Pittsburgh, Campbell Soup of Camden, N.J., California Packing of San Francisco, Corn Products of New York, General Foods of White Plains, N.Y., Gerber Products of Freemont, Michigan and Anderson-Clayton and Company of Houston. All were drawn to Mexico even before the end of the U.S. bracero program 18 months ago. The troubles that have resulted from the bracero cutoff may be the final straw,. tipping the scales to a "go south" decision for other companies and expansion for those already here. The failure of local U.S. labor to step into the exhausting field work left by the barred Mexican workers is costing the companies money and adding to short- ages caused by dwindling farmland acreage in rapidly urbanizing states like California. "The bracero cutoff expired just ahead of the last big U.S. tomato crop- much of which was left to rot in the fields," said Herbert Wallace, Jr., General Manager of Heinz operations in Mexico. PROFITABLE ACTIVITY For Heinz, like other companies, moving to Mexico has been a profitable,. expansion encouraging proposition from the start. The company moved here two years ago, opening a strawberry plant at Salamanca, 150 miles northeast of Mexico City, that employs 600 workers and ships 60 tons of strawberries a day to the United States at the height of the season. It now is also handling chiles,. pineapples and garlic powder. Campbell's producing for the Mexican market, began with a small plant that packed just three soup ingredients at its start in 1959. Now Oampbell's is buying 26 local crops. California Packing .shi~s only chiles to the United States from its Mexican plant, but is developing plans for expanding into vegetables and fruit, testing the move first with Mexican grown peaches. Canners first found a reluctance in the United States to buy Mexican grown or packed food, but executives say this has been overcome by publicity stressing that all Mexican products must pass the same rigid U.S. Food and Drug Administration standards as those grown or processed in the United States. A shortage of cans and other technical problems-especially the `high initial cost of moving-are still a negative factor for companies considering the move to Mexico, but these do not appear too weighty in contrast with the benefits being offered. PAGENO="0523" 4963 Mexico's food exports in 1965 totaled about $400 million-90 per cent of which went to the United States. Food exports for example to Japan are rising rapidly. Given the cost squeeze now on at home, U.S. companies are finding expansion possibiliti~s in Mexico harder and harder to ignore. Source: "The News," Mexico City, Mexico, July 9, 1966. APPENDIX 3 STRAWBERRIES-ACREAGE PRODUCTION, AND YIELDS IN MEXICO, 1960-61-1965-66 Year Acreage Production Yield short tons tons/acre 1960 to 1961 4, 400 22, 100 5. 0 1961 to 1962 4,900 25,400 5.2 1962 to 1963 5, 100 28, 100 5. 5 1963 to 1964 5, 300 30, 500 5. 8 1964 to 1965 7, 000 42,000 6. 0 l965to 19661 11,000 55,000 5.0 1 Estimated. Note-The acreage estimates have been revised downward, and the yields upward. Adverse weather caused a reduc- tion in 1965-66 yields in the Irapuato area. If growers discontinue planting kiondikes, production per acre will be some. what higher. Source: USDA-FAS-April 1966. APPENDIX 4 MEXICAN CITRUS PLANTINGS DOUBLE IN 5 YEARS Mexican Government officials have encouraged the planting of oranges during the past 5 years. Although a tree census has not been made in any of the Mexican states, estimates by growers' associations, shippers, and government officials indicate an increase of more than 100 percent since 1900. It is probable that these estimates have understated the plantings. In most areas, heavy planting of new groves is continuing this year. There are several reasons for this extreme optimism among both growers and the government. Among the more important are low coffee prices, the high U.S prices for both fresh and processed products after the 1962 freeze in Florida, the many press articles on the problems in harvesting U.S. citrus following the end of the bracero program, and the need in Mexico for crops that require more hand labor than the basic field crops. Many growers are still under the impres- sion that there is an unusually good export demand for both fresh and processed citrus, especially in the United States and Canada. ORANGE AND TANGERINE TREES (BY STATES) IN MEXICO [In thousands of treesJ State 1951 1961 1965 Nuevo Leon San Lois Potosi Tamanlipas Veracruz Jalisco - 4,800 750 700 4, 000 6, 000 2,000 1,000 3, 000 8,000 3,000 1,500 18, 000 Sonora 500 500 500 Sinaloa 250 800 Other States Total 1, 600 50 1,700 100 3, 000 12,350 14,500 34,900 Source: USDA-FAS, May 1966. PAGENO="0524" 4964 APPENDIX 5 FRESH FRUITS-U.S. IMPORTS FROM MEXICO, Year Bananas Limes Mangoes Oranges Pine- apples Straw- berries Other Total Quantity in thoasaedn of pounds 1955 62, 290 2,929 619 3, 912 24, 157 93 907 1956 32,765 3,863 495 5,958 18,284 61,905 1957 75, 606 3, 014 702 1, 454 18, 807 63 99, 646 1958 42,251 4,338 868 21,442 19,836 4 267 89,006 1959 47,390 3,926 458 25,302 15,534 51 121 92 782 1960 7,960 4,588 512 21,617 19,731 562 14 54,984 1961 18,953 5,864 345 18,766 24,683 579 97 69,287 1962 10,587 4,376 1,076 27,703 31,303 895 1,414 77,354 1963 7,987 4, 890 1, 165 112, 949 33, 581 3,412 2,484 166, 458 1964 11,099 4,034 1,349 110,637 24,470 4,092 8,154 163,895 1965 19,214 3,414 1,039 69,998 20,578 5,791 5,139 125,173 Value in thousands of dollars 1955 1,449 228 93 142 391 2,303 1956 876 288 116 232 322 1 1,835 1957 2,150 228 177 58 376 5 2,994 1958 1,841 300 151 793 376 1 13 3.483 1959 1,945 236 116 1,086 307 8 14 3,712 1960 482 281 116 779 424 43 3 2,128 1961 1,278 312 92 695 497 120 10 3,004 1962 442 281 249 1,046 707 142 90 2,957 1963 260 362 285 3,976 906 421 170 6,388 1964 398 310 255 4,766 682 513 384 7,308 1965 654 268 233 3,318 572 845 262 6,152 I Imports for consumption. Source: USDA, FAS, F. & V.0., June 6, 1966. Mr. IL-TERLONG. Thank you, Mr. Cox. The next witness is Buforci IV. Council. STATEMENT OP BUPORD W. COUNCIL Mr. COUNCil2. My name is Buford IV. Council from Ruskin, Fla., and I am one 0-f the vanishing breed, an American farmer. I am part of a family farming operation engaged in the growing of tomatoes, citrus fruits, and cattle. The operation is located on the west coast of Florida and has been in production since 1910. I am associated with my two brothers and their three sons. REASON FOR CONCERN Our farming operation affects a great number of people, as is true of many farms in this country. We provide employment for some 100 regular workers in our vege- table, fruit, and cattle operations and several hundred more during harvesting and processing seasons. * Our west coaSt area normally grows two crops of tomatoes a year but since Mexican imports have gotten so heavy, we are only planting the spring crop. In the past, Mexico used to be predominantly a winter producer of this crop but has now not only increased its volume of tomato produc- tion but extended its season to include the fall, winter, and spring. This has hurt us very much. I can also see where the increasing production of citrus in Mexico will adversely affect us in that particular farming operation and, of PAGENO="0525" 4965 course, you have heard of the problem that we cattlemen have had on beef imports and on which some action has already been taken. TIlE NATURE OF THE PROBLEM Granted that foreign producers may have some basic costs of pro- duction and shipping similar to ours, they have a very unfair advan- tage over our producers in the great disparity that exists in their costs for labor, taxes, and other obligations which have been heaped upon us by our own Government and on which the foreign producers are not anywhere close to ours. Our workers are paid good wages and make more in an hour than a Mexican worker does in a day's work and yet there is no reason to believe that the Mexican worker in Mexico is that inferior to our own workers. In fact, we employ a number of American-Texas__Mexicans who are very good workers and Mexico has the benefit of having the same kind of workers who are Mexican nationals and who used to work on U.S. crops in the bracero program and were considered very productive. In order for us to keep our good workers in competition with the demand from other industries, we must pay them higher and higher wages. This Mexico does not have to do because it has an overabundance of workers. Also, our taxes get higher and higher and we are expected to sup- port our Government, and our economy as well, in a manner which, I am sure, is not expected in these other countries. THE IMPACT OF FOREIGN COMPETITION You are probably aware that most of this competition comes from Mexico. During the 1967 spring season, Mexico flooded the Far Western U.S. market and began to move into the Midwest, an area which we had been supplying heretofore. During the 1968 spring season-which has just been concluded- Mexican imports again disrupted all markets west of and including Chicago and forced the entire Florida spring deal into the markets along the eastern seaboard. During the 1967 season, the loss of our Western markets depressed the prices to the extent that there was no profit to the Florida. spring tomato producers and during the 1968 spring season, we suffered very heavy financial losses. Another problem is that Mexican tomatoes are ripe when imported and when excess quantities cross the border unsold, it becomes neces- sary that they be consigned into the U.S. market and because of their ripe condition, they must be sold for whatever price they will bring- which results in a very disorderly marketing situation. SOLUTION TO THE PROBLEM As a grower whose family has been in this business for years, I have come to realize the great need for orderly marketing of these perish- able crops in a mam~er that will keep the producer in business and provide the consumer with a good and steady supply of reasonably priced food. PAGENO="0526" 4966 I am the chairman of the Florida Tomato Committee, which is the administrative body of the Florida tomato marketing agreement and order. It would be futile to attempt to impose orderly marketing programs on our domestic producers with uncontrolled imports from Mexico. Fortunately, under such a program, we can control both the grade and size of both our own shipments and the imports through section 8E of the Agricultural Marketing Agreement Act of 1937, as amended. But it would take quantitative controls of imports in order to main- tain orderly marketing conditions for both foreign and domestic fruits and vegetables. We see an answer to this problem in the bill before you, H.R. 16416, entitled the "Fresh Fruits and Vegetables Market-Sharing Act of 1968," and H.R. 16992, which would give the foreign producer a fair share of our market and require more orderly distribution of the volume of shipments. If legislation of this type is not enacted soon, we will not only be forced out of business in these crops which are so vulnerable to the foreign competition from low-wage countries, but our consumers will become entirely dependent on foreign sources for these products, which we believe would be a very unwise policy on the part of our Government. Thank you, Mr. Chairman and members of the committee, for your consideration of my views in these hearings. Mr. HERLONG. Thank you, sir. The next witness is Mr. J. S. Peters. STATEMENT OP JOHN S. PETERS Mr. PETERS. Mr. Chairman, my name is John S. Peters and I am manager of the Membership and Industry Relations Division of Florida Fruit and Vegetable Association, a nonprofit agricultural trade association, representing growers of a majority of the fruits and vegetables produced in Florida. Prior to my present position, I was actively engaged in the pro- duction and marketing of tomatoes and my former partnership with Luther Chandler and Cecil Barber (both of whom are deceased) was active in the organization of Florida Fruit and Vegetable Association in 1943. My present position requires continuing current information on conditions affecting the membership of this association, including crop prospects and product movement in Florida and competing areas. U.S. FRUIT AND VEGETABLE TRADE Over the years, Florida growers have been threatened with reduc- tion or removal of the tariff on fresh fruits and vegetables. However, in the past few years, the import duty has become progressively less effective as domestic agricultural labor costs have skyrocketed and wages in foreign competing areas have remained ridiculously low. This has resulted in the U.S. markets being flooded at times with imports of many fruits and vegetables from low-wage countries. It has already been stated that Mexico is the major foreign exporter PAGENO="0527" 4967 of these products to U.S. markets and despite the fact that Mexico is not a member of the General Agreement on Tariffs and Trade and that U.S. producers are unable to take advantage of potential market opportunities in t)hat country because of highly restrictive import controls-both tariff and nontariff-the United States extends very liberal treatment to imports from Mexico. I have personally observed the Mexican farm operations and assure you that their vegetable production potential is almost unlimited and the threat to our domestic industry is no longer a matter of conjecture. The Mexican trade problem was very realistically summarized by Mr. A. Clinton Cook and Mr. Gilbert E. Sindelar of the U.S. Depart- ment of Agriculture Foreign Agricultural Service in their article entitled "Trade with Mexico," as follows: The restrictive import measures adopted by the Mexican government in fnll view of the liberal policy of the United States have, without question, provided a convenient stimulus for Mexico in exploiting both dimensions of marketing, foreign and domestic. The liberal treatment extended by the United States towards imports of fruits and vegetables has more than adequately provided the nucleus for Mexico's expansionary activities in the U.S. market. Under the veil of protectionism the domestic fruit and vegetable industry of Mexico has, on the other hand, been permitted to develop and operate free from exposure to com- petition from the United States. Mexican duties are a major obstacle to expanding trade. The ad valorem portion of the Mexican tariff alone ranges from 50 percent to 110 percent on fresh fruits and vegetables and a similar policy on many other items explains the continuing decl.ine in this trade with that country. On the other hand, our trade with Canada continues to expand as a result of the reciprocal trade arrangements which permit amicable settlement of differences on a mutually satisfactory basis. Canada im- ports $50 to $60 million worth of fresh vegetables from this country each year, which is roughly 90 percent of these products which are ex- ported by U.S. shippers. By comparison, we export only $3 to $4 million worth of these products to all of Europe, or about 5 percent of the total. ADVERSE EFFECT ON AMERICAN FARMERS The adverse effect of unregulated imports reached critical propor- tions in 1966. On March 29, 1966, ,Joffre C. David, secretary-treasurer of Florida Fruit & Vegetable Association, as a member of the roster of technical specialists, outlined this problem to Mr. Louis C. Krauth- off II with copies and a cover letter to the Florida congressional dele- gation. This communication should be of interest to the committee and is made a part of my statement as appendix A, since my allotted time will not permit me to read it. On June 16, 1967, Mr. David again communicated with the entire Florida congressional delegation, pointing out the seriousness of the problems at the time and expressed the need for legislative action; and I am offering a copy of this letter for the record as appendix B. On July 6, 1967, a plea was made to Secretary of Agriculture Orville L. Freeman for advice and assistance in a solution to this situation by Mr. David. I am also submitting this letter for the record as appendix C. PAGENO="0528" 4968 On August 31, 1967, Senator Spessard L. Holland communicated with the Secretary of Agriculture as a followup to a letter he had written on June 19 of that year, pointing out the precarious situation which had developed as a result of these increasing imports as follows: The 1967-1968 acreage marketing guide for Florida vegetables issued by the Agricultural Extension Service, University of Florida, after pointing up the fact that overabundant supplies depress markets and that growers should keep production in line with market demand, makes the following significant state- ment which clearly illustrates the plight of the Florida vegetable grower: "A major factor affecting the volume of imports from Mexico is the prevailing price level in the United States. If production and marketing costs in the United States continue to increase relative to cost levels in Mexico, there will be cor- responding increases in imports. Tomatoes, cucumbers, and possibly peppers are likely to continue their sharp upward trend. Mexico's shift to vine-ripened tomatoes, precooling, and improved shipping facilities may have added to its advantage over the United States tomato industry. United States imports of winter vegetables from Mexico are likely to continue the upward trend in the years ahead." Senator Holland called upon the Department of Agriculture for their recommendations and advice as to correcting the situation but the Department was unable to provide any such recommendation or advice. I am including Senator Holland's entire letter as appendix P to my statement. RECOGNITION OF ADVERSE EFFECT The other members of the Florida congressional delegation also communicated with responsible branches of the U.S. Govermrient on bringing the seriousness of this problem to their attention and re- questing the solution thereto. Florida Fruit & Vegetable Association flies contain nmnerous copies of these exchanges of communication; but without burdening the record with them, suffice it to say that responses from the executive branch have been unsatisfactory and inaction has accomplished noth- ing toward a solution of this very grave situation. In transmitting the proposed Trade Expansion Act of 1968, Presi- dent Johnson recognized the ineffectiveness of present laws for relief from the adverse effects of imports. Unfortunately, the proposed as- sistance program contained in this bill will not be of benefit to highly perishable short-season vegetable crops such as the ones being produced with low-cost labor in Mexico and indiscriminately placed in disorderly competition with fresh produce grown in this country. PROPOSED CORRECTIVE LEGISLATION This is the reason why I am here today before this committee as are the others concerned with the future of our American fruit and veg- eta~ble industry in this country, requesting that you give serious con- sideration to the type of legislation proposed as H.IR. 16416, and H.R. 16992, entitled the "Fresh Fruits and Vegetables Market-Sharing Act of 1968." This legislation, like the meat import law of 1964, does not actually impose quotas, but sets up the mechanics for estab- lishing targets which imports cannot exceed in any year. It recognizes the seasonal nature of fresh fruits and vegetables by permitting the importation of as much as 25 percent of the target figure during any 1 month and permits increases as the U.S. market grows. PAGENO="0529" 4969 This legislation will enable us to achieve orderly importation of fruits and vegetables without being unduly restrictive upon our com- petitors. It will also serve notice to those countries that the United States cannot become a dumping ground for fruits and vegetables pro- duced with cheap labor. The entire agri-business community is concerned about this adverse situation created by unresfticted imports of fruits and vegetables and I am including as appendix E a memorandum from the Florida Bank- ers Association as an example of such concern. Texas Citrus Mutual has filed a statement with this committee, outlining the situation with respect to the effect of cirtus imports from Mexico on their industry. Additionally, they have requested me to tell this committee that they support IELR. 16416 and urge its enact- ment into law. I am including their request as appendix F of my statement. I appreciate the privilege you have extended in permitting me to appear at this hearing and we sincerely plead for your support toward the enactment of necessary legislation to relieve this deplorable situa- tion which adversely affects U.S. consumers, laborers, and growers- legislation which will fix a definite policy is the only way to prevent the ultimate destruction of many segments of the fruit and vegetable industry. Thank you very much. (The appendixes referred to follow:) APPENDIX A FLORIDA FRUIT & VEGETABLE ASsocIATION, Orlando, Fla., Marc1i~ 29, 1966. Hon. ROBERT L. F. Sncss, Hon. CHAnI~s E. BENNETT, Hon. CLAUDE D. PEPPER, Hon. DANTE B. FASCELL, Hon. A. SYDNEY HEBLONG, Jr., Hon. PAim G. ROGERS, Hon. JAMES A. HALEY, Hon. D. R. "Bu~ix" MATTHEWS, Hon. DON FUQUA, Hon. SAM GIBBONS, Hon. EDWARD J. Gui~x~, Hon. WILLIAM C. CRAMER. GENTLEMEN: The attached copy of letter to Mr. Krauthoff is self-explanatory. It should serve to point out to you the duality of the problem engendered by proposed amendments to the Fair Labor Standards Act and the lack of protec- tion extended to the producers and workers in those agricultural commodities which are highly vulnerable to foreign competition from low-wage countries. Certainly our agricultural producers have no objection to anyone working in this industry making a decent living but when they are confronted with the problems engendered by such divergent policies as outlined in my letter to Mr. Krauthoff, they frankly are at a loss as to how to reconcile such thinking and actions on the part of our Government. It would seem only proper and fair that when H.R. 13712 comes up for con- sideration on the floor of the House, you should raise-among others-the follow- ing questions: 1. What is being done, if anything, to afford our domestic producers and Amer- ican workers the necessary protection to permit them to enjoy the benefits which are being proposed in this piece of legislation? 2. To what extent has the Secretary of Labor-who has already demonstrated militant protectionist attitude towards American workers-done to carry out his responsibilities under the provisions of Section 4(e) of the Fair Labor Standards Act, which require him to make a thorough and complete investigation of the impact, or possible impact, of foreign competition before any proposed amend- ments to this Act are considered? 3. What is the attitude of the Secretary of Agriculture in this administration with respect to the increase in foreign competition and expatriation of many of our agricultural industries with regard to its effect on the national economy as well as our national security? 95-159-68-pt. 1O-34 PAGENO="0530" 4970 4. Will the State Department and the Office of the Special Representative for ~Trade Negotiations qgree to the delisting from tariff negotiations of those corn- .inodities which are highly vulnerable to the foreign competition for the reasons hereinabove named? 5. Failing to have the necessary understanding and/or cooperation from these administrative agencies, what would you, as a Member of Congress, propose to do about this problem? I am sure that your constituents who are so affected would like to have the ~answers to the above questions because we certainly at at a loss to give them those answers. Sincerely yours, JOFFRE C. DAVID, secretary-Treasurer. FLORIDA FxUIT & VEGETABLE AssociArioN, March ~9, 1~966. Mr. Louis C. KEAUTHOFF II, ~Chairman, Trade Information Committee, Office of the ~Special Representative for Trade Negotiations, Ea,ecutive Office of the President, Washington, D.C. DEAn Mx. KEAUTHOFF: As a member of the Roster of Technical Specialists, I have been the recipient of many complaints and expressed concern from pro- ducers of agricultural commodities who are highly vulnerable to foreign compe- `tition from low-wage countries. This concern has been heightened recently by repeated announcement that the Kennedy Rounds of tariff negotiations' goals are a 50% across-the-board cut in all tariffs with a bare minimum of exceptions. The problem which these people are voicing has been greatly aggravated by two developments which have taken place since 1965. One of them was, for all practical purposes, the virtual embargo on the importation of supplemental foreign agricultural workers imposed by Secretary of Labor W. Willard Wirtz and the other has been the proposals now contained in H.R. 13712, amending the Fair Labor Standards Act to extend the many benefits of that law to here- ~tofore exempt workers in agriculture. While the former action was designed to preclude any adverse effect from the competition of foreign workers in this country to our domestië workers and the latter is to provide the domestic workers with a greater measure of wage benefits, little thought has been given to shutting the back door, so to speak, to the influx of foreign agricultural commodities, which will not only adversely affect our domestic producers but our American workers in these industries as well. Our people find it difficult to reconcile the above actions of Mr. Wirtz and the proposed legislation with the Kennedy Round of tariff reduction. The least that could be done for our domestic industry and its employees under the cir- cumstances would be to request that these agricultural commodities which are highly vulnerable to foreign competition from extremely low-wage countries, as hereinabove stated, should be taken off the list for negotiation at Geneva. I have discussed this with Senator Spessard L. Holland while in Washington some weeks ago and he, as well as other Members of our Congressional Delega- tion, are deeply concerned over these developments. I feel it only just and proper that you should be so advised and that it has already been indicated to me you may very well expect serious repercussinns unless this problem is properly resolved by the Office of the Special Representa- ~tive for Trade Negotiations. Sincerely yours, JOFFRE C. DAVID, Secretary-Treasurer. PAGENO="0531" 4971 APPENDIX B FLORIDA FRUIT & VEGETABLE ASSOCIATION, June 16, 1967. Hon. SPESSARD L. HOLLAND, Hon. GEORGE A. SMATHEBS, Hon. ROBERT L. F. SIKES, Hon. DON FUQUA, Hon. CHARLES E. BENNETT, Hon. SYDNEY HERLONG, Jr., Hon. EDWARD J. GURNEY, Hon. SAM GIBBONS, Hon. JAMES A. HALEY, Hon. WILLIAM C. CRAMER, Hon. PAUL G. ROGERS, Hon. J. HEBERT Bunim, Hon. CLAUDE D. PEPPER, and Hon. DANTE B. FASCELL. GENTLEMEN: For some years now we have seen the threat of foreign competi- tion from low-wage areas, principally Mexico and the Caribbean countries, mak- ing disastrous inroads into our fruit and vegetable industries. This season the problem reached critical proportions among many of our Florida producers to such an extent that the agri-business community, which includes farm equip- ment and supply groups, bankers, merchants and labor, has voiced great con- cern over this deplorable situation. You have heard about it, read news- paper accounts of meetings and received many communications. I have corresponded with you and furnished you factual information about the growth of this problem for quite a few years and you have responded ad- mirably in trying to seek an answer and possible solution from responsible agencies of government, and a number of you have introduced bills 1~hat would in part mitigate the onslaught of these imports on our own economy. I can say without being facetious that if someone wanted to refer to all the background information and efforts contained in our own Association files on this subject, it would take no less than a moving van to transport the material accumulated over the years. Therefore I am not going to burden you with a historical recital of this problem since your own files and your own knowledge of this matter are probably as replete as mine. In short we have reached the critical point in that the people affected who have to meet payrolls and pay their bills can't help but feel that we have not been very effective in dealing with this serious problem. I know and you know that it is not an easy problem to resolve but there must be a better solution to it than to leave our industries at the complete mercy of countries who are not only ex- ploiting our markets but are doing so advantageously by exploiting their own labor. As you will recall Secretary of Labor W. Willard Wirtz has strongly objected to the importation of foreign workers employed in this country, even at our higher standards, if the very presence of these workers "adversely affected" the employment of our domestic workers. He has quite successfully and effectively exercised his view in this matter through his certification authority for bring- ing in foreign workers and by his adverse effect criteria. Perhaps a page of his book should be used in controlling the importation of commodities produced with peon labor. Otherwise we have left the back door wide open to be flooded with imports of this origin. Tariffs at their presently low levels have long ceased to be a satisfactory means of equalizing costs of production and thereby controlling imports, in the light of the tremendous wage differentials and other related labor costs which exist in our country vis-a-vis Mexico. We must therefore resort to some form of flexible import limitations which when interpreted to mean quotas has a bad connota- tion with the free traders in our State Department and other internationally minded high officials in our executive branch. More recently I heard the term ~`market sharing" used by an official of the Department of Agriculture in rela- tion to foreign imports. This perhaps might have a more palatable connotation. And here again I must emphasize that no one is asking for the total exclusion of imports of competitive commodities but rather better control so as to give the domestic producers first consideration in the market place as have the American workers under the Secretary of Labor's adverse effect criteria, which I have al- ready mentioned. PAGENO="0532" 4972 It also might be quite appropriately the time to ask the Secretary of Agri- culture to take as much interest in this problem as the Secretary of Labor has so ably done with regard to the importation of foreign labor. But even this latter Cabinet member has not solved the problem of the American worker in other industries which are suffering from the same ailment. As you well know we are working on that aspect too in the hopes of a broader approach through HR. 478 and H.R. 479 and similar bills which have been introduced. I would like to suggest that you consider the merits of appropriate market sharing controls on imports of agricultural products and that you ask the Secretary of Agriculture to outline the type of measures that might be enacted for this purpose. Otherwise any proposed legislation in this respect W~1li, as it has always in the past, run the gamut of criticism not only from our own De- partment of Agriculture but other Departments which will concern themselves with this. We are not interested in hearing any further response from Administration officials with regard to the "escape clause" and other well-meaning statutory pro- visions which have been totally ineffective in resolving this problem. Let me thank you again for your serious consideration of this problem and let's recognize that we must come up with a better answer than we have been able to in the past if it is going to be resolved in the best interests of our agricultural industry. Sincerely yours, JOFFRE C. DAVID, Secretary-Treasurer. APPENDIX C FLORIDA FRUIT & VEGETABLE ASsocIATIoN, Orlando, Fla., July 6, 1967. Hon. ORVILLE L. FREEMAN, Secretary of Agriculture, Department of Agriculture, Washington, D.C. DEAR SECRETARY FREEMAN: Thank you for your thoughtful letter of June 16. I appreciated the opportunity of attending your Farm Policy Conference in Athens, Georgia, and felt that it was extremely worthwhile. You are to be complimented for your interest in holding these meetings at the grass-root level and getting firsthand information and advice from the farmers and their repre- senatives with regard to their problems. We concur in your thoughts on the need for more bargaining power for farmers-for more "muscle in the marketplace." It might interest you to know that we have several marketing agreement and order programs in effect, both Federal and State, on fruits and vegetables. Additionally we have organized a few Exchanges which in essence provide some bargaining strength by virtue of the fact that these cooperative organizations acquire title to the members' products for the purpose of setting conditions of sale. These programs have produced some measure of stability and improvement in the returns to the growers. However the commodities to which they are confined have been largely those which as yet are not under the serious threat of foreign competition. By now I am sure you have heard from members of our Congressional Delega- ation with regard to the disastrous inroads being made into some of our fruit and vegetable industries here in Florida by foreign competition from low-wage areas, pricnipally Mexico and the Caribbean countries. Quite obviously some of the programs which we have would not work satis- factorily on commodities which are subject, such as tomatoes, to a flood of cheap imports from Mexico unless some reasonable quantitative or flow-to-market restrictions can be applied on the imports, as well as the domestic product. No one is asking for the total exclusion of imports of competitive commodities but rather better control so as to give the domestic producer first consideration and an opportunity to exercise his "muscle in the marketplace" as you have suggested. Tariffs at their presently low levels have long ceased to be a satisfactory means of equalizing costs of production and thereby controlling imports, in the light of the tremendous wage differentials and other related labor costs which exist in our country vis-a-vis Mexico and similar areas of production to the south of the border. PAGENO="0533" 4973 We have also found out through experience that the Section 22 provisions of the Agricultural Adjustment Act do not lend themselves to any relief for the problems encountered by the fast-moving perishable commodities when gluts `and market disruptions are caused by excessive imports from foreign countries. This Association was instrumental in the passage of the amendments to the Agricultural Marketing Act which requires foreign imports to meet the same standards when imposed on certain commodities operating under a federal marketing agreement and order program; we have found this to be some measure of help in holding up the quality standards in the marketplace, but what we need now is some means of volume control or market sharing program with foreign imports in order to maintain orderly marketing and satisfactory returns to our domestic producers. We shall greatly appreciate your giving this problem serious consideration. Sincerely yours, JOFFEE C. D~&vin, Secret ary-Treasurer. APPENDIX D U.S. SENATE, COMMITTEE ON APPROPRIATIONS, Washington, D.C., August 31, 1967. Hon. ORvu~LE L. FREEMAN, Secretary of Agriculture, Washington, D.C. DEAR Mn. SECRETARY: In my letter of June 19, 1967, I pointed out the critical and precarious situation facing Florida producers of fresh fruits end vegetables because of the increasing volume of imports of these commodities from Mexico and other low wage producing areas. A reply dated July 13, 1967, signed by Mr. Rodney Leonard, indicates that the Department shares my concern and states that after reviewing the Depart- ment's position a more complete reply would be forthcoming. I again wish to stress the importance and urgency of this matter. One merely needs to look at the import statistics for the past ten years to see what is hap- `pening. Imports of tomatoes from Mexico in 1965 totaled 66 million pounds. In 1966 such imports had increased to 358 million pounds, an increase of more than 500 percent, and are continuing to increase at a rapid rate. For your convenience I am attaching a table showing imports from Mexico of tomatoes and other vegetables for the period 1955-1966. The injury to domestic growers caused by the increasing import volume is further aggravated by the timing of such imports which distort and weaken domestic prices just at the time when Florida's domestic production is to be marketed. These uncontrolled imports also make the provisions of the Agricul- ~tural Marketing Act ineffective and of little value since efforts by domestic growers to balance supplies and marketings with demand would be thwarted by imports. The 1967-1968 acreage marketing guide for Florida vegetables issued by the Agricultural Extension Service, University of Florida, after pointing up the fact `that over-abundant supplies depress markets and that growers should keep production in line with market demand, m'akes the following significant state- ment which clearly illustrates the plight of the Florida vegetable grower: "A major factor affecting the volume of imports from Mexico is `the prevailing price level in the United States. If production and marketing costs in the United States continue to increase relative `to cost levels in Mexico, there will be corres- ponding increases in imports. Tomatoes, cucumbers, and possibly peppers are likely to continue their sharp upward trend. Mexico's shift to vine-ripened tomatoes, precooling, and improved shipping facilities may have added to its `advantage over the United States tomato industry. United States imports of winter vegetables from Mexico are likely to continue the upward trend in the years ahead." There is no question, but that costs of the American farmer will continue to rise and that the disparity between Mexican and United States labor and other costs will serve as additional incentive for imports to increase at an even faster pace. The problem has grown more serious each year. It has now reached critical PAGENO="0534" 4974 - ~C~C~Ct) I- 0 I C,) >- -J C~COc~4-~ ~ c,~0c~c~ cc o~ C-) S ~ S cC-oC ~-u-~r-~ ~ C,) Cl) o E ~ 5 0 r-~ .-~ ~ N- NJ = = - -~ r- cc~I~r) -0)0 CI) *9 NJ ~ N) N) N)~ ~ = o 0 C-) 0 C,) ~- *~ ~ )D NC'J 00 (`4(00) (0(0(0 -c - - ~ S CI - w 0 0) ~ -~ ~ C-) 00 HHHHW 0~ PAGENO="0535" 4975 proportions and it is imperative that effective corrective action be taken without delay. In my letter of June 19 I suggested the possibility of some form of a "market sharing" plan which would establish an equitable share of the domestic market for imports based on a representative import base period with an appropriate adjust- ment for market growth. This would have the effect of stabilizing imports in relation to domestic consumption and to the growth of the domestic market. I would appreciate your reactions to this suggestion. I would also like to be advised of the existing authority available to cope with this import problem and whether you believe it is adequate. If it is not adequate, I would like your~ suggestions as to the additional authority needed to the end that the flow of imports may be related to an equitable sharing of the market and so that orderly marketing procedures may be established. An early reply will be appreciated as we simply cannot permit present conditions to continue. Yours faithfully. SPE5SARI L. HOLLAND. APPENDIX E FLORIDA BANKERS ASSOCIATION, ORLANDO, FIA., APRIL 17, 1968 MEMORANDUM TO ALL FLORIDA BANKERS A bill has been introduced into the Congress by Representatives Syd Herlong,. and Paul Rogers in the House, and Senator Spessard Holland in the Senate, en- titled, "The Fresh Fruit and Vegetable Market Sharing Act of 1968". As an organization vitally interested in all matters concerning the agricultural econ- omy of the state, bankers should support this legislation and make known that support to their respective Senators and Representatives in the Congress. Essentially, this proposed legislation states that access to the United States. market for foreign produced fresh fruits and vegetables should be established on an equitable and orderly market sharing basis, consistent with the main- tenance of a strong and expanding U.S. production designed to avoid the dis- ruption of the domestic market, and unemployment of domestic workers. Since 1956 fruits and vegetables imported have increased to the extent where they have seriously disrupted the market for these commodities in the United States, and while the Agricultural Act of 1956 gives authorization to agreements with other countries to limit exports, such authority has never been exercised in connection with fruits and vegetables. The increase since 1956 has been caused mainly by lower costs of production in other countries, particularly low wage rates, and because of this latter fac- tor, it seems certain that imports of fresh fruits and vegetables will con- tinue to increase and further disrupt the market for these commodities in this: country. The Fresh Fruit and Vegetable Marketing Sharing Act of 1968 would author- ize the President to negotiate with other governments to limit imports each year to not more than the share of the United States consumption of such com- modities supplied by imports thereof during a representative period of not less' than the average of any two consecutive import years prior to 1967. If no agree- ment could be reached, the Act would limit the import based upon the average of the five calendar years, 1962-66, with a monthly limitation to provide more orderly marketing~ This bill is important to the economy of the State of Florida, and therefore,. to Florida banking. We urge you to write your Senator and your Representa- tive as soon as possible, asking him not only to support, but also to actively seek passage of this important legislation. RICHARD E. EHLI5, President, F'orida Bankers Association, Orlando, L. S. TILLER, Chairman, Agriculture Division, EVP Indian River Citrus Bank, Vero Beach, How~&im MONULTY, Chairman, Farm Committee, President, Florida State Bank, Sanford. PAGENO="0536" 4976 APPENDIX F TEXAS CITRUS MUTUAL, Weslaco, Ten, May 22, 1968. Mr. J. S. PETERS, Florida Fruit and Vegetable Association, Orlando, Fla. DEAR Mn. PETERS: We have received notice from our Congressman E. "Kika" de la Garza of the open hearings starting Tuesday, 4 June, on the balance of trade between the United States and foreign nations including imposition of quotas. Texas Citrus Mutual will be unable to appear at the hearings but under- stand your organization will submit a request to be heard. If so, we request you represent our organization also. Texas Citrus Mutual is a non-profit organization of Texas citrus growers, ~patterned after your Florida Citrus Mutual. We represent some 2000 Texas citrus growers, representing approximately 75% of the Texas citrus production. Our offices are located at 115 North 10th Street in Edinburg, Texas. The importation of citrus fruit from Mexico is of vital concern to we Texas citrus growers, and it appears from the experience this season that it will loom larger each year as a factor adversely affecting the marketing of domestically produced citrus. This conclusion is drawn from the fact that our cost of produc- tion is increasing at a rate far in excess of that faced by producers in Mexico. Over the past few years specific action has been taken on the national level which has and will continue to increase our cost of production, i.e.,-ending the Bracero Program-minimum wages for farm workers-increasing wages for farm workers, packing house and processing plant workers-increasing costs for supplies and equipment-and increasing taxes at county, state, and national levels necessary to support our higher standards of living. There is no indication the foreign costs of production will increase at any- where near our rate while the ending of the Bracero Program resulted in lower wages in Mexico. Over the years the citrus growers of Texas, as well as the growers of California nnd Florida, have assessed themselves for the purpose of advertising and pro- motion of citrus. As a result of these programs the growers have developed a good demand for citrus. Further, these same growers are paying the highest wages paid in any commercial citrus producing area. They are also paying their share of the taxes necessary to support our higher standards of living and other obligations of our government. The United States citrus growers do not receive long term, low interest government loans designed to plant and care for their orchards while they are coming into production as is the case in foreign areas. The American citrus growers DO NOT receive a direct government subsidy on each carton of citrus sold fresh in export as many foreign governments pay to their growers, nor do they receive a subsidy on frozen concentrate or products sold in export. Foreign governments with their long term leans and subsidy payments have encouraged the planting of citrus. principally oranges, to the point where large surpluses are predicted. These countries are looking to the United States to dis- pose of their excess production during peak crop years. The maintenance of a sound domestic citrus industry and steady employment of our American workers employed by this important industry should be a national objective. With the emphasis on balance of payments, it appears this is an area that will drain more dollars each year from the United States. This season. through May 20, Mexico alone has crossed into the United States 2261 carlot equivalents oranges, 428 carlot equivalents tangerines, 6 cars mixed citrus and 19 carlot equivalents limes. These imports represent approximately $9 million that have flowed from the United States into Mexico (USDA-State Market News Service, Weslaco, Texas). There has been in addition citrus entering the United States from other countries not included herein. During the 1966-67 citrus season the largest shipper of fresh citrus from Texas was the Edinburg Citrus Ass'n. Operating two packing houses they shipped 2133 PAGENO="0537" 4977 carloads of citrus fruit. The impact of imported fruit on our labor force is more substantial than many realize. The approximately 3000 carloads of Mexican citrus that have entered the States this season, was packed in Mexico, depriving from gainful employment a work force in numbers approaching the number employed by three of our highest capacity packing houses. Last season (1966-67), which incidentally was a disastrous one for orange growers in the United States due to the tremendous crop, the Texas growers received 29% of parity for their orange crop and the Florida growers received 25% (USDA C&MS-F&V Citrus Fruits: Estimated equivalent on-tree returns and parity prices 10/2/67). As a result of our much smaller crop than Florida's- and the fact it can be sold much closer to our producing area with savings in freight-we `should always receive a higher percentage of parity than the Florida area. However, this season to date Mexico crossed 2261 carloads of oranges compared with 255 cars last season. Except for the 124 cars that crossed at Nogales all the fruit has crossed the border here in Texas and sold in our traditional marketing area. Consequently the Texas growers received oniy 49% of parity to date for their orange crop while Florida growers have received 66% of parity (USDA C&MS-F&V Citrus Fruits: Estimated equivalent on-tree returns and parity prices 3/29/68). Last season Texas bad an orange crop of 2.8 million boxes and marketed fresh 2986 cars (Texas Valley `Citrus Committee)-500 boxes per car-and Mexico imported through the Valley 256 cars for a combined total of 3242 cars of oranges shipped from the Valley into our marketing area. `Beulah' reduced our orange crop this season to only 1.9 million boxes yet there has been shipped from the Valley this season to date, 4580 cars of oranges (2319 cars Texas and 2261 cars Mexican oranges)-some 40% more than the total shipments last season. Were it not for the December freeze in California which reduced their crop-and the much shorter crop in Florida this season-the percent of parity received by Texas growers would have been much lower. H.R. 16416 is a means of providing orderly marketing of foreign citrus. It would prevent dumping of foreign surplus during peak production years and assure adequate supplies for the American consumer during periods of domestic shortages. Sincerely, JAY D. Bonun, E~recutive Vice President and General Manager. Mr. HERLONG. Thank you, Mr. Peters. There is one question that came to my mind when you were testifying. You testified mostly about the imports from 1~{exico coining into the United States and destroying American markets. Do you have any figures on how much of that production is brought about by U.S. growers going down there and farming, using the cheap labor, and sending their products into the United States? Do you have any figures on that? Mr. PETERS. We don't have those actual figures because American capital going down there has to tie itself in with Mexican corporations. We do have knowledge that such capital has gone down there in years gone by. are aware, however, that Mexican growers are becoming increas- ingly prosperous and divorcing themselves from this source of produc- tion money to a certain extent. Mr. HERLONG. Thank you. Any further questions? Mr. Curtis. Mr. CURTIs. I would just like to ask one general question for the record. PAGENO="0538" 4978 Mr. HEiu~oNG. Mr. Curtis. Mr. CURTIS. Has the domestic market for your products, fruits and vegetables, been increasing during, say, the past 10 years? Do you have the figures on that? Mr. PETERS. We have the figures. Mr. CURTIS. Could you supply them for the record? I would like to get those figures in relation to what imports are. What I am really interested in~ is to see whether your problem is that you aren't getting as big a percentage of a growing market as you were or whether you are actually experiencing a decline. It could be either way. I am not, by this question, saying you don't have a problem, you do, but it could be a different kind of problem. Could you get those overall figures for the record? Mr. PrirEns. Yes, sir; but may I suggest that perhaps the volume figures would probably be more meaningful than the price figures. Mr. CURTIS. I think so, too. Mr. PETERS. And you will find those as a supplement in Senator Hol- land's letter, attachment to Senator Holland's letter. Additionally, we will be happy to provide further import figures which will tell you that, while the Florida production has remained rather static on tomatoes for the past several years, the Mexican imports have continuously increased, especially during the last quarter and the second quarter of each year. Mr. Oinrns. Thank you. (The following letter was received by the committee:) FLORIDA FRuIT & VEGETABLE AssOcIATION, Orlando, Fla., July 29, 1968. Hon. THOMAS B. CURTIS, Member, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR Mn. Cuirris: When I appeared before the Committee on Ways and Means on July 2, 1968 to testify concerning the balance of trade between the United States and foreign nations, you inquired as to whether the domestic market for fruits and vegetables had been increasing during the past ten years and requested that I provide the Committee with figures that would reveal whether Florida producers were getting as big as percentage of a growing market or were actually experiencing a decline. I am supplying the Committee on Ways and Means a tabulation compiled from official sources that supplies this information as it applies to a number of Florida's major agricultural crops, a copy of which is enclosed for your reference and I am sure that you recognize the parallel producing seasons of Mexico and Florida. Thanking you for the interest you have shown in the problems of the agricul- ~ural industry and trusting that you will call upon us for any additional information you may require, Yours very truly, J. S. PETERs, Manager, Membership and Industry Relations. PAGENO="0539" 10-YEAR COMPARISON OF U.S. PRODUCTION, FLORIDA PRODUCTION, AND IMPORTS FROM MEXICO OF SELECTED FRESH FRUITS AND VEGETABLES Cucumbers Tomatoes Peppers Strawberries 1957 1966 Percent 1957 1966 change Percent 1957 1966 change Percent 1957 1966 change Percent change U.S. production 4, 576 4, 713 +3 20, 147 20, 572 +2 3, 240 4, 062 +25 2, 762 2, 553 -8 Florida production 1,608 1, 877 +17 5, 522 7, 305 +32 1, 044 1, 606 +54 60 208 +247 Mexican imports 1 22 480 +2, 082 1,004 3,587 +257 93 245 +163 0 117 +11, 700 i4~. Eggplant 1957 1966 Watermelons Limes Oranges Percent 1957 1966 change Percent 1957 1966 change Percent 1957 1966 change Percent change U.S. production 499 549 +10 27,487 28,917 +5 140 168 +20 2113,136 ~120,720 +7 Florida production 371 397 +7 6, 460 10, 030 +55 140 168 +20 2 83, 700 2 90, 360 +8 Mexicanimportsl 6 56 +833 247 615 +149 30 34 +13 14 475 +3,293 1 Mexico is the major exporter of these products to U.S. markets and their producing season parallels Sources: Compiled by E. F. Scarborough, Florida Department of Agriculture, Orlando, FIa., from that of Florida. USDA Agricultural Statistics 1967 through 1956; Florida Citrus Summary, 1967; Florida Vegetable 2 Florida and U.S. production on split season basis; i.e., 1956-57 shown as 1957, etc. Summary, 1967; USDA Foreign Agricultural Service. PAGENO="0540" 4980 Mr. ilrntoNG. Are there further questions? Mr. Chairman, reference is made in here to a statement that was filed by Mr. Curl of Texas Citrus Mutual. I read that statement myself and in that statement it stated that a letter from the Department of Commerce had indicated that this was a progressive reduction in tariffs on citrus, particularly oranges, coming into the United. States. I know you are interested in this, too. I was personally told both by Governor Herter when he was in charge of this program and later by Ambassador Roth that there had been no negotiations over there with reference to citrus in the Kennedy round, and I would like, Mr. Chair- man, for this committee to inquire of the Department of Commerce as to the authority for such a statement that the duty on citrus, for example, is to be progressively reduced from 1 cent a pound to 6 cents a pound over the next 4 years. I will probably talk later to Mr. Rutledge about that but I would want this committee to get that information from the Department of Commerce to see what authority they had for makii~g such a statement in view of what had be.en previously told to me-I am informed that we do have this information. There were no reductions on oranges. This report showed it is all citrus and that is the thing we are concerned about. Are there further questions of these witnesses? If not, we want to thank you for your contribution and for being here with us. We appreciate it very much. Mr. Cox. Tha..nk you. (The following statement of Representative Paul G. Rogers, of Florida, was received by the committee:) STATEMENT OF HON. PAUL G. ROGERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA Mr. Chairman: I appreciate very much the opportunity afforded me by the Committee to pre- sent my views concerning H.R. 16416 which I co-sponsored with Mr. Herlong, a distinguished Member of this Committee and my colleague from Florida. This bill would provide access to the United States markets for foreign pro- duced fresh fruits and vegetables on an equitable and orderly ~arket~sharing basis consistent with the maintenance of a strong and expanding United States production and is designed to avoid disruption of the domestic fruit and vege- table market, and unemployment of domestic workers. The particular problem confronting the fresh fruit and vegetable growers in Florida is the drastic increase in imports from Mexico. The past 12 years have witnessed a five-fold increase in fresh vegetable im- ports from Mexico. From January 1, 1968 to May 1, 1968, Mexico marketed one-half of the fresh tomatoes consumed in the United States. Also, Florida some years ago, had 90% of the Canadian tomato market; now Mexico has 90% and Florida has only 10%. Florida citrus is also particularly injured by imports of oranges and tangerines from Mexico. Texas, California and Arizona are also hard bit. In 1966, orange imports from Mexico into the United States were 258 car- loads. In 1967, there were 2,323 carloads-a nine-fold increase. Florida's fresh fruit and vegetable growers cannot continue to compete with. these heavy imports from low-wage areas and hope to maintain a steady econ- omy in the State. I trust that the Committee has benefitted from the testimony from representa- tives of Florida's fruit and vegetable industry, and that proper legislative action will be taken, commensurate with the gravity of the problem. Mr. HERLONG. Our next witness is Mr. Robert Rutledge of the Flor- ida Citrus Mutual. Mr. Rutledge, we are happy to have you and Mr~ PAGENO="0541" 4981 Amory Underhill to testify before the committee. If you will identify yourself for the record and proceed in your own way we will `~ppreciate it STATEMENT OF ROBERT W. RUTLEDGE, EXECUTIVE VICE PRESI- DENT, FLORIDA CITRUS MUTUAL; ACCOMPANIED BY WILLIAM AMORY UNDERHILL, COUNSEL Mr. RUTLEDGE. Thank you, Mr. Chairman. My name is Robert W. Rutledge. I am executive vice president of Florida Citrus Mutual, `Lakeland, Fla. We now represent approximately 15,000 Florida citrus growers who produce about 85 to 90 percent of all the citrus grown in the State of Florida. Mr. HERLONG. Thank you. Mr. RUTLEDGE. Mr. Chairman, I would prefer for the sake of time not to read this statement but merely go through it and summarize and get what I think are the important points here page by, page and then read a very short sunimary, if that is all right with you. Mr. HERLONG. Without objection, your entire statement will then appear in the record. Mr. RUTLEDGE. That is what I would like; yes, sir. Mr. HERLONG. Proceed in your own way. Mr. RUTLEDGE. Gentlemen, on the first page here I think it is im- portant to note that the Florida citrus industry over' the past 20 years is increasing at a very rapid rate. Twenty years ago we had about ~325,000 acres of citrus in the ground. At the present `time we have about a million acres of citrus planted in the State of Florida. It is `the largest citrus industry in the world and as well the American citrus consuming market is the largest in the world. It just didn't get that way because something happened overnight. I think it got that way because of the great promotional efforts of ~California, Texas, and Florida, and over a period of these past 20 years I estimate myself that we as growers from these large citrus- producing areas in the United States have spent well over $200 mil- lion in developing this market through advertising, promotion, and Tesearch. We are now in a position to supply the American consumer with plenty of citrus and citrus products at prices that go back almost `20 years. Last year we sold frozen orange concentrate from Florida `throughout the United States to the American consumer at prices that `go back, as I said, about 20 years. Now, with this developmental effort and with our rapidly increasing production of citrus not only in Florida but coming in California and Texas as well, we don't think it is right or fair by any stretch of `the imagination to allow cheaply produced foreign fruit to take advantage of this huge market development effort. And we underscore again that the productive capacity of these citrus industries, p'articularly in Florida, is so great that we will be able to more than take care of the American consumer at prices well below most soft drinks that are now being sold throughout the United States. Our problem is so great that we believe that we can only stay in business by spending more of our money, all paid for by our growers PAGENO="0542" 4982 in further developing our domestic market, through advertising, pro- motion, and research. We soon expect in Florida the productive ca- pacity of our orange industry to be well over 200 million boxes as corn- pared to 104 million boxes this season, 144 million boxes last season,~ so you can see by this that our productive capacity is there and that our productive estimates for the future are going to go very quickly now into figures that are going to be very hard to handle for the Florida citrus industry. In the past years we have worked with the Department of Agricul- ture in what they call the three-party plan and have invested consid- erable sums of money in the development of some of these European. markets and at the present time we hope to be able to export 3 to 4 percent of our crop and hopefully, if this market development pro-. gram continues, to increase 10 to 15 percent. Before the Trade Information Committee at hearings in 1963 we testified very strongly, much aiong the same basis that we are today,. that the tariff on foreign citrus coming into the United States must be maintained, and Mr. Herlong has mentioned here this morning that we were told in no uncertain terms that the tariff structure for Florida citrus or citrus in general throughout the United States was not changed in any shape or form. However, I have since learned that the statement that Mr. Carl made from Texas Citrus Mutual probably is in reference to kumquats only and I certainly hope it is, but that will be checked into and we will furnish the committee with some authoritative information on this as quickly as possible. (The material referred to was not received by the committee by the time the hearing went to press.) Mr. RUTLEDGE. We get to Mexico. In Mexico they have a very rapidly expanding citrus industry. Just a few years ago they pro- duced 12 million boxes of citrus. Now they are producing 34 million boxes of citrus, and they have the capacity there to go right on up to 80 or 90 million boxes of citrus. I think there is a very significant figure here of what can happen because it is happening to the U.S. citrus industry. It affects Cali- fornia, affects Florida. Last year Mexico brought into the United States 258 cars of oranges. This season they will bring in 2,323 car- loads of oranges and 422 carloads of tangerines, so we have a very significant problem here inasmuch as with their plantings the pres- sure for them to export more and more of their production is going to be beyond them and they will be seeking again this largest citrus consuming market that we, the Florida citrus industry, along with California, have developed over a long period of years. Mexico has all kinds of regulations about taking citrus into Mex- ico. I don't think we would want to, but we inquired about it. We might want to sell some concentrate in Mexico City but they have certainly got that tied up to an extent where it takes all kinds of permits and regulations to comply with and it is practically impos- sible to get anything in there. PAGENO="0543" 4983 In short, the citrus trade with Mexico is a one-way street with them entering the United States only. We completely support in every way, shape, and form the fruit and vegetable statement made here this morning and as well we support the House bill 16416 in every respect and we will further support any revisions of this bill as they might apply to our industry and other industries. A very brief summary, gentlemen. The Florida citrus industry now has retail sales totaling $1 billion for the first time. Florida citrus production will probably double within 10 years or less and we are as well trying to develop our export markets, get back what we lost of the freeze of 1962 in Canada and in Europe. The other recommendation is that the current tariffs on foreign citrus imports into the United States must be maintained if the U.S. citrus industry is to survive. I thank you very much for the opportunity to appear before the committee and hope that this information will help you in proceed- ing to help not only the citrus industry but other industries through- out the United States that are virtually being put out of business or soon will be put out of business without some kind of quota or other devices to help us stay in business. (Mr. Rutledge's prepared statement follows:) A STATEMENT OF ROBERT W. RUTLEDGE, ExECUTIvE VICE PRESIDENT AND GENERAL MANAGER, FLORIDA CITRUs MUTUAL My name is Robert W. Rutledge and I am Executive Vice President and Gen- eral Manager of Florida Citrus Mutual, Lakeland, Florida, representing more than 15,000 Florida citrus growers in matters affecting their general welfare. There are approximately 17,000 commercial citrus growers in Florida, and Mutual represents approximately 85-90% of the total citrus production. TLORIDA CITRUS RETAIL SALES AT $1 BILLION MARK ANNUALLY Florida Citrus Mutual has been organized for 20 years and since 1948 retail sales of Florida's citrus fruit and products have increased from $250 million to $1 billion this season, an incrOase of 300%. Over this same 20-year span, com- mercial citrus acreage in Florida has increased from 325,000 acres to nearly 1,000,000 acres today. This season Florida citrus growers will receive about $300 million on-tree for their fruit, up considerably from the previous season which saw many growers fail to meet their cost of production. The American consuming citrus market is the largest in the world. Florida citrus growers and those of other citrus growing areas in the U.S. have devel- oped this market through continued expenditures of huge sums of money for advertising, merchandising, publlcity and research. I estimate that the U.S. citrus industry has invested at least $200 million over the past 20 years in the development of domestic markets through advertising, merchandising, pub- licity and research expenditures paid for almost entirely by the citrus growers in Florida, California, Arizona. and Texas. It is not right nor fair, in any stretch of the imagination, to allow cheaply produced foreign fruit to take advantage of this huge market development effort. As well it has been underscored time and time again that the productive ca- pacity of the U.S. citrus industry, and particularly Florida, is increasing rapidly and the American consumer's needs for fresh citrus and citrus products are more than adequately being fulfilled at extremely reasonable prices. In fact, last year's consumer prices for frozen concentrated orange juice-which utilizes 60% to 65% of our orange crop-were as low as any time in its twenty year history. It is well recognized that the Florida Citrus Industry can only stay in busi- nes:s by fui~ther intensive development of our domestic markets and this can be done only by further research, `advertising and promotion, most of which is paid for by the grower. PAGENO="0544" 4984 FLORIDA ORANGE PRODUCTION MAY DOUBLE WITHIN TEN YEARS The Florida Citrus industry is on the threshold of rapidly expanding orange production in the years ahead since total commercial orange acreage in Florida is now about 750,000 acres of which nearly 30% is considered non-bearing, or under 5 years of age. The harvesting season that is now rapidly concluding will see approximately 104 million boxes of oranges picked, 401/2 million boxes less than the previous season's record breaking orange crop of 1441/2 million boxes. Ac- cording to a projection made by the Florida Crop & Livestock Reporting Service last November, Florida's orange production could reach as high as 190 mil- lion boxes by 1971-72, and as high as 230 million boxes by the 1976-1977 season. Even though these estimates are on the high side, it seems almost a certainty that we will produce 200 million boxes of oranges within 10 years' time. Chart #1 shows the high and low orange production predictions made by the Crop Reporting Service for 5 year intervals based on the orange trees that are al- ready in the ground. Therefore, the entire Florida Citrus Industry is busily engaged in long range planning in order to develop ways not only to increase i~onsumption and demand for Florida citrus fruit and products, but to help the industry to better manage its supplies from season to season in order to keep citrus growing profitable in the future. THE FLORIDA CITRUS INDUSTRY HAS AN ALL-OUT CAMPAIGN TO EXPAND EXPORTS While the Florida Citrus Industry is working on a number of important pro- posals to increase domestic consumption of citrus, one of the most important projects is to increase the sales of our fresh and processed products in export mar- -~iets, primarily Canada and European markets However, `because of the rapidly rising citrus production in many foreign countries shows in Table #1 attached, competition for the major foreign consuming markets has been intense and Florida has never been able to export more than about 3% of its citrus crop. During the 1966-67 record crop year, the industry joined hands in a "three- party" program with the U.S. Department of Agriculture's Foreign Agricultural Service and distributors of Florida citrus abroad in a cooperative promotional effort to market citrus fruit and products in Europe. The initial results were so exciting that during the 1967-68 season over $700,000 was spent by the Flor- ida Citrus Commission in these "three-party" programs. For next season the Florida Citrus Commission has budgeted nearly $1 million as their share in pro- moting our citrus products overseas These "three-party" plans involve 9 Euro- pean countries and are primarily centered on developing consumer interest in concentrated and chilled citrus juices from Florida. The Florida Citrus Industry is deeply grateful to the U.S. Department of Agriculture and its assistance in developing these European programs that will help the Florida Citrus Industy to export more of its citrus crops in the future which will contribute importantly to a more favorable balance of trade for the United States. It is hoped that in a few years we can be exporting either in fresh form or processed products at least 10-15% of our total orange crop. IMPORT TARIFFS ON FOREIGN CITRUS MUST BE MAINTAINED The announcement last year that citrus import tariffs were virtually un- changed following the Kennedy Round of Tariff and Trade Conferences in Geneva was warmly greeted by every citrus grower in Florida and throughout the United States. I appeared before the Trade Information Committee and the U.S. Tariff Commission in Washington on December 17 and 18, 1963 to testify that any reduction in import duties on foreign citrus would spell economic dis- aster for the Florida citrus grower. With citrus production rising rapidly in so many foreign countries, and with their costs of producing citrus and marketing substantially lower than ours because of the low labor costs, and further be- cause most foreign citrus producing countries export more than 1/2 of their citrus crop, the United States would be a prime market for these low cost pro- ducers if the tariffs were lowered. As a result, most citrus fruit and products were placed on the "exceptions list" because of its over-riding national interest. The necessity for retaining these citrus import duties are extremely important today in light of the rapidly increasing production that is forecast for the future PAGENO="0545" 4985 which will guarantee plentiful U.S. citrus supplies for the domestic market at very reasonable consumer prices. Some concessions were gained at the Kennedy Round which will help in the increased exports of FlOrida citrus, including some liberalization of Great Brit- ain's import restrictions to permit entry of U.S. produced fresh grapefruit beginning December 1 of each season instead of holding it back until March 1 when our shipping season is nearing the end. Also there has been some lowering of import duties on canned citrus products shipped to Canada. However, we still have substantial non-tariff barriers in many foreign countries where we would like to expand consumption, especially of concentrate, chilled and canned citrus products. We are concerned with such foreign non-tariff barriers as refer- ence prices, variable levies, unreasonable pesticide residue limitations, import licenses required, specialized label requirements and many other ingenuous devices to hinder the sale of our fruit and products overseas. Therefore I urge the Government to exert every effort, under existing laws, in pursuing the re- moval of these non-tariff barriers. The most important premise that we have stressed in all of our discussions concerning tariffs and trade has been that the Florida Citrus Industry does not seek access to the markets of any country which produces sufficient citrus to supply its domestic market, but only seeks "equality of access" to the markets of those countries which do not produce citrus fruits in any significant volume. RAPIDLY EXPANDING MEXICAN CITRUS PRODUCTION COULD SERIOUSLY HURT U.S. CITRUS INDUSTRY Table #1 entitled "World Orange Production" shows that Mexico's orange and tangerine production averaged under 5 million boxes during the 1935-39 period, but under a policy of government subsidization of citrus growers in Mexico, production last season was nearly 28 million boxes and the crop will have increased by 37% in just 3 years from now. From 1951 to 1965 orange and tangerine trees in Mexico have increased from 12,350,000 to 34,900,000 which is neariy %rds as many orange and tangerine trees as there are in Florida. In spite of the import tariff which amounts to 1ç~ per pound of fresh oranges or tangerines, this season has seen orange imports from Mexico into the United States increase from 258 carloads last year to 2,323 carloads, or a 9-fold increase in just one year. In addition, 422 carloads of Mexican tangerines was sold in the United States this season. If this trend continues it could be disastrous for U.S. citrus growers, especially since the Mexican orange grower can grow, har- vest, pack, transport to port of entry at the Texas border, and pay the prevail- ing duty per 90 lb. box for a sum 50~ per box less than the Florida orange grower. It is interesting to note that while we do have a 1~ per lb. duty on Mexican orange and tangerine imports into the U.S., it is virtually impossible to ship and sell any fresh oranges, tangerines, grapefruit, or processed citrus products into Mexico because of their severe trade barriers. There is an actual embargo on oranges entering Baja California in order to eliminate competition to Mexi- can oranges. Mexico has serious restrictions on the importation of frozen orange concentrate which involves the refusal to issue import permits and a prohibitive tariff. In short, citrus trade with Mexico is a one way street entering *the United States only. MUTUAL SUPPORTS THE PROPOSED FRESH FRUITS AND VEGETABLES MARKET-SHARING ACT OF 1968 Primarily because of the rapidly increasing production of Mexican citrus and its potential threat `to the economy of the Florida citrus industry, Florida Citrus Mutual urges the Ways and Means Committee to favorably consider H.R. 16116 which is referred to as the "Fresh Fruits and Vegetabies Market- Sharing Act of 1968". It would allow Mexican citrus interests to share in the total market without the spectre of flooding `the U.S. market with low cost Mexican oranges and tangerines which could seriously disrupt the marketing of not only Florida fresh citrus fruits, but Texas, California and Arizona also. Florida Citrus Mutual is in full accord with the basic purposes of this Market Sharing Act introduced by Representatives Hhrlong and Rogers of Florida. 95-1.59 O-68---pt. 10-35 PAGENO="0546" 4986 I sincerely appreciate this opportunity to appear before the House Committee on Ways and Means and for your interest in proposals that will not only keep the U.S. citrus industry healthy, but in ways of expanding our citrus exports in order to improve our U.S. balance of trade with foreign nations. Em millions of boxes, and percentj Country ~ Average production, 1935-39 Production, 1965-66 season Production, 1966-67 season Estimated Exports Percent of production, (fresh), production 1971-72 1965-66 exported season United States Florida Other, United States United States as percent of world Algeria Argentina Australia Brazil Egypt Greece Israel Italy Japan Lebanon Mexico Morocco South Africa Spain Turkey Others World total 67. 0 140. 6 187. 5 200 6.9 5 (24.5) (42. 5) (100.4) (40. 2) (144.5) (43. 0) (155) (45) 35. 0 28. 0 32. 0 29 7. 2 3.2 9. 2 2.7 23.0 6.4 1. 5 8.7 11.7 15.9 1. 1 4. 8 .9 4. 2 24.2 1.1 4.1 10.1 16. 4 6.5 36.8 13.0 10. 0 20.8 37.0 51.6 3. 7 27. 2 18.8 15. 6 58.9 10.5 15.9 10.6 23. 5 7.1 36.5 12.4 13. 4 24.9 43.1 64.4 4.4 27. 7 21.3 16. 1 71.7 11.6 16.8 13 6.8 67 25 (1) 10 (1) 45 (1) 16 (I) 18 2. 4 24 31 11.7 56 50 4.8 13 70 (1) 5 (1) 38 (1) 25 13.3 71 20 9. 8 63 80 39.9 68 14 (1) 20 (1) 189. 7 493.4 593. 0 680 95. 6 1 Not available. Source: Foreign Agricultural Service, USDA, except `Estimated Production 1971-72" is projected by Florida Citrus Mutual. CHART NO. 1 Million Boxes 1966-67 `71-72 Florida Crop and Livestock Reporting Service November 1967 175 150 125 100 FLORIDA ORANGES Production Potential of Existing Acreage Projected to 1986-87 275 250 225 200 2 High Range 2 0~ - - - - 196 4~-1 ~7~8 19 10 50 Low Range 0 Basic Assumptions: Acreage: Present 746,000 acres; Loss 1% per year Productivity: Trees 25 years, 100%; 15-24 years, 81%; 10-14 years, 47%; 5- 9 years, 20%; 1- 4 years, none Present Production: 1967-68, low; 1966-67, high `76-'77 `86-87 PAGENO="0547" U.S. DEPARTMENT OF AGRICULTURE ORLD ORANGE PRODUCTION (Includes Tangerines For Some Of The Countries Other Than U. S.) FOREIGN AGRICULTURAL SERVICE PAGENO="0548" 4988 SUMMARY AND R!ECOMMENDATIONS OF FLORIDA CITRUS MUTUAL 1. The Florida Citrus Industry now has retail sales totaling $1 billion an- nually and the American consuming citrus market is the largest in the world. 2. Florida's orange production will probably double within 10 years and there will be plentiful supplies of citrus at reasonable prices for the American consumer for many years to come. 3. The Florida Citrus Industry is looking to export markets as an important outlet for our rapidly rising production nnd is investing considerable sums of money in these export markets. We urge that vigorous efforts be made to remove many of the non-tariff barriers in some of the important European consuming markets. 4. The current tariffs on foreign citrus imports into the U.S. must be main- tained if the U.S. citrus industryis to survive. 5. Rapidly increasing Mexican citrus production could seriously hurt the U.S. citrus industry, and Florida Citrus Mutual recommends the approval by the House Ways and Means Committee of H.R. 16416 entitled "Fresh Fruits and Vegetables Market-Sharing Act of 1968". Mr. HFIRLONG. Thank you, Mr. Rutledge. This information is help- ful to the committee. I note in your statement that you said that the Florida citrus acreage had increased in recent years from roughly 325,000 acres to upward of a million acres at this time. Is there any particular reason for this great increase in plantings of citrus? Mr. RTJTLEDCIE. One is that the price following the 1962 freeze at- tracted a lot of people, a lot of big corporations, but we attribute most of this increase to a loophole in the tax law and that is where it allows a corporation or an individual to plant an orange grove and expense the maintenance of this grove up for `a ~xiriod of 5 years. Now, if this maintenance expense had to be capitalized I think it would be an entirely different situation and this is something that we would certainly like to see done before you go home this session because we need it, and in. the citrus industry when we bring this up people say it is too late. It isn't too late because there will be at least 50,000 to 60,000 addi- tional acres planted in the State of Florida this year with most of it being planted with speculation money as a tax writeoff, sell the prop- erty in 5 years to get capital gains, and most of this money is, I re- peat a.gain, from the outside with the idea of gaining capital gains and is putting them in direct competition with people who wish to be in the citrus business from here on out. Mr. fuRLONG. This loophole that you mention is actually a method under the present law of transferring normal income into capital gain. Mr. RuTLEDGE. Yes, sir. It actually has put many corporations in the citrus business, put a lot of dentists, lawyers, doctors, not that we are particularly against any of those people, but I am sure that they wouldn't have been in the citrus business today if it hadn't been for this tax loophole. Mr. HERLONG. Thank you. Thank you very much. Any further ques- tions? Mr. Conable. Mr. CONABLE. Mr. Chairman. I notice quite a few Jaffa oranges in the market. Are you getting a lot of oranges from that area? Mr. RUTLEIxIE. At this time of year, yes, sir, and they come in and they pay the duty. It amounts to 1 cent per pound and they can still be very competitive at that rate.. PAGENO="0549" 4989 Mr. CONABLE. I am a little confused about your summary and rec- ommendations here. You have as one recommendation: The current tariffs on foreign citrus imports into the United States must be maintained if the U.S. citrus industry is to survive. Is maintenance of the tariffs enough for you with the conditions you described? Mr. RUTLEDGE. Up to this time it has been but with our continued increase in the cost of producing and manufacturing and picking and hauling our crops it will soon not be enough. Mr. CONABLE. In other words, in addition to this recommendation you are interested in some quantitative limitation of imports as well? Mr. RUTLEDGE. Yes, sir; and that is why we support the Herlong- Rogers bill as well because a tariff in itself in the future probably will not be enough. Mr. CONABLE. That is all, Mr. Chairman. Mr. HERLONG. Mr. Watts. Mr. WATTS. Mr. Rutledge, I was very much interested in your state- ment about a lot of people going into the orange growing business for the purpose of gaining capital gains. What is the solution to a situa- tion of that kind? I am fairly familiar with Mr. Herlong's bill. Mr. RUTLEDGE. We think that is the solution. That's the only solu- tion that we see that resembles any remote possibility of solving this problem. Mr. WATTS. In other words, make everybody capitalize the purpose of the ground? Mr. RUTLEDGE. No; capitalize the expense of maintaining that grove for a period of 4 years. Mr. WATTS. A period of 4 years. Mr. RUTLEDGE. Yes, sir. Then if they would still run a loss, then after that period of time if they would lose money on that particular citrus grove, that could be written off as an expense item. Mr. WATTS. But if they made money on it, it couldn't be written off. Mr. RUTLEDGE. That is right. Mr. WATTS. In other words, if I follow you, your idea would be to make the man that comes into the grove business for the first 4 years capitalize all of his expenses in connection with it. Mr. RUTLEDGE. Yes, sir. Mr. WATTS. And even though he kept that grove 30 years if he made money on it he would still be capitalizing it. Mr. RUTLEDGE. Yes, sir; and the way they get their money back then is they have a higher base from which to depreciate on after that period of time. Mr. WATTS. What about people that now have groves and they have had for 10 or 15 years? Would it affect those? Mr. RUTLEDGE. It wouldn't affect them whatsoever. Mr. WATTS. The bill is entirely prospective and not retroactive in any sense. Mr. RUTLEDGE. That is right. It would only apply to trees not in the ground at the time of passage of the bill. It would not be retroactive, sir, that is right. Mr. WATTS. Even though they kept that grove for many, many years they wouldn't be allowed to charge off the expense of spraying it? PAGENO="0550" 4990 Mr. RUTLEDGE. No; all those expenses are-in other words, if you lose money now on a grove that is 5 or 6 or 10 years old you can charge this off to expenses. What we are after here is not to make it profitable. Mr. WATTS. If somebody has had an orange grove we will say for 20 years and he makes money on it-I am just trying to get some infor- mation. I am not familiar with it. I come from Kentucky where we raise tobacco, not citrus fruit-if he, say, has had a growth of 20 years and in 1968 he makes money he is not allowed to charge off as expenses the spraying and the pruning or whatever there is. Mr. RUTLEDGE. Yes, sir. Mr. HERLONG. In that year he can. Mr. RUTLEDGE. This bill that we are referring to would only affect young growers put in the ground and only would affect those young groves up to 4 years. Mr. HERLONG. If I may explain to the gentleman- Mr. WATTS. I guess I got off the track. Mr. HERLONG (continuing). An orange grove doesn't produce any crop for the first 4 years so what you are doing is building up a capital. investment and some people are building up this capital investment by the use of normal income and charging it off as an expense rather than as capital outlay. Mr. WATTS. Then they sell? Mr. HERLONG. Yes; and get a capital gain on the difference between what they paid for the row land and what they sell the production grove for. Mr. Watts. I can see the loophole there but if I understood him, he said if a man cont.inued to own that grove for 20 years and made money on it he would still be in the same position. Mr. RUTLEDGE. No. Mr. HERLONG. No. He would still add to the capital cost of t.hat orange grove the money spent in producing it for the first 4 years but after that each year stands on its own bottom. Mr. RUTLEDGE. That is right. Mr. WATTS. Well, at the end of the fourth year he would have a capital investment of x dollars. Then after the fourth year whateve.r expense he was out in producing fruit would be a deductible expense; am I correct? Mr. RUTLEDGE. That is correct. Mr. WATTS. That sounds fair to me. I misunderstood. I thought I asked you if he continue to have it for 20 yea.rs would he still have to capitalize all of the expenses on it. I thought you answered me by say- ing if he made money he would. Mr. RUTLEDGE. No; I didn't mean to say that. Mr. WATTS. What I misinterpreted that you meant was when he did sell it if he had it 20 years he had a capital gain on the expense that he had had for the first 4 years. Mr. RUTLEDGE. That would still be. Mr. WATTS. After that he is just like anybody else that is farming. He charges off his current expenses against current income of that year. Mr. RUTLEDGE. Yes, sir. Mr. WATTS. That sounds reasonable. Thank you, sir. PAGENO="0551" 4991 Mr. RUTLEDGE. Yes, sir. Mr. HERLONG. Are there further questions? If not, we thank you very much, Mr. Rutledge, for your testimony and for your help to the committee. Mr. RUTLEDGE. Thank you, sir. Thank you, gentlemen, very much. Mr. HERLONG. The next witness is Mr. Daniel R. Gallagher. Mr. Gallagher, we welcome you to the committee and will you identify yourself for the record and proceed and also identify those with you. STATEMKNT OP DANIEL It. GALLAGHER, DIRECTOR, `GREEN OLIVE TRADE ASSOCIATION; ACCOMPANIED' BY G. K. PATTERSON, CALIFORNIA OLIVE GROWERS & CANIIERS INDUSTRY COMMIT- TEE, A~I) JOHN E.. NOLAN, JR., LEGISLATIVE COUNSEL Mr. GALLAGHER. Thank you. Mr. HERL0NG. May I suggest that the House has gone into session now and we may be called away for a quorum call in a very short time. I just wanted to let you know that. Mr. GALLAGHER. All right. Fine. Thank you, Mr. Ohairman. My name is Daniel R. Gallagher. I am director of the Green Olive Trade Association. The gentleman on my right is G. K. Patterson, representing the California Olive Growers & Canners Industry Com- mittee,' and Mr. John Nolan on my left who is our legislative counsel. Our organizations represent virtually the entire California can- fling industry. The purpose for our being here before you this morning is to acquaint you with an inequity in the tariff that is, in our esti- mation, posing a threat to our industry. Basically, the problem arises in that the tariff structure as it exists today does not differentiate between the duty applicable to bulk- or retail-size containers. If retail-size containers had been in effect at the time that the duty was applied, in all probability' they would have taken on a different tariff duty than that which exists now. Because of this disparity in the tariff structure the Spanish Gov- ernment has recently taken advantage of this gap to develop the olive bottling industry organized, controlled, subsidized, and aimed directly at the U.S. market which is their principal export market. Over `the past few years the imports of bottled olives have increased by 100-fold to the point where they will, during the current fiscal year, account for approximately one-third of the total market. Wi'thout appropriate legislation approved by this committee and promptly enacted, the American olive industry as it exists today can- not survive. We wish to point out the composition of the industry, the tariff as it presently exists, `the threat that this competition poses to our in- dustry, and the proposed relief that we would like to realize. The industry is presently cOmprised of two segments, the Cali- forma-style or black, ripe olive industry, whicth is entirely domestic in nature, grown, processed, packed in the United States. The other basic style is the Spanish or green olive. Traditionally, most green olives imported and sold in the United States originate in Spain and are shipped to this `country in bulk containers, wooden casks or barrels, with several hundred pounds' capacity. PAGENO="0552" 4992 Until recently, bottled olives were not introduced into the American market. In .a recent year, 157 million pounds of olives were consumed by the American public. Fifty-one percent of these were Spanish origin, 43 percent California, with 6 percent being miscellaneous. The industry is comprised of three distinct segments-bottlers, growers, and processors. The bottlers consist of 60 firms operating ap- proximately 70 pla.nts located throughout the United States whose principal activity is importing bulk olives for packaging and retail sales. * Many of these firms are family businesses which have perpetuated themselves through several generations of service. Others are present- ly divisions of larger companies and chainstores. For the most part, they are located around the major metropolitan areas such as New York, Chicago, St. Louis, Houston, Philadelphia. They employ thou- sands of workers and perform the function of inspecting, washing, packing, brining, and marketing the product that originates in Spain. The machinery utilized for this purpose varies from a relatively simple operation to a complicated modern laborsaving setup. There are approximately 25,000 olive groves in the United States, virtually all of them in `California, occupying around 32,000 acres. For this purpose, the land has great economic value as the consumption of California-type olives has increased over the last 20 years. The present on-farm value of this crop has exceeded $10 million. They employ around 2,000 permanent employees, in peak harvest reaching 10,000 workers. Many of the `growers are members of one of the three large cooperatives that process, pack, and sell California olives. The remainder sell their output to `the nine independent pack- ers of California fruit. There are nine remaining from `the 30 or so that existed in the late 1950's. The industry itself is comprised `of a highly mechanized pack- ing and processing operation, representing' a multimillion-doliar investment. The essential facts. about the U.S. tariff on olives is that the tariff does not differentiate between bulk and imports in smaller containers. The duty is the same on olives whether they are imported in a 900- pound cask or a 2-ounce bottle. Basically the duty, as the tariff reads, is either on a 30-cent-per- gallon basis, which is approximately 15 percent ad valorem, or 20 cents a gallon, which is 17 percent ad valorem. The California-style olives which are presently not imported would be dutiable at 5 cents per pound for an effective rate of about 11 per- cent ad valorem. The last few years have seen the emergency of an olive bottling industry in Spain, monolithic instructure and aggressively supported and guided by the Spanish Government. In April 1966, Libby Espana, S.A., a wholly-owned subsidiary of a U.S. corporation, began operations with substantial shipments of olives in retail-size glass containers to this country. It has since been joined in this enter- prise by other Spanish olive bottling concerns and by Cadesa, a govern- ment-sponsored organization comprised of Spanish bulk olive exporters. Together they have achieved the dramatic penetration of the Ameri- can bottled olive market as we represented by the graphs in the front of our statement. * PAGENO="0553" 4993 The United States through the years has represented about 80 per- cent of Spain's market for exports of bulk olives. They have now set upon a program to convert these olives into glass as opposed to ex- porting them in bulk. Under the program the Government now determines the types, the qualities of the olives, the containers, the exports, and to what mar- kets, prescribed sales and payment methods, and retains the right to fix export prices. I would like to point out that they are presently exercis- ing this right. The industry has been highly subsidized since a Spanish Minister of Agriculture order of March 1965, at which time they implemented a program for development that provided for various concessions for industrialization and expansion of their glass-packing capacity. The 1967 Tariff Commission report notes that the incentives have been granted to Libby, Cadesa, and other Spanish exporters. One of the principal factors and benefits they derive is a 12-percent turnover tax on the value of exported goods which is paid to the bottle exporters and constitutes a direct export subsidy. Exports in bulk have not re- ceived any of these subsidies as do bottled olive export to the United States. This existence today represents a very direct threat to the importers of bulk olives from Spain and potentially represents a threat to the California olive growers likewise. Should the program continue of subsidizing the industry it is only going to be a matter of time before eventually it takes over the entire American market. The damage has already been partially done to the bottlers of green' olives. At stake are thousands of jobs of bottling employees, capital investment that has been undertaken by the olive growers in Cali- fornia, the amount of land disposed to growing of olives in California, and the attendant business that is done with related manufacturers of caps, glass bottles, and other industries. `There is practically no'thing the American industry can do to avoid these losses. We recognize the inconsistencies in the labor picture be- tween the United States and Spain and this is basically something that we feel we can live with but we cannot live with the subsidy that the industry is presently enjoying in Spain. It cannot be applied to a more economical method of producing the products `because basically they cannot produce more economically than we can. For the most part, the olive groves `of California cannot be used for any other purpose, and I think this is a very significant factor when you relate the orobable impact on the industry. Presently House bill 11247', which has been introduced by Congress- man Utt of your committee and 14 other House Mem'bers, as well as a corresnonding piece of legislation in the Senate cosponsored by Sen- ators Dirksen and Kuchel wherein they are proposing a 50 percent ad valorem duty on sealed containers containing less than 11/2 pounds of olives, the proposed `bills represent a sensible solution to the problem. Had this retail-size packing industry existed at `the time that the tariffs were originally adopted it is reasonable to assume that some provision would have `been made for this segment of the industry. PAGENO="0554" 4994 The proposed 50 percent will possibly place the domestic industry in a competitive position with the subsidy program presently existing in Spain. This legislation will not take away the Spanish exporters' market for olives. Even without the sale of bottled olives the United States uses about 97 percent of the olives from Spain or sold as a green olive in the United States. The bills proposed would merely take away the advantages of the outdated tariff structure and aggressive Government support presently provided the Spanish industry. Prompt enactment of these bills will be instrumental in preserving the industry. If I may state from my own situation, unless we get some kind of recognition of the problem with which we are confronted it isn't a matter of whether we want to continue to operate as we are or not; the economic facts of life will almost preclude our existence as an industry within the next few years. Mr. HERLONG. Thank you, Mr. Gallagher. I notice that you de- parted from your statement. Would you want your full statement to appear in the record ~ Mr. GALLAGHER. Yes, please. (Mr. Gallagher's prepared statement follows:) STATEMENT OF DANIEL R. GALLAGHER, DIRECTOR, GREEN OLIVE TRADE ASSOCIATION, INC., AND CALIFORNIA OLIVE GROWERS & CANNEBS STATEMENT OF THE PROBLEM This Statement is presented by the Green Olive Trade Association and the California Olive Growers and Canners Industry Committee. Together these or- ganizations represent nearly all of the principal independent importers of Span- ish olives and virtually the entire American olive growing and canning industry. The threat which confronts these organizations and their members is relatively new. It arises because our tariff schedules do not differentiate between olives im- ported in bulk and olives imported in small retail-size containers. This differen- tiation is made in the case of other imported food products, and it probably would have `been made for olives if the importation of bottled olives had been consid- ered a possibility when our tariff laws were enacted. Because it was not, a gap has existed in our tariff structure. It is this gap which the Spanish government has taken advantage of to force the development of an olive bottling industry organized, controlled, subsidized and aimed directly at the United States market. Over the past few years our imports of bottled olives have increased more than 100-fold as the accompanying graph shows. During the same period the im- ported product has captured about one4hird of the total market. It is well on its way to capturing the rest. Without appropriate legislation, approved by this Committee and promptly enacted, the American olive industry cannot survive. This Statement will discuss in turn the American olive industry, our present tariff treatment of olives `and the basis of the threat posed by Spanish bottled olive imports. It will conclude with a brief discussion of the legislative relief the industry considers essential to its continued existence. THE AMERICAN OLIVE INDUSTRY To understand the American olive industry it is helpful to think of it in terms of the two basic kinds of table olives used here. The so-called "California-style" or ripe olive is black. It is entirely a domestic product, grown, processed and packed in the United States. The other basic type is the so-called "Spanish-style" or green olive. Tradi- tionally most green olives have been grown in Spain and shipped to this country PAGENO="0555" 4995 in bulk containers-wooden casks or barrels-of several hundred pounds capac- ity. Until recently, most green olives have been packaged in this country, usually in bottles. In a typical recent year Americans consumed 157 million pounds of olives. Of these, some 79 million pounds or 51% were Spanish-style (green) olives; 70 million pounds or 43% were California-style (black) olives and the remaining 6% was comprised of Greek, dried, and other miscellaneous types. The American olive industry has developed over the years in three distinct groups: bottlers, growers, and processors. The bottlers consist of some 60 firms operating more than 70 plants where im- ported bulk olives are packaged for retail sale. Many of these are small family businesses, some with a record of several generations of service. Some are divi- sions of larger food companies or chain stores. For the most part they are located around the major population centers, principally: New York, Chicago, Cincin- nati, Detroit, Houston, and Philadelphia. They employ thousands of production and related workers. They perform the important functions of washing the olives under high pressure water sprays, inspecting them to remove defective olives, packing them in salt brine lactic acid solutions into bottles that are vacuum capped and labeled. Their machinery varies from simple equipment in small plants to the complicated stainless steel labor-saving equipment that many have added in recent years. There are approximately 2,500 olive growers in the United States, virtually all in California where they work some 32,000 acres devoted exclusively to olive production. For this purpose the land has great economic value as the consump- tion of California-style olives has doubled over the period of the last twenty years. In recent years the on-farm value of their crop has exceeded ten million dollars. They have some 2,000 permanent employees and their employment at harvest peak reaches approximately 10,000 workers. Many of the growers are members of one of the three large cooperatives that process, pack and sell California olives Those who do not belong to a coopera- tive sell their crop to the independent processing firms. There are nine process- ing firms now remaining from the 30 or so that existed in the late 1950's. The processors employ thousands of additional workers and have a multimiflion dollar investment in the high speed pitters, slicers, fillers, washers, continuous cookers, vacuum packing machines and other modern equipment necessary to their businesses. TARIFF TREATMENT OF OLIVES The essential fact about the United States tariff on olives is that our tariff schedules do not differentiate between imports in bulk and imports in smaller containers. Thus, unlike the treatment of many other food products, our domestic olive packers and their employees receive no protection. The duty is the same whether olives are imported in 900 pound casks or 2 ounce bottles. Nearly all imports on Spanish-style olives are dutiable under one or the other of two TSUS categories: Item 148.50, at 30 cents per gallon, or Item 148.44, at 20 cents per gallon. These are specific rather than ad valorem rates and they have remained unchanged since 1930. Their ad valorem equivalents based on the values of the market year 1965-66 are 15% and 17% respectively, as nearly as can be figured from known data. During that year 73% of olive imports came in at the effective rate of 15% ad valorem and 20% at the effective rate of 17% ad valorem. If California-style olives were imported (they have not been to date in any significant quantities) they would be dutiable under TSUS 148.56 at 5 cents per pound, an effective rate of about 11% ad valorem. EMERGENCE OF THE SPANISH THREAT The last few years have seen the emergence of an olive bottling industry in Spain, monolithic instructure and aggressively supported and guided by the Spanish government. In April, 1966, Libby Espana, S.A., a wholly-owned sub- sidiary of a United States corporation, began operations with substantial ship- ments of olives in retail-size glass containers to this country. It has since been joined in this enterprise by other Spanish olive bottling concerns and by CADESA, a government-sponsored organization comprised of Spanish bulk olive exporters. Together they have achieved the dramatic penetration of the American bottled olive market shown on the graph on page 4998. PAGENO="0556" 4996 Spain has been for many years a major world exporter of olives, although re- cently nearly 80% of Spain's olive exports have been shipped directly to the United States. In an effort to convert those exports from bulk to bottles, the Spanish government has moved into a comprehensive program of control. Under this program the government now determines what types and qualities of olives and olive containers may be exported to what markets, prescribes sales and pay- ment methods and retains the right (recently exercised) to fix export prices.1 The Spanish olive bottling industry has been developed by a program of substantial subsidies-direct as well as indirect. This program is described in the Order of March 3, 1905, issued by the Spanish Ministry of Agriculture (as reported in the USDA Foreign Agricultural Service Report, AGR #65, dated March 29, 1900, and entitled "Spain: Government Programs for the Expansion of Spanish Agriculture"). Quoting from that publication, the benefits are li~teth as follows: 1. Freedom to amortize equipment in the firstS years. 2. Government credit priority. 3. Compulsory expropriation of land (for erection of plants). 4. Reduction of up to 95 percent of Excise Tax (Licencia Fiscal) during the time of installation. 5. Reduction for 5 years of up to 50 per cent on tax levied on capital yields (Impuesto sobre las Rentas del Capital) derived from loans issued by Span- ish and foreign banking and credit organizations, provided such yields are applied to the financing of new investments. 6. Reduction for 5 years of up to 95 per cent of Estate or Patrimonial Trails- fer Tax, (Impuesto General sobre Transrnisiones Patrimoniales y Actos Juridi- cos) and legal documents thereto, as levied on establishment of firms or caiptal expansions. 7. Reduction for 5 years of up to 95 per cent of Turnover Tax (impuesto General sobre el Trafico de las Empresas) paid on sales which serve to ac- quire foreign equipment goods for establishment of new industries. 8. Reduction for 5 years of up to 95 per cent of import duties and compensatory duties (Derechos Arancelarios and Impuestos de Compensacion de Gravamenes Interiores) levied on imports of equipment goods and the materials and/or products incorporated into the equipment manufactured locally. 9. Up to 20 per cent subsidy on :ictu'~l inve~tments. 10. Reduction for 5 years of up to 95 per cent of Municipal taxes (Arbitrios o Tasas de las Corporaciones Locales) applied to the establishment of new indus- tries or the expansion of existing ones. The 1967 Tariff Conunission Report2 notes that these incentives have been granted to Libby Espana, CARESA, and Aceitunera del Aijarafe, and that the Spanish government also refunds the Spanish turnover tax and local indirect taxes previously paid on products that are exported. This tax refund amounts to 12% of the value of the exported goods, paid to the bottled olive exporters, and constitutes a direct export subsidy for bottled olives. Exports in bulk have received none of these subsidies during the period of spectacular growth of bottled olive exports to the United States.2 WHY LEGISLATION IS APPROPRIATE American growers and processors of olives-a major agricultural industry in California-must inevitably confront the same threat to their existence. Although U.S. bottlers have borne the brunt of subsidized Spanish exports so far, our growers are equally vulnerable. Spain is already exporting California-style ripe olives to countries other than the United States, and has also sent samples of such olives to the United States. Should it begin a program of subsidizing canners of ripe olives as it did for bottlers of green olives it could take over the entire American market. ~ Through the use of an Exporter's Card (Carta del Exportador) and a cartel-like managing group for the entire Spanish olive industry (ACEMESA) the `Spanish government has extended its control to the smallest details of olive packaging and export. 2 United States Tariff Commission, Olives, Report to the United States `Senate on Investi gation' No. 322-51, 1967, pp. 14-15. 3Late this Spring the Spanish government made a similar benefit (11% tax refund) available for bulk exports, but the government-established minimum prices prevent this from having any price reduction effect. PAGENO="0557" 4907 The damage already done to bottlers of green olives in the United States and the threat facing ripe olive producers and canners is substantial in national terms as well as in terms of the individuals and businesses which are directly affected. At stake are thousands of jobs of bottling employees, capital investments of millions of dollars in plants and equipment, at least 40 million dollars worth of investment in olive groves, and the sole or principal source of income of 2,500 California olive growers and additional thousands of harvest workers. In addi- tion, some eight million dollars worth of annual business for American manu- facturers of caps, bottles, cans, labels and other supplies is in jeopardy. There is practically nothing the American olive industry can do to avoid these losses. It has already invested heavily in modern labor-saving equipment and plants. It cannot reduce U.S. wage rates to Spanish levels, nor can it obtain the governmental subsidies and rebates which are available to Spanish bottlers. It cannot use much of its machinery for other purposes, since most was specifically designed or adapted for olives. For the most part, the olive groves in California cannot be used for other purposes. In recognition of these harsh facts, fifteen Members of the House of Repre- sentatives and Senators Dirksen and Kuchel have within the last year proposed legislation to create an additional tariff category for olives imported in sealed containers holding less than 91/2 pounds.4 The new tariff category would have a higher rate of duty (50% ad valorem) than the duties on bulk. The duties on olives imported in bulk would remain unchanged. The proposed Bills prescribe a sensible tariff classification. Had there been a retail-size packing industry in Spain when our tariff structure was adopted, it is virtually certain that our laws would have reflected this distinction. We have readily accepted it for other food products and other nations have recognized it for olives as well. The proposed 50% ad valorem duty is reasonable in the light of the govern- ment-assisted price warfare to which the American olive industry has been sub- jected. It can be demonstrated that this duty is appropriate on the basis of import prices made possible by the strong hand the Spanish government is playing in the international olive trade. This legislation will not take away from Spanish exporters any market that they have traditionally enjoyed. Even without sale of bottled olives here they would continue to have a virtual monopoly (97%) of the United States market for green olives through sales in bulk. The Bills proposed would merely prevent them from taking advantage of an anomalous outdated tariff structure with aggressive government support in order to eliminate the American olive industry. Prompt enactment of the Bills is necessary to preserve that industry. Mr. JTERLONG. Without objection it will so appear. Do you other gentlemen care to testify? Mr. NOLAN. No, not unless there are questions. Mr. }IIERLONG. Are there any questions? Mr. Burke. Mr. BURKE. In Spain do they subsidize the olive industry there? Mr. GALLAGHER. Yes. Mr. BURKE. The big problem, as I understand it from the mail I am receiving from the people back home, is that in recent years there has been a change in the method of shipping olives here to the United States. Before they used to ship them in large barrels and now they are arriving here in small containers. They have more or less displaced a lot of the olive packaging industry here. Is that true? Mr. GALLAGHER. That is correct. Mr. BURKE. Is the same rate of tariff paid when they are shipped in by bulk as they are in small containers? 4H.R. 11247. introduced by Congressman Tunney; H.R. 1i1286 introduced by Congress- man TJtt, and H.R. 11743, introduced by Congressmen Sisk, Betts, Burke, Johnson, Mathias, Teague, Tunney, Talcott, Moss, McFall, Gubser, Leggett, and Clausen. PAGENO="0558" 4998 IMPORTS OF SPANISH BOTTLEDOLIVES (Millions of Pounds) 20__ I I I `5 I I I 0 Note: During December 967 and January-April 968, a period of 5 calendar months, 9 million 10 5 pounds of bottled olives were imported into the United States--over three times the amount imported for the comparable five months of the prior campaign year. The rate of imports is increasing dramatically, but even if it were projected without increase, the I ~ total for the 1967-68 crop year would esceed 21 milhon_pounds. Source: Figures for /963-64 through /965-66 from Report to the U.S. Senate on investigation No. 332-5/, March 3/, /967, figures for /966-67 and /967-68 from "informac/ones y Estadisticas Sobre La Ace/tuna" -Ventura de Ia Vega, Seville. 21.6 (at 4/30/68) 963-64 1964-65 965-66 966-67 1967-68 PAGENO="0559" 49~o Mr. GALLAGHER. The tariff structure as it presently is set up applies on a gallonage basis and does not differentiate as to the form in which they are imported. Mr. BURKE. What do you believe is the answer to it? Mr. GALLAGHER. We believe that the only possible answer to the sub- sidy program would be to recognize this inequity in the tariff structure and to provide for it in the form of an ad valorem duty on glass. This is not related to the problem, if I might say, purely of labor because 90 percent plus of the product sold in this country in retail-size containers is machine-packed and while there is a distinct differential in the labor cost existing between the United States and Spain, as a percentage of total cost it is not great. Mr. BURKE. I would like to point this out too. I notice that the quan- tity, in millions of pounds, in the small containers was increased from 0.5 in 1965 and in 1968 the January to April figures indicate that that has risen up to 8.4. Mr. GALLAGHER. Is this from the graph? Mr. BURKE. I have some information here from the Tariff Commis- sion. That is the quantity in total imports of Spanish style olives. They have gone up to 8.4. Mr. GALLAGHER. This is what period now? Mr. BURKE. That is the percent of production. Mr. GALLAGHER. In million of pounds? Mr. BURKE. In million of pounds, yes, sir. Mr. GALLAGHER. Right. Of course the problem didn't originate until around 1963. In 1963 and 1964 it was in its developmental stages and it subsequently started to take hold and has now become a very significant problem. Up through April of this year for a 5-month period it has gone up to about 9 million pounds as opposed to the same comparable period, say, back in 1965-66 of 1.2 million pounds. We are estimating this year it will be about 21.6 million pounds. Mr. BURKE. Thank you very much. That is all, Mr. Chairman. Mr. HERLONG. Mr. Utt. Mr. Urr. I notice in your statement you list wt least 10 subsidy incentives granted for exports but y~u did not speak about them when you were giving your oral testimony and it would seem to me that any one, two, or three of these would be sufficient to develop a countervail- ing duty on exports from Spain. Have you had any countervailing duties assessed on imports from Spain? Mr. GALLAGHER. We have tried to effect a countervailing duty pri- marily on the premise that they are given a 12-percent drawback on the value of exported goods, tax drawback. We have not approached it from the standpoint of these other items that are stated here. Whether or not this could be substantiated would be difficult to ascer- tain because it is my understanding that these same benefits are derived by any industry presently being developed in Spain for the purpose of converting raw materials into finished goods. Mr. Urr. One thing that is missing from your testimony is the time that it takes to produce an olive tree and an olive crop which differen- tiates it completely from tomatoes, or cotton, or any other annual crop that we have and I wish you would put that in the record.~ How long does it take to produce an olive tree that produces commercially? PAGENO="0560" 5000 Mr. GALLAGHER. It takes approximately 10 years to bring an or- chard into production. Mr. Urr. Ten years? Mr. GALLAGHER. Ten years. Mr~ TJTT. Which means that if the assault that is now being made on the olive market in America is successful they are not going to start an olive grove very quickly again and it will destroy an industry prac- tically forever and it would be possible under this cartel system that they have and the supports on exports for Spain to completely capture the American olive market, would it not? Mr. GALLAGHER. This is true. Mr. TJTT. Thank you. Mr. HERLONG. Any further questions? Mr. Betts. Mr. BETTS. I have no questions, Mr. Gallagher, but `I am pleased that you are here and have given this statement to us. There are two olive bottling plants in our district. The case you make is with refer- ence to the bottling industry, and not the processing because the pro- cessing is done in Spain, is that correct? Mr. GALLAGHER. That is right. Mr. BETTS. And the only problem is that of shipping olives in bot- tles from Spain for sale in the American market in competition with olives bottled in this country. Mr. GALLAGHER. That is correct. Mr. BETTS. Thank you. Mr. HERLONG. Mr. Broyhill. Mr. BROYHILL. How does the importing of the green olive injure the growers of ripe olives in California? Or does the amount of tariff affect only the bottle industry of California? Mr. GALLAGHER. Potentially. Let me turn this question over. Mr. BROYHILL. It is a different type Of olive, isn't it, used for dif- ferent purposes? Mr. PATTERSON. What is actually happening to the bottlers of the green olives today perhaps can be described as the potential threat to the ripe olives which the California industry is dependent upon al- most entirely for their economic well being. Mr. BROYHILL. Would the consumer eat more green olives rather than ripe olives? Mr. PATTERSON. No, but our concern is that the policies the Spanish Government is now embarked upon to encourage industrialization of. plants, they have plenty of olives there they can make into ripe olives and package them and send them in here and do the same thing to the California olive industry that is already happening, and we have a big investment in orchards and the whole economic structure out there. Mr. BROYHILL. Thank you. Mr. PATTERSON. We are in trouble. Mr. HERLONG. Thank you very much for your appearance before the committee. We appreciate it. Mr. GALLAGHER. Thank you very much. Mr. HERLONG. I recognize the gentleman from California, Mr. TJtt. Mr. TJrr. Our next witness is Mr. Ed Crane from Santa Ana, Calif. He represents the chili industry in the State of California, having a large plant in my district, and this group represents about 90 percent PAGENO="0561" 5001 of the production of chili products. Mr. Crane is an able representative and a great citizen of our community, as was his father before him. I want to apologize for the lack of members today but we got caught in a legislative bind so the House convened at 11 o'clock today instead of 12 and you are suffering from a lack of an audience. I assure you that the members of the committee will read carefully the statement that you make to us. Thank you for coming. Mr. HERLONG. Mr. Crane, we welcome you to the committee. If you will identify yourself and the gentleman with you for the record and proceed in your own way we will be glad to recognize you. STATEMENT OP W. ED CRANE, IN BEHALF OP CAL-COMPACK FOODS, GENTRY CORP., SANTA MARIA CHILI, TN0., AND UNIVERSAL FOODS CORP.; ACCOMPANIED BY LEWE B. MAB.TLN, OOUNSLL Mr. CRANE. Thank you, Mr. Chairman and my friend Mr. Utt. I am W. Ed Crane, vice president of Cal-Compack Foods and I appear here today on behalf of the four domestic chili pepper and paprika pro- ducers listed below: Cal-Compack Foods, Santa Ana, Calif.; Gentry Corp., Glendale, Calif.; Santa Maria Chili, Inc., Santa Maria, Calif.; and Universal Foods Corp., Westminster, Calif. I have with me Mr. Lewe B. Martin of the law firm of Pope, Ballard & Loos. Mr. Chairman, I would like permission to read portions of rthe testimony which you have and then speak extemporaneously to the balance of it but I would like it in the record as it is. Mr. HERLONG. Without objection your entire statement will appear in the record. Mr. CRANE. Thank you, sir. The four companies which I have spoken of account for 90 percent of the chili pepper and paprika prod- ucts produced in the United States. Our particular interest in these hearings is to oppose the further delegation by Congress to the President of the authority to negotiate trade agreements contained in section 201 of H.R. 17551. Section 201 has been represented as necessary by the administration for housekeeping requirements in case the President should raise duties under section 351, .the "escape clause" or if a tariff rate should be increased because of a customs reclassification. The record shows that 12 industries have applied for relief under the escape clause and all have been rejected at the Tariff Commission level. H.R. 17551 while relaxing the criteria for firms and workers continues the same rigid requirements for industries and indeed as Ambassador Roth clearly stated in his address to the U.S. Chamber of Commerce on May 21, 1968, the administration has no intention of according any industry tariff relief. It is true that in some few rare cases an upward duty adjustment has resulted from a customs reclassification and in these cases the U.S. negotiators have bent over backwards to compensate complaining foreign countries. However, the vast majority of judicial decisions or administrative reclassifications have resulted in tariff reductions for which no compen- 95-159 O-68--pt. 1O-36 PAGENO="0562" 5002 sation to the United States has ever been negotiated. The plain facts are that the United States has an overwhelming credit balance in these matters. Under the circumstances it would appear there is no need for further tariff cutting authority unless in this bill there is some intent to slash duties on those items which were reserved by the Kennedy round or were import-sensitive and therefore left out. At this point I would like to deviate from the reading of the testi- mony, Mr. Chairman, and speak to two or three of the points that we cover in this testimony. We appeared in 1963 and ngain in 1964 as an industry before the Tariff Commission and the Trade Information Committee to present our case for reservation in the Kennedy round. We are at the present time bringing up these industry figures and rewriting the report that we presented to the TIC and the Tariff Commission at that time and Mr. Chairman, we would like permission to submit that document when it is completed to this committee if that is possible. Mr. HERLONG. Without objection it will be done. (The information referred to was not received by the committee by the time hearing went to press.) Mr. CRANE. A little bit on the background of paprika and chile pepper, which are tied together as far as our industry is concerned, but which are two different items as far as the countries from which they come. Most of the parprika imported into this country comes from either the Mediterranean countries or the Balkan comitries and Hungary which is sometimes included in the Balkan countries. All of these are non-GATT countries with the exception of Spain and Spain produces, or ships to the United States, about half of the imports that come into this country, so Spain obviously has a significant effect as far as setting the price is concerned in the market place. The history of Spanish imports or imports from Spain has been a rather steady amount as far as the actual amount of pounds imported. From right after the war until about the midfifties Spain had a strict government control and the Spanish Government actually set the price at which Spain would ship paprika to the United States. Then along in the midfifties the Spanish Government withdrew this type of control and more or less established a free market, but at the same time they put on an export bounty or subsidy, if you would, of 12 percent so that the Spanish exporter if he produced and sold at the cost would have a 12 percent profit just on the basis of the bounty that he got in orderto bring U.S. dollars into Spain. This has been going on for about 10 or 12 years now and in Spain, as I say, the market has fluctuated in a range of 33 cents, probably plus or minus 10 percent, and the Spanish producer has continued to ship into this country. If Spain produces a lot of paprika the prices go down. If the crop is short the prices go up. But as Spain goes so go the rest of the countries involved. Another thing that is critical as far as Spain is concerned is that in November of last year with the devaluation of the pound, Spain because of her high trade with the United Kingdom 2 days later de- PAGENO="0563" 5003 valuated the peseta, which is their currency, about 14.4 percent, the same as the British devaluation. Immediately the Spanish quotations to this country dropped 14 percent. Within a day we were getting new quotations of a 14 percent less price so with the devaluation they just dropped their prices 14 percent. A couple of days later the Spanish Government was concerned that other countries were reaping the benefits of their devaluation and so they applied an export tax. They left the 12 percent export bounty on but they reapplied back an export tax which was 3 pesetas per kilo or about 6 percent, this in order to recover for the Spanish Govern- ment a part of the benefit that we might reap or any other country might reap outside of the United Kingdom. They kept this on until about the first of March when after a meet- ing with the paprika industry over there, representatives and so forth, they determined it was best to take it off and so they took the 6 percent export tax off on the first of March and immediately the price dropped back down. In other words, the bounty paid and the export tax applied directly affected the quotations of the Spanish exporter to this country. Obvi- ously our paprika industry, which is relatively a small industry and certainly well controlled to a great degree by the imports-this is not included in this statement here but a point I might make is the total paprika industry in this country is about 17 million pounds and about 12 million pounds of that is imports, six of the 12 coming from Spain. The balance of the 5 million pounds is produced in the United States. This is an industry that has grown and in answer to a question on the previous testimony our internal production is growing ait about the same rate as our imports. In other words, there is not much deviation. We are holding our share of the market under the present conditions. I would like to speak a little bit about Mexico and the position that we are in with Mexico as pertains to chili peppers. Mexico produces no paprika for all practical purposes, a little bit for their own home consumption. They import none to my knowledge. They use very little but they are a large producer of chili peppers. In fact they produce more chili peppers in Mexico than we do here in the United States and about 45 percent of our U.S. consumption comes from Mexico. Mexico does not belong to GATT. It has always reaped the benefits of any negotiations which we have had with GATT but at no time have they shown any favoritism toward us. In Mexico chili peppers have an ad valorem duty of 35 percent and in addition to this you must get a permit to ship into Mexico. With very few exceptions I would say there has been no exportation of chili peppers from the United States to Mexico in the last 20 years. In 1962 the Mexican Government in order to try to control the pro- duction and establish a stabilized price of Mexican chili peppers went into a subsidization program and they bought chili peppers from the farmers and producers at a fixed price and then sold them at whatever they could get for them. There were peppers actually purchased in that year. We bought some ourselves because of a severe heatwave `that curtailed about 40 percent of the California crop. PAGENO="0564" 5004 In other words, our crop was down 40 percent so we had some available down there and we actually bought peppers at half what the Mexican Government paid the Mexican farmer for them. The Mexican Government, according to the information that they gave me, lost about 12 million pesos on this type of subsidization program in 1962. They actually dumped most of it in the United States. Since that time they have still been active but the market has stablized so that we have had no real adverse effects since then. About 9 million pounds of chili peppers actually came into the United States from Mexico last year and about half of this 9 million pounds, and these figures will be available in the report that we will submit later on exactly, came in ground form and was ground of course by Mexican labor .and at Mexican wages, which is about one-fifth of our wage in California at the present time, so it is a little difficult to compete with them. Any concession that we were to give as far as these agreements would obviously help Mexico and in that they could export more to this country. I have one other thing that I will skip over that I would like to speak to. Do I have more time, Mr. Chairman? Mr. HERLONG. Yes, go right ahead. Mr. CRANE. Specifically we have mentioned in the statement the price squeeze. We have discussed a little bit about the effect of Mexico and of Spain on the price which we are able to sell our product for. The price-cost squeeze of course affects us as it does all industry but I would like just to bring to the attention of the committee two specific things which are beyond our control and which have a vital effect on the chili pepper industry. One of course is the act of Congress which took away from agricul- ture the braceros, which all of you are very well aware of. This actually increased our cost when we had to replace the bracero with local labor which was less efficient about $100 an acre which is more than the profit the farmer normally gets from it. Our cost went up from about 40 percent as far as the actual wage rate was concerned but the efficiency of the local itinerant labor avail- able is about 60 percent of what the Mexican national was so we have obviously had a hardship laborwise as far as the California farmer is concerned due to this act of Congress. Just recently, which would appear somewhat innocuous in the month of May the Secretary of Agriculture, whom I understand controls the subsidization on the sugar beet industry, has the right to establish what the going wage is to be used in the farming of sugar beets; that is, in the hoeing, and thinning, and so forth-on May 24 I understand the date was-determined that the going rate of labor in sugar beets should be raised from $1.40 to $1.50 an hour. The sugar beet grower in order to get his subsidy, which will average about $2 a ton or about two-thirds of the profit he receives, obviously has to go along with this wage increase set by the Secretary but the thing that we would like to point out is that with this wage increase just in sugar beets it is an automatic minimum wage set for all farm labor in the State of California because if you are working crews in sugar beets and working crews right next to them in peppers or any PAGENO="0565" 5005 other vegetable crop, if you have this minimum on one, the others have to follow you or you get no labor, so it is just a matter of economic practicality. This Government action by the Secretary of Agriculture, which obviously was not pointed at the chili pepper or paprika industry, raised our cost and whether that cost is borne by the farmer or by the prot~essor, or by the consumer, ultimately it is an increase of another 7 percent in the cost which obviously wasn't intended for us in any way, shape, or form. I would like to conclude my remarks, Mr. Chairman, with the last part of my written statement. We have no export markets for our products and no foreseeable reciprocal duty reductions abroad can create a market. Import penetration is already at an unreasonably high level-a level not contemplated by any of the omnibus orderly market- ing or import ceiling bills now before Congress. As stated above the escape clause mechanism of the TEA is unwork- able and apparently is not to be changed for industries seriously affected by imports. Under the circumstances, we urgently recommend that no further tariff cutting `authority be delegated until the past and future effects of our trade policy can be more thoroughly analyzed and effective or mandatory reservations from negotiations be established for industries such as the chili pepper and paprika industry. Mr. Chairman, I thank you for allowing me to appear. (Mr. Crane's prepared statement follows:) STATEMENT OF W. ED CRANE ON BEHALF OF THE DOMESTIC CHILI PEPPER AND PAPRIKA INDUSTRY Mr. Chairman and members of the Committee, I am W. Ed Crane, Vice Presi- dent of Cal-Compack Foods and I appear here today on behalf of the four domestic chili pepper and paprika producers listed below: Oal-Compack Foods, Santa Ana, California. Gentry Oorporation, Glendale, California. Santa Maria Chili, Inc., Santa Maria, California. Universal Foods Corporation, Westminster, California. These four companies account for over 90% of the chili pepper and paprika products produced in the United States. Our particular interest in these hearings is to oppose the further delegation by Congress to the President of the authority to negotiate trade agreements contained in Section 201 of H.R. 17551. Section 201 has been represented as necessary by the Administration for house- keeping requirements in case the President should raise duties under Section 351, the "escape clause" or if a tariff rate should be increased `because of a cus- toms reclassification. The record shows that twelve industries have applied for relief under the escape clause and all have been rejected at the Tariff Com- mission level. H.R. 17551 while relaxing the criteria for firms and workers continues the same rigid requirements for industries and indeed as Ambassador Roth clearly stated in his address to `the U.S. Chamber of Commerce on May 21, 1968. the Administration has no intention of according any industry tariff relief. It is true that in some few rare cases an upward du'ty adjustment has resulted from a customs reclassification and in these cases the U.S. negotiators have bent over backwards to compensate complaining foreign countries. However, the vast ma)ority of judicial decisions or administrative reclassilleations have resulted in tariff reductions for which no compensation to the U.S. `has ever been nego- tiated. The plain facts are that the U.S. has an overwhelming credit balance in these matters. Under the circumstances it would `appear there is no need for further tariff cutting authority unless there were some "intent" to slash the duties of articles PAGENO="0566" 5006 reserved `because they were import sensitive or were simply overlooked in the Kennedy Round. Representatives of this industry appeared before the Tariff Commission and the Trade Information Committee in 1963-64 to admonish our negotiators against including chili pepper and paprika in any across-the-board negotiations. The reasons for reserving these articles then are more imperative today in this era of trading blocs, sophisticated non-tariff barriers, balance of payments deficits and devaluation of currencies. Paprika has historically been imported from `the low cost producing Mediter- ranean and Balkan countries. These countries either are communist (Czechoslo- vakia, Hungary, Rumania and Bulgaria) or are non-GATT members, (Morocco and Portugal) or in the case of Spain offered very few concessions. Any duty cut on paprika would add to the large price advantage enjoyed by the non- communist exporters receiving most favored nation treatment and would serve as an attraction to these countries to increase their production and exportation to the U.S. Spain over the years has supplied 45-60% of imports of paprika (30-40% of U.S. consumption) and as such substantially influenced U.S. market prices. Following World War II and into the mid 1950's the Spanish Government set the price at which paprika could be exported to the U.S. As a result of this price control, the Spaniards were able `to sell as much or `as little in the U.S. as required by the size of their crop. Subsequently, the Spaniards reestablished a free market and prices were allowed to fluctuate. However, the Spanish Government did not overlook this important market and source of dollar earnings and set up an export subsidy payment of 12% of the value of paprika exports. Thus, a Spanish producer, even if he sold ~it his cost, had `a built-in profit of 12%. Although this subsidy payment has provided the Spanish industry a devas- tating competitive weapon, the recent upheaval in international monetary exchanges may prove even more damaging. On the 18th of November of 1967, the British devalued the pound from $2.80 per pound to $2.40, or 14.3%. Two d'ays later, the Spanish Government devalued the peseta 14.4% from $.0167 per peseta to $.0143. The result of this was an immediate drop in `the quotations of Spanish paprika for export to the United States, almost identical in amount to the devaluation. Several d'ays later, the Spaniards had some second thoughts and added an export tax which would eliminate some of the effects which devaluation had on non-U.K. exports. This export tax amounted to 3 pesetas per kilo, or the equivalent of about $.0195 per pound, or `about 6%. With the addition of this export tax, the quotations of Spanish paprika went back up a similar amount. The net effect since the devaluation was a reduction in the quotations of Spanish paprikas by 14%, and then an *increa'~e of approximately 6% b~ick after the export tax. On approximately March 1, the Spanish Government rescinded the export tax, thus reinstating the full 14.4 decrease. The economic effect on the U.S. industry has been an intensification of the price-cost squeeze caused by increasing raw material and labor costs and the lowering of import prices. Mexico, the only commercial import source of chili peppers, accounting for approximately 45% of the U.S. consumption, warrants careful consideration in any future trade policies. It does not belong to GA'l'T, grants no concessions to the United States but readily accepts the benefits of all of the concessions granted by the U.S. and other GATP members. Imports from Mexico, though rapidly increasing at the existing rates of duty. were given a recent stimulus by the Mexican Government. In 1962 a Government program was established to support the production of and stabilization of the price of chili peppers in Mexico. This program resulted in the dumping of large ciuantities into the U.S. in 1963-64. Ground chili pepper exnorts, which product incidentally is not used by Mexicans, are climbing swiftly. This has not only provided a new avenue to dispose of sur- plus chili pepper production, but has increased the man hours worked in this Mexican industry-and at wage rates one-fifth those of the U.S. Again, any concession on chili pepper either ground or unground would attract even larger imports of chili products and unilaterally benefit Mexican producers and exporters. We see no merit to even considering legislation which will again expose this industry to the possibility of the lowering of an already low duty rate. We have no export markets for our products and no foreseeable reciprocal duty reductions abroad can create a market. Import penetration is already at PAGENO="0567" 5007 an unreasonably high level-a level not contemplated by any of the omnibus orderly marketing or import ceiling bills now before Congress. As stated above the escape clause mechanism of the TEA is unworkable and apparently is not to be changed for industries seriously affected by imports. Under the circumstances, we urgently recommend that no further tariff cut- ting authority be delegated until the past and future effects of our trade policy can be more thoroughly analyzed and effective or mandatory reservations from negotiations be established for industries such as the chili pepper and paprika industry. Mr. HERLONG. Thank you, Mr. Crane, for your testimony. Any questions? Mr. Urr. I don't have a question but I am glad Mr. Crane brought out the effect of the bracero program on agriculture. It is a very * interesting thing in that for years and years we have not had the agri- culture people coming before this committee asking for relief. Since we had the bracero program terminated which was simply a supplemental supply of labor they have been coming in by droves. I know in California there they are in the same boat that you are in, that the bracero labor was a supplemental program that helped make it. I planted a crop with the normal domestic help. When it came time to harvest it I had to have supplemental labor. If I couldn't get that supplemental labor I left that crop and went into a completely mechan- ized crop. We just had testimony, before you came into the room, from Florida tomato growers who had one grower that dropped from 373 employees down to 75 because he went out of tomatoes into a mechan- ized crop, potatoes, and in that group were a lot of Mexican laborers who lost their jobs because there was no supplemental program available. I know the bracero program is not a matter for this committee to consider, but we are getting the indirect results of the bracero program. Thank you. Mr. CRANE. Thank you, Mr. TJtt. Mr. HERLONG. Thank you very much for your statement. Mr. HERLONG. The next witness is Mr. Fred W. Burrows. Mr. Burrows if you will identify yourself for the purpose of the record we will be happy to receive your statement. STATil~MEN~ OP FRED W. BURROWS, EXECUTIVE VICE PRESIDENT, INTERNATIONAL APPLE ASSOCIATION Mr. BtJRROWS. Thank you. My name is Fred W. Burrows and I am executive vice president of the International Apple Association with offices here in Washington, D.C. If it is all right with the Chairman we would like to summarize our statement and have the entire statement appear in the record. Mr. HERLONG. Without objection the entire statement will appear in the record. Mr. BURRROWS. The International Apple Association is a nonprofit membership organization serving the entire fruit industry with em- phasis on apples and winter pears. Our membership covers all segments of the apples and winter pear industry, including producers, packers, shippers, processors, wholesale and retail distributors, exporters, im- porters, and allied industries. PAGENO="0568" 5008 We have members in 34 countries outside the United States. Our membership produces and/or handles in excess of 75 percent of the commercial apples and winter pear crop and is directly concerned with practically all of the apple exports and 90 percent of the winter pear exports. The U.S. National Fruit Export Council presented a general state- ment of position and policy before the House Ways and Means Comrn mittee on June 11, 1968. As a charter member of the USNFEC, we strongly support that statement. Further, we would like to emphasize to the conimittee that, since its inception in 1895, the International Apple Association, Inc. has advocated a policy of "free trade." Our statement here today will cover some of the specific tariff and trade problems facing the apple and pear industry and how they come about. First I think it should be recognized that apples and pears are im- portant to many countries around the world and in the United States there are thousands and thousands of employees in the growing, packing, storing, and selling of the apple and pear crops. In addition there are many thousands of people employed by allied industries that are dependent on these crops. The estimated farm value of the combined apple and winter pear crops in the United States in recent years is about $300 million and the retail value is about a billion dollars. In addition to being important to our overall economy apple and pear exports are important to our balance of payments position. We would emphasize that the exports of apples and pears are all sold for cash and there is no subsidy involved. In 1965-66 apples contributed $26 million and pears $6 million to our balance-of-payments position. In 1966-67 apples contributed about $20 million and pears nearly $7 million to our balance of payments. We would like to point out that if we could regain our 1935-39 export levels we could easily double the contribution to the balance-of- payments position. We would like to emphasize that the world apple market is facing real stiff competition. During the past 30 years the total world apple production has dou- bled in that 30-year period and in that same 30-year period the European apple production has nearly tripled. The production in Asia has increased five times and in South America 10 times. On the other hand, during that same 30 years the U.S. share of the total world apple production has dropped from about 50 percent to 25 percent. I have been speaking about apples primarily but the world pear production is about in the same picture. Historically the United States has been well recognized as the leader in the production of apples and pears, and for many, many years, we have pioneered and developed innovations including new varieties, new cultural practices, new equipment, new storage facilities, et cetera, and as a result we grew, packed, and sold the best apple and pear in the world and we enjoyed a comparative advantage in the world markets and we still do, everything being equal. During the last 60 or 70 years exports of apples and pears have been an important and integral part of our market. However, at the end of World War II many countries around the world and notably in Europe erected trade harriers, both tariff and nontariff. PAGENO="0569" 5009 At the same time these countries copied `and borrowed our techniques and varieties and increased their own production behind these barriers. We would like to emphasize that the barriers were erected first and then the production came after `the erection of the barriers. More importantly, these barriers still exist and their prime purpose is to protect the domestic industries in these countries around the world and in many cases this production of apples and pears in other coun- tries is m!arginal in nature and without the protection of `the tariff and nontariff barriers they could not exist. I would like to contrast this development with what has happened in the United States. Through hard work, private money, without sub- sidy the apple and pear industry and apple and pear exports developed without a protective wall. However, with this increased production in other countries and the high duties from Europe, in Scandinavia, and the admitted pro- tectionist attitudes in the various trading blocs around the world, our export market for apples has dropped considerably. In other words, in 1934-38 we were the No. 1 apple exporting nation `in the world. We accounted for about 38 percent of all the world apple exports. In 1962-66 we dropped from No. 1 to No. 6 during that 30-year period and we only accounted for about 7 percent of the world apple exports and. this despite an admitted comparative advantage in our fruit and by comparative advantage I mean our fruit is better packed, has better quality, and better varieties. We just can't overcome these barriers that have been erected. If we get these barriers eliminated we can compete and we think we can come back to where we were in prewar years. Just in passing I would like to emphasize that during the prewar years, 1934 to 1948, we exported 8 percent of our crop. During the period 1962 to 1966 we only exported 3.5 percent of our total apple crophere in the United States. What are some of these nontariff barriers? Well, we have seasonal opening dates. In other words, in Belgium, Norway, Sweden, Finland, Ireland, and some other countries they don't `allow any U.S. apples and pears in until a certain date and this is for the purpose of protect- ing their domestic production. The opening dates are usually not established until well after the domestic production is out of the way and as a result we lose a lot of valuable marketing time. Other nontariff barriers are quotas and licenses and there are three countries involved there. Norway has a quota system, United Kingdom has a quota license system, and so does Venezuela. In Norway they have established a quota of 18,000 metric tons. This was established some 3 or 4 years ago and it is readily apparent that this 18,000 metric tons is not adequate to meet the domestic needs. As a result we could export more to Norway if our negotiators could show them the light over there so to speak. In the United Kingdom we believe that the total quota is adequate. However, it is split up into two periods. In other words, the second half of the year, for example, July through December, 20 percent of the quota is allocated to that period and 80 percent to the period from January 1, to June 30 and our most important marketing period is in the period prior to Christmas. PAGENO="0570" 5010 *That is when the prices are high. That is when we are not faced with competition from the southern hemisphere which comes in as you know in opposite seasons to ours so that if we could get the United Kingdom quota switched over so we could get 40 percent in that July to December period we would be in better shape. In Venezuela the situation there is quite irritating. Three years ago they instituted a licensing system in Venezuela and at the same time announced that they were going to reduce the quota 10 percent a year in order to establish a tropical fruit industry of their own. This tropical fruit industry is not in existence commercially speaking and yet they have cut the quota 10 percent per year for the last 2 years. On top of that they have not issued the licenses until about February 1 or early February so that the importers down there and our exporters here lose a month of valuable marketing time. Of course we have to talk about Mexico too. Everybody does, it seems. They have a peculiar situation in that apples are restricted. We can't get in there. We can get in in two States along the border and we do get some apples into Mexico through that vehicle. On the other hand, they have a duty of 75 percent ad valorem plus a specific duty of a little over 2 cents a pound so it is just prohibitive. At the same time as we all know Mexico is not a part of GATT. They enjoy most favored nation treatment so wethink that our negotiators or our people should start making Mexico toe the line. There are other nontariff barriers such as variable levy and reference prices, containers, which will be adopted by the Common Market, which are not universally used around the world. In many countries they have established food and drug laws that have no semblance to reasonableness and these can be used as effective barriers to keep us out. Some of these are covered more thoroughly in my statement. I think one of the most effective nontariff barriers is the simple fact of trading blocs such as the Common Market and such as LAFTA. We have a situation in Brazil whereby they are a member of LAFTA. LAFTA comes in, Argentina can send food into Brazil free of duty. On the o+h~r hand, the duty on U.S. apples is 37 percent. We have been working with Ambassador Roth for better than a year trying to get a seasonal duty in Brazil for U.S. apples and pears. In other words, say from September 1 to March 1 when Argentina is not in the market whatsoever we have been pushing Ambassador Roth to negotiate for a 50-percent reduction in the duty during that time. Reportedly negotiations are going on in Geneva. However, the re- sults are very slow and nothing has been achieved as yet. In addition Brazil has an 18-percent sales tax on fruit but this same tax does not apply to LAFTA fruit. This is an outright violation of GATT and again we have been in contact with Ambassador Roth's office and supposedly aide memoires et cetera are going back and forth in order to eFminate the discrepancy. In a quick perusal of the appendix pages 19 and 20 we will show you that we are faced with very high and sometimes insurmountable duties on both apples and pears in many countries. For example, in Norway the duty is close to $1.25 to $1.50 a box. PAGENO="0571" 15011 In Finland the duty is nearly 13 cents a pound to December 10 and then after that is 15 cents ad valorem. In Sweden the duty is 2.2 cents a pound to March 1 and in Mexico I have already given you some fig- ures, but in general the duty on apples and pears even in countries that don't produce apples and pears is high and there isn't a reason in the world why our negotiators or our negotiating teams should not seek more vigorously reasonable and equitable access into those countries. We would like to point out that the only tariff concessions obtained for TLS. apples and pears in the Kennedy round was from Canada and in this case each country, the United States and Canada, agreed to eliminate a very minor duty on apples. Further, the Kennedy round failed to produce any change in the nontariff barriers that exist in many countries against our apples and pears and, therefore, the net result remains the same; namely, that we are denied the rights and privileges that we are entitled to under the GATT. I think Congressman Rivers put it most aptly, that we have enough laws on the books and I would just like to say in closing that we would like to make a point of enunciation and execution. The U.S. Govermnent has long enunciated that we would insist other countries live up to their commitments and provide reciprocal trade opportunities for the United States. We think that now is the time for execution and a little less enunciation. (Mr. Burrows' prepared statement follows:) STATEMENT OF FRED W. BURROWS, EXECUTIVE VICE PRESIDENT, INTERNATIONAL APPLE ASSOCIATION, INC. The International Apple Association, Inc. is a non-profit menthership organiza- tion serving the entire fruit industry with emphasis on apples and winter pears. Our menlbership covers all segments of the apple and winter pear industry, in- cluding producers, packers, shippers, processors, wholesale and retail distributors, exporters, impor1~ers, and allied industries. We have members iii thirty-four countries outside the United States. Our membership produces and/orhandles hi excess of seventy-five percent of the commercial apple and wirrter pear crops and is directly concerned with practically all of the apple exports and ninety percent of the winter pear exports. The U.S. National Fruit Export Council presented a genbral statement of position and policy before the House Ways and Means Committee on rune 11, 19G8. As a charter member of the USNFEO, we strongly support that statement. Further, we would emphasize that, since its inception in 181)5, the International Apple Association, Inc. has advocated a policy of "free trade". Our statement here today will cover some of the specific tariff and trade probrems facing the apple and pear industry and the background that created and amplified these problems. THE VALUE AND IMPORTANCE OF APPLES AND PEARS Apples and pears are important commodities in many countries around the world. In the U.S. thousands upon thousands of men and women are employed in the growing, packing, processing, transporting and selling of these crops. Also, many allied industry firms and their employees are dependent, in part or whole, on these crops for their existence. In recent years the combin~d farm value of an average apple and pear crop is estimated at over $300,O(X),000, with a retail value after packing, storing, processing, transporting, etc. of over one billion dollars. THE COMPETITIVE SITUATION The appended tables, and the tables below, show that the world apple and pear production has increased substantially during the past 35 years, notably in Europe, Asia and South America. Th~~ increase has been especially sharp in those three areas since the close of World War II. PAGENO="0572" [Million bushelsj Average crop 1935-39 1956-~60 1962-66 North America Europe Asia South America South Africa, Australia, and New Zealand 143. 1 124.6 12.8 2. 4 14. 5 134. 8 288.1 48.3 20. 7 16. 9 156. 5 338.3 70.9 23. 8 29. 4 Total 297. 4 508. 8 618 9 U.S. share (percent) 48. 1 26. 5 25. 3 WORLD PEAR PRODUCTION North America 29. 6 31. 4 28. 8 105.5 Europe Asia 43.1 10.9 82.8 13.8 21.8 South America 2. 5 4. 6 4. 7 South Africa, Australia, and New Zealand Total & 6 6. 8 10. 3 89. 7 139. 4 171. 1 U.S. share (percent) 33. 0 22. 5 16. 8 Source: USDA. It is worthy to emphasize that- (a) In 1935-39 North America produced about 50% of the total world apple production vs. only about 25% in 1962-66; (b) By 1962-66 European apple production had nearly tripled and ac- counted for 55% of the total; (c) For apples Asia is over 5 times larger; South America nearly 10 times larger; and Elsewhere double. (d) For pear production the picture is similar. Historically, the United States has been tb~e recognized leader in World apple and pear production. Over the years the U.S. Industry pioneered and developed countless innovations involving better technical know-how, new and better * varieties, new packages, new packing equipment, new and improved equipment * of all kinds, storage facilities, transportation, etc. We grew, packed, stored and sold the best apples and pears in the World and enjoyed a distinct comparative advantage (and still do, all things being equal) in the world markets, and especially in Europe-our most important export market. However, at the close of World War II many other countries, notably European, imposed nearly insurmountable trade barriers-both tariff and non-tariff- against the import of U.S. apples and pears. At the same time the European countries, and others, copied and were "loaned" our technical know-how and innovations. With this help, and behind a complete protective wall of excessive tariffs and unreasonable and arbitrary non-tariff `barriers, the increased produc- tion picture evident today developed. Many of these barriers, tariff and non-tariff, or new ones, exist today for the prime purpose of protecting the tremendously in- creased domestic production, much of which is i~eportedly economically "mar- ginal"; and without the "wall" could not exist nor could not have developed. We would emphasize that the increased production did not precede the imposition of the barriers, rather the reverse. Contrast that with the situation in the U.S. Over the years, through hard work and private money, and without subsidy of any kind, we developed an apple and pear industry second to none. On the samC basis, we expanded our exports so that they became an integral and significant part of our overall marketing program. Our industry and our export program were developed without the imposition of a protective wall or other devices. In fact, there are no restrictions on the import of apples and pears into the U.S. Our duty on apples and pears has always been very low and with the "Kennedy Round" the duty on apples was eliminated and the pear duty reduced. 5012 WORLD APPLE PRODUCTION (DESSERT AND COOKING VARIETIES) PAGENO="0573" 5013 Under these conditions the United States was the number one apple and pear exporting nation of the world prior to World War II, since before the turn of the century. Exports were an important and integral part of our market. Even during the troubled pre-war period (1934-38) we exported o~v'er 10 million bushels of apples, or about 8% of our total crop (`see appended tables). In 1962-66, in the face of the artificially stimulated increased apple production and the continu- ing arbitrary trade barriers, we exported an average of only 4.5 million bushels, or 3.5% of our total crop, despite the fact that ou'r fruit does `have an admitted comparative advantage (i.e., quality of fruit, pack, package, etc.). During the 1925-29 `i~eriod we exported an average of 12.3 million bushels to western European nations alone, `with the United Kingdom taking 8.4 `million bushels of that total. A similar decreased export `picture exists for winter pears, only more so. With our world recognized comparative advantage, it is our considered judg- meat that U.S. apples and pears could successfully compete in the world markets if the unreasonable and arbitrary barriers and "preferences" were eliminated. This, in our opinion, is esp~?cially evident in the E.E.C. where the three main principles of the Community's Common Agricultural Policy completely ignore the validity of "comparative advantages". The same is true to a substantial degree within other trading `blocs. The appended tables and the data on the next page show developments in the exports of `apples and pears around the world after World War II, as compared with pre-war. While the U.S. has dropped from `the Number One spot to Number Six, otber competing countries have experienced an "export explosion" under the cloak of trade barriers and "preferences"-at the expense of the U.S. Apple and Pear Industry. For example, during the 1934-38 period the U.S. enjoyed 38% of the apple export market. By 1958-62 our share had dropped to 6.3% and is at about that level today. The data following shows what has happened in certain competing countries. PERCENTAGE OF TOTAL APPLE EXPORTS FROM SPECIFIED COUNTRIES f In percent~ 1934-38 1 1958-621 1965-66 2 1966-67 2 Argentina Australia 0.5 14.9 11.9 10.4 16.9 10.7 12.8 11.4 Canada 25.3 4. 6 3.7 4. 5 Denmark .1 2.1 .7 .7 France 1.4 1.8 9.5 12.8 Italy Netherlands 6.4 1.8 46.3 6.1 33.5 4.0 34.1 4.0 South Africa .9 4. 4 5.6 7. 8 United States 38. 0 6.3 9. 0 6.3 I Annual average. 2 Crop year, except Southern Hemisphere. U.S. BALANCE OF PAYMENTS Apples and pears are not only important to our Nation's economy. Even under the exist'ing restrictive conditions, the exports of U.S. apples and pears make a valuable and important contribution to the U.S. balance of payments. position. All exports of U.S. apples and pears are sold for cash, namely, U.S. Dollars. The f.'a.s. value of our export shipments during the 1965-66 season was about $26,000,000 for apples and $6,000,000 for pears. During the 1966-67 season the value was about $20,000,000 for apples and $6,900,000 for pears. If our compara- tive advantage was allowed to operate without the existing restrictions and thereby `allow us to regain our 1934-38 export levels, exports of U.S. apples and pears could contribute $55 to $60 million to our payments position. NON-TARIFF BARRIERS As stated previously, many countries, especially in Europe, imposed excessive tariffs as well as non-tariff barriers at the close of the War. Many of these non- tariff . barriers (and excessive duties) are still in existence, in whole or part, today. Some of the major barriers include: 1. $eo,son,ai opening dates.-Belgium, Denmark, Finland, Ireland, Norway, Sweden and Switzerland are among the countries which restrict imports by use PAGENO="0574" 5014 of seasonal opening dates. (Typical opening dates are carried in the Appendix.) Imports are restricted until a date is established annually by the government, usually after consultation with the domestic growers. Naturally the purpose of this barrier is to protect the domestic growers as long as domestic supplies are available. Often the dates are not announced until late in the season and the announcement is usually `made only a few days ahead of the effective date. Also, experience clearly indicates the date is often fixed well after adequate and satisfactory domestic supplies are available. Further, in Sweden and Norway we face a set, graduated, declining duty schedule, and these are rigidly adhered to regardless of the opening date. The result is that our apples and pears are confronted with an unreasonable tariff despite the fact that domestic supplies are practically non-existent. In many instances the restrictions are in conflict with GATT. 2. Quotas and I,icenses.-Norway, the United Kingdom and Venezuela are among the nations which restrict imports through the use of quotas and licenses. The Norway quota, adopted three years ago, of 18,000 metric tons is reliably reported as inadequate to meet the market needs. This quota plus the late seasonal opening dates tare especially restrictive against U.S. apples and pears. The overall U~K~ apple quota is seemingly adequate. However, the system favors Southern HemF~phere supplies. The quota is split into two periods, namely 7/1-12/31 and 1/1-6/30, with only 20% of the quota allocated to the July-December period-our principal shipping time. In the later period we com- pote directly with heavy, newly harvested supplies from below the Equator Also, the demand for apples usually slackens in January and February and prices are lower. The Venezuela quota and license situation is especially annoying, restrictive and, in our opinion, unreasonable and arbitrary. Venezuela does not produce deciduous fruits. Venezuela enjoys a very favorable balance of payments with the U.S., and there is no ju~~tification for the restriction. Venezuela initiated the quota system for deciduous fruits in 1966, based on the imports in 1965. At that time they also announced this quota/would be cut 10% annually to encourage the development of a local tropical fruit industry, which is commercially insignificant. Despite the mild protests of our Government the quota was reduced about 10% in both 1967 and 1968. Further, the allocation of the licenses to importers in both years was not made until about February 1, resulting in a complete loss of exports in January-a most valuable marketing period. Mexico is another enigma. Imports of apples and pears are permitted entry into parts of Sonora and Baja California without a license. However, licenses are required for all other areas, and the excessive duty of 75% ad. vaL plus 2.18~ per pound completely restricts legitimate trade. At the same time Mexico enjoys Most Favored Nation treatment from the U.S. and exports an ever and rapidly increasing volume of agricultural commodities to this country with no restriction of any kind. 3. Variable ie'vies and reference prioes.-These are an established "fact" within the E.E.C.'s Common Agricultural Policy and are an effective weapon against trade development. The threat of an additional levy can only result in importers being most reluctant to make advance purchases of U.S. fruits because they will not know what the laid-in cost might be at the time of shipment. From all appearances the United States tolerates the E.E.C.'s Common Agri- cultural Policy of which variable levies ar'd rc'ference prices are an integral part. We might ask if this "toleration" by the U.S. is recognition that the CAP is "good". If so, why don't we adopt a similar system? GRADES AND STANDARD CONTAINERS Grade standards and specifications for standard containers under considera- tion by the E.E.C. and O.C.E.D. are potential non-tariff barriers to trade. For example, consideration is being given to adopting a standard apple container which would hold about 30 lbs of apples. Presumably, all trade would have to be in the adopted container. Our principal container for both domestic and export trade is the telescope tray pack carton, which carries 40 to 45 lbs of fruit, depending upon fruit size and variety. The serious problem;s of packing a special container for export are clearly evident. The net result would be declining U.S. exports to the detriment of our industry and the U.S. payments position. PAGENO="0575" 5015 FOOD LAWS Some countries, notably in the E.E.C., have established unreasonable food laws regulating the use of pesticide chemicals for both pre-harvest and post- harvest use, which could restrict U.S. exports. Other nations are working to establish such laws. Presently the situation is not most acute for post-harvest chemicals. Because of the slowness in adotping the latest and best technical know-how to provide the best possible safe product to the consumer, and because of the nearness to their markets, the domestic producers in practically all the European countries do not use these post-harvest chemicals which are in common use in the U.S., and which have been judged to not endanger the public health by the World's leading health body, namely, the U.S. Department of Health, Educa- tion and Welfare. In the U.S. over 75% of the "fresh" apple tonnage is placed in cold storage and is shipped to domestic and foreign markets during the ensuing 10 or 12 months. The need to use the latest approved scientific advancements to provide consumers with a satisfactory product is readily apparent. Unreasonable food laws should not be allowed to restrict U.S. exports simply because they are not needed or used in other countries. - While post-harvest chemicals are of major concern now, unreasonable laws regulating pre-harvest chemicals could be of even greater importance in the years to come. Even in the U.S. the methods and safe chemicals needed to control insects and diseases vary from state to state. For example, because of the rainfall pattern, apple scab (a disease) is practically non-existent in the Northwest, whereas in the Northeast 6 to 14 sprays of approved, safe chemicals during the growing season are required for commercial control. The differences in the fungicide residues on the fruit between the two areas is apparent. Similar situations in overseas producing countries exist. Unreasonable food laws es- tablished on the use pattern in domestic orchards could completely stifle trade. The present pressure by overseas governments on our Government to drastically reduce long estabilshed DDT tolerances is a case in point. FOREIGN TRADING BLOCS Based on experience to date we are strongly opposed to the U.S. encouragement of such blocs. In every instance the theme of these blocs seems to be one of "protectionism" to the detriment of U.S. industries, and especially the Apple and Pear Industry. It is already apparent that the U.S. is on the outside looking in while other countries grant special privileges to one another. This point was fully covered by the U.S. National Fruit Export Council. A ease in point is Brazil. They are members of LAFTA as is Argentina. Brazil does not grow apples and pears. Argentina does. The Brazilian duty on apples and pears is excessive and restricts trade. The U.S. Government and Industry has been working hard to secure a reasonable duty. Our efforts have been violently opposed by Argentina despite the fact we would not be competitive in the Brazilian markets because of our reverse harvest seasons. Brazil does not impose any duty on Argentine fruit. Further, Brazil has imposed an 18% "sales tax" on U.S. apples and pears. This tax is not applicable to fruit from LAFTA countries and is in direct violation of GATT. MOST FAVORED NATION The U.S. grants MFN treatment to all countries, except some Communist bloc countries, even though many of 1-hose countries have no treaty or agree- ment with the U.S. and do not grant MFN treatment to us. We believe most strongly that the U.S. should grant MFN treatment only to those countries that grant such treatment to us. Since this subject is covered in the statement of the U.S. National Fruit Export Council, we do not feel it is necessary to elaborate here. DUTIES An examination of the appended tables concerning "Rates of Duty for Imports Into Specified Countries" on apples and pears can only result in the conclusion that exports of U.S. apples and pears are confronted with excessive to insur- mountable duties in many, if not most, of the countries around the world. This is especially true in Latin American cOuntries, Brazil, Sweden, Norway and PAGENO="0576" 5016 Finland. In Latin America and Brazil deciduous fruits are not produced, and the fruit production in Scandinavia is not adequate (nor of the quality) to meet domestic needs. Therefore, the duties are unreasonable and arbitrary and must be reduced. At the same time, we strongly contend that the E.E.C.'s Common External Tariff is higher than is justified and tends to encourage the production of surplus, marginal tonnage. Certainly, U.S. apples, even with their comparative advantage, find the 14% ad. val. (84 cents per box on a $6.00 c.i.f. value) in the 8/1-12/31 period a difficult barrier to overcome. The only tariff concessions obtained for U.S. apples and pears in the Kennedy Round was from Canada. Each country agreed to eliminate a very minor duty on apples. Further the Kennedy Round failed to produce any change in the unjustifiable non-tariff barriers that exist in many countries against U.S. apples and pears. Therefore, the net result remains the same, i.e., we are denied the rights and privileges we are entitled to under GATT. In clOsing, we would like to make a point of "Enunciation vs. Execution". The U.S. Government has long "enunciated" that we would insist other countries live up to their commitments and provide "reciprocal trade" opportunities for the U.S. Now is the time for "execution". APPENDIX APPLES, FRESH-PRODUCTION IN SPECIFIED COUNTRIES AVERAGE 1935-39 AND 1953-62, ANNUAL 1965-67 Dessert and cooking: North America: Canada Mexico United States Total Europe: Austria Belgium-Luxembourg Denmark France Germany, West Greece Italy Netherlands Norway Spain Sweden Switzerland United Kingdom Yugoslavia Total Asia: Japan Lebanon Turkey South A'nerican: Argentina Chile At rica: South Africa, Republic of 3__ Oceania: Australia New Zealand Total specified countries, dessert and cooking4. 7.1 14.0 8.2 10.4 5.7 7.3 8.0 9.9 2.8 4.2 4.0 3.5 10. 5 30.4 48.7 59. 3 36. 1 74.7 55.6 67.7 .4 5.2 7.6 7.6 12.9 88.3 100.3 118.7 3.6 14.3 16.4 15.8 1.1 3.1 2.0 1.9 5.4 11.5 15.1 16.6 4.8 10.1 8.6 8.5 16.5 9.8 7.3 4.1 10.6 23.2 25. 5 20.3 7.1 11.2 6.2 9.8 124.6 307.3 312.8 354.1 (In millions boxes) Continent and country Average 1935-39 1958-62 Crop year 1965-66 1966-67 1967-68 1 14.6 16.8 22.3 21.0 1.2 3.2 5.7 5.8 127.3 123.0 136.1 126.4 143.1 143.0 164.1 153.2 25. 0 5.8 120.7 151.5 12.0 13.0 3.6 64.7 104.4 8.2 100.6 20.7 2.3 14.7 9.0 3.7 15.7 L9 384.5 7.6 41.1 52.0 2.1 2.6 5.7 5.1 11.7 16.6 1.4 20.0 19.0 1.0 2.5 2.6 1.2 7.1 9.3 10.4 13.7 16.7 2.9 3.5 4.8 48.6 53.8 5.1 7.6 20.2 20.7 23.7 20.9 2.4 3.0 9.7 9.5 16.8 16.3 4.6 5.1 297.4 552. 5 600. 1 638.4 672.9 I Preliminary. Includes Syria. 3 1935-59 total production; subsequent years Fruit Board handlings. Year of the bloom. May include some cider apples in countries not reported separately. Source: FAS, USDH. PAGENO="0577" 5017 PEARS, FRESH-PRODUCTION IN SPECIFIED COUNTRIES, AVERAGE 1935-39 AND 1958-62, ANNUAL 1965-67 Continent and country Crop year Average 1935-39 1958-62 1956-66 1966-67 1967-681 DESSERT AND COOKING North America: Canada Mexico United States Total Europe: Austria Belgium-Luxembourg Denmark France Germany, West Greece Italy Netherlands Norway Spain Sweden Switzerland United Kingdom Yugoslavia Total Asia: Japan Lebanon Turkey South America: Argentina Chile Africa: South Africa, Republic of Oceania: Australia NewZealand Total, special countries, dessert and cooking4 0.6 3 28. 7 1.5 9 28. 0 1.1 1. 5 20. 7 2.1 1. 5 30.0 1.8 1. 5 18.2 29.6 30.4 23.3 33.6 21.5 .9 2. 1 ~ 1.8 11. 9 .9 8.5 1.6 .2 3.0 1. 1 7. 0 .8 2. 8 3.0 3.2 3 11.0 10. 8 1.7 29.8 5. 5 .4 4.8 1.7 1.8 2.8 3.8 1.8 2.0 .3 12.4 12. 6 2.0 42.4 3. 5 .4 7.1 2.4 1. 0 3.1 1. 7 2.3 1.3 . 3 13.2 15. 5 2.4 55.1 5. 1 .4 7.5 1. 6 1. 4 1.9 3.7 2.4 2. 2 .2 14.0 17. 9 3.0 45.0 3. 3 .2 4.9 1.8 1. 1 1.0 4. 1 43.1 90.6 92.7 111.7 101.1 7.4 (2) ~- ~ 2.4 .1 - 8 2.5 .3 11.1 .1 5. 3 4. 3 .4 3. 2 5.0 .6 15.9 .2 5.9 3.6 4 4. 3 6.7 .8 17.8 .1 5.9 5. 2 3 3. 7. 6.1 .8 18.9 .2 6. 2 5. 0 5 3. 6 5.9 .8 89.7 151.0 153.8 185.2 163.7 I Preliminary. 2 Less than 50,000 boxes. 31935-39 total production; subsequent years fruit board handlings. Year of the bloom. 4 May include some cider pears in countries not reported separately. Source: FAS, USDA. 95-159 O-68---pt. 1O-37 PAGENO="0578" 5018 APPLE EXPORTS FROMSPECIFIED COUNTRIES I [In thousands of boxesj Average exports 1965-66 1966-67 1934-38 1958-62 Italy 1,730 25,223 22,741 23,326 Argentina 139 6,489 11,487 8,744 France 364 990 6,441 8, 720 Australia 4,017 5, 669 7,263 2 7, 800 South Africa 235 2,381 4, 062 5, 326 United States 10,017 3,403 6,093 4,276 Canada 6,814 2,495 2,544 3,045 Netherlands 474 3,340 2,702 2,916 New Zealand 975 1,617 1,944 32,000 Chile 433 398 922 1,003 Belgium-Luxembourg 338 718 1,232 584 Denmark 24 1,146 456 3500 Switzerland 1,331 566 42 138 Total 26, 891 54,435 67, 929 68, 378 U.S.share 38 6.3 9 6.3 I Crop year basis except calendar year for Southern Hemisphere countries. 2 Partially estimated. 3 Estimated. Wte: Complete and comparative data not av:able for countries behind the Red Curtzn, which are expanding their production and exports. Source: USDA. PEAR EXPORTS FROM SPECIFIED COUNTRIES I [In thousands of boxesi Average exports 1965-66 1966-67 1934-38 1958-62 Italy 1, 030 5, 142 5, 803 14, 324 Australia 568 1,365 1,429 22,080 South Africa 691 1,097 1,231 1,756 Netherlands 97 1,846 985 1,740 Argentina 405 1,605 1,961 1,566 United States 2,647 1,290 1,396 1,353 France 43 349 1,419 1,064 Belgium-Luxembourg 313 565 143 66 Total 5, 794 13,259 14,367 23, 949 U.S. share (percent) 45.7 9.3 ~ 7 5.6 I Crop year basis except for calendar year for Southern Hemisphere. 2 Partially estimated. Source: USDA. PAGENO="0579" 5019 FRESH APPLES-RATES OF DUTY FOR IMPORTS INTO SPECIFIED COUNTRIES Country Period Rate of duty Rate of duty expressed in U.S. equivalents European Economic Aug. ito Dec. 31 14 percent ad valorem Community. Jan. 1 to Mar. 31 10 percent ad valorem 1 Apr. 1 to July 31 8 percent ad valorem 1 Norway Aug. 1 to Feb. 15 0.50 kroner per kilogram 3.16 cents per pound. Feb. 16 to Mar. 15 0.40 kroner per kilogram 2.53 cents per pound. Mar. 16 to July 31 0.20 kroner per kilogram 1.26 cents per pound. United Kingdom Apr. 16 to Aug. 15 4/6 per hundredweight (112 0.56 cents per pound. pounds). Aug. 16 to Apr. 15 Free Denmark Apr. 1 to July 31 10 percent ad valorem, but not 10 percent ad valorem, but not. less than 5 lire per kilogram. less than 0.33 cents per pound. Aug. 1 to Mar. 31 18 percent ad valorem, but not 18 percent ad valorem, but not less than 24 tire per kilogram. less than 1.58 cents per pound. Peru Jan. 1 to Dec. 31 60 percent ad valorem plus 1.5 60 percent, plus 5.5 cents per soles per kilogram. pound. Panama do 0.03 balboa per kilogram gross.... 1.36 cents per pound. Costa Rica do 25 percent ad valorem, plus 30 25 percent ad valorem, plus U.S. cents per kilogram gross. 13.61 cents per pound. Bahamas do 20 percent ad valorem Brazil do 32 percent ad valorem, plus a 5*percent customs dispatch tax. Hong Kong do Free Mexico do 75 percent ad v~lorem, plus 75 percent ad valorem, plus 0.60 peso per kilogram 2.18 cents per pound. gross. Sweden July ito Feb. 28 (29) 25 kroner per 100 kilogcams_ 2.20 cents per pound. Mar. ito June 30 Free Finland Dec. 10 to June 30 15 percent ad valorem 15 percent ad valorem. July 1 to Dec. 9 90 marks per kilogram 12.70 cents per pound. Ireland Jan. ito Dec. 31 1 penny per pound 1.17 cents per pound. Iceland do 7 aurar per kilogram plus 10 0.07 cent per pound. percent ad valorem. Venezuela do 0.10 bolivar per kilogram gross.... 1.36 cents per pound. Guatemala do 30 U.S. cents per kilogram 13.61 cents per pound plus 25 gross plus 25 percent ad percent ad va~orem. valorem. Bermuda do Free Dominican Republic do 36 cents per 100 pounds 0.36 cent per pound. Netherlands Antilles do Free Malaya do iO cents per pound 3.27 cents per pound. Singapore do Free Canada do do Philippines do 15 pesos per 100 kilogram 3.39 cents per pound. gross. See footnote at end of table. PAGENO="0580" 5020 FRESH PEARS-RATES OF DUTY FOR IMPORTS INTO SPECIFIED COUNTRIES Country Period Rate of duty Rate of duty expressed in U.S. eqUiv&ents European Economic Aug. 1 to Dec. 31 13 percent ad valorem I Community. Jan. ito July 31 10 percent ad valorem 1 Norway Aug. ito Jan. 15 0.60 kroner per kilogram 3.79 cents per pound. Jan. 16 to Feb. 14 0.20 kroner per kilogram 1.26 cents per pound. Feb. 15 to July Ii 0.15 kroner per kilogram 0.95cent per pound. United Kingdom Feb. ito July 31 4/6 per hundredweight (112 0.56 cent per pound. lbs.). Aug. ito Jan. 31 3/0 per hundredweight (112 0.38 cents per pound. lbs.). Denmark Jan. ito July 31 10 percent ad valorem, but not iO percent ad valorem, but not less than 5 öre per kilogram. less than 0.33 cent per pound. Peru Jan. ito Dec. 31 60 percent ad valorem plus i.5 60 percent ad valorem plus 5.5 soles per kilogram. cents per pound. Panama do 0.03 balboas per kilogram 1.36 cents per pound. gross. Costa Rica do 25 percent ad valorem plus 30 25 percent ad valorem plus U.S. cents per kilogram gross. 13.61 cents per pound. Bahamas do 20 percent ad valorem Brazil do 32 percent ad valorem plus a 5-percent customs dispatct.~ tax. Hong Kong do Free Mexico do 75 percent ad valorem pIus 75 percent ad valorem plus 2.18 0.60 pesos per kilogram cents per pound. gross. Sweden July ito Dec.31 25 kroner per 100 kg 2.20 cents per pound. Jan.ltoJune30 Free Finland Aug. 1 to Nov. 30 40 percent ad valorem Dec. ito July 31 8 percent ad valorem Ireland Jan. 1 to Dec. 31 id. per pound 1.17 cents per pound. Iceland Feb. ito July 31 3.36 aurar per kilogram plus 0.04 cent per pound plus 10 10 percent ad valorem. percent ad valorem. Aug. 1 to Jan. 31 7 aurar per kilogram plus 10 0.07 cent per pound plus 10 percent ad valorem. percent ad valorem. Venezuela Jan. ito Dec. 31 0.10 Bollvars per kilogram gross 1.36 cents per pound. Guatemala do 30 U.S. cents per kilogram 13.61 cents per pound plus 25 gross plus 25 percent ad percent ad valorem. valorem. Bermuda do Free Dominican Republic do 36 cents per 100 pounds 0.36 cent per pound. Netherlands Antilles do Free Malaya do 10 cents per pound 3.27 cents per pound. Singapore do Free Canada Mar. ito June 30 do July ito Feb. 28 (29) 1 cent pound (gross) maximum 0.93 cent per pound (gross) for for 22 weeks, otherwise 10 22 weeks, otherwise 10 per- percent ad valorem. cent ad valorem. Philippines Jan. ito Dec. 31 15.00 pesos per 300 kilograms 3.39 cents per pound. gross. 1 Common external tariff, to become effective Dec. 31, 1967. SEASONAL OPENING DATES IN RECENT YEARS 1962-63 1963-64 1964-65 1965-66 1966-67 1967-68 APPLES Mar. 16 Mar. 16 Mar. 16 Mar. 16 Mar. 16 Mar. 16 Belgium Norway Feb. 18 Sweden Jan. 2 Denmark May 1 Finland Dec. 10 Ireland Jan. 15 Mar. 9 Feb. 8 Jan. 17 Feb. 17 Apr. 1 May 1 Dec. 10 Dec. 10 Dec. 15 Feb. 16 Jan. ii Dec. 7 Apr. 1 Nov. 82 Jan. 10 Feb. 21 Feb. 1 Dec. 161 Jan. 8 Apr. 1 Apr. 1 Nov. 22 Dec. 1 Jan. 6 Dec. 5 PEARS Belgium Feb. 16 Norway Dec. 17 Sweden Nov. 1 Denmark Feb. 1 Finland Dec. 1 Mar. i6n Mar. 16 Jan. 2 Dec. 1 Nov. 20 Nov. 23 Feb. 1 Feb. 1 Dec. 1 Dec. 1 Mar. 16 Dec. 8 Nov. 15 Feb. 1 Nov. 8~ Feb. 16 Feb. 16 Jan. 9 Nov. 30 Oct. 31 Nov. 21 Feb. 1 Feb. 1 Dec. 1 4 Nov. 10 1 For 4 varieties. All other varieties Jan. 9. 2 Lower duty date in lieu established Dec. 10 date. 3 Sept. 16 for EEC class extra. 4 Lower duty date in lieu established Dec. 1 date. PAGENO="0581" 5021 Mr. HERLONG. Thank you very much for your statement. Mr. BuRRows. We appreciate the opportunity to be here. Mr. HERLONG. Are there questions? Mr. Betts. Mr. BErN. I think you have given us an amazing description of nontariff barriers. I don't recall any industry that has been in here that is up against so many different types. Just what do you think can be done about them? You suggest; that we have enough laws on the books. Mr. BURROWS. For example, I will tell you what is going to be done on this Brazilian situation right now. I have been in touch with Ambassador Roth's office last week and all of this week so far trying to find out what is going on in the negotiations in Geneva to get the seasonal duty. We are not getting any place. Apparently the negotiators are taking a rather apathetic view of it and so we are going to come now and get Congress to stick the needle into Mr. Roth. Mr. BErrS. Is that all you are expecting us to do, just to tell Mr. Roth to get to work over in Geneva? Mr. BuRRows. Right at the moment I don't have any legislation that can be constructed to eliminate the nontariff trade barriers that are facing us. In other words, what can we do, for example, on the food law. Let's say we can't go into the United Kingdom with fruit treated with EA diphenylamine, which is an all-preventive chemical, postharvest chemical. It is cleared in this country. We are actually carrying, we have already carried on 2 years of research over there to establish its safety in the United Kingdom. They didn't quite accept our data. So we are going another six months. This is a nontariff trade barrier. Mr. BErrs. I am sorry I didn't hear all of your statement but are you concerned primarily with exporting and the obstacles you run into there, or is there some import problem? Mr. Bumiows. The only country that exports any volume of apples up until this time into the United States is Canada. There we have ver good relations. Mr. BETrS. Are there any tariffs on them. Mr. Bumiows. During the Kennedy round they eliminated the tariff between United States and Canada on apples. It is only 10 cents a box now and they are doing it over a 5-year period so you can imagine stepping it down on imports, some day we may be faced with a very terrific problem in imports. For example, France in the last 20 years has gone from practically nothing to up to 65 million bushels of apples. Last year out of the 65 million. 5 million were Golden Delicious. This is a preferred variety in the United Kingdom so France is only, what, 48 hours away from the United Kingdom. They send the apples to the United Kingdom on consignment whereas our people want dollars in the bank and the importer of course in the United Kingdom has to make plans long in advance so he has his money tied up. What happens is that Frarce even during the last year has tripled their exports to the United Kingdom and we have lost close to 40 percent of our exports to the United Kingdom. Two years ago France tried to ship some Golden Delicious into this country and they are PAGENO="0582" 5022 desperate. They are desperate to the point they don't know what to do with it. In other words, when the French moved out of Algiers they had a lot of extra cash. They had citrus groves down there and they lost their citrus groves so they had extra cash. They came to France and put the money into apple orchards. As a result France very tremendously overproduced with apples and this trend is still going on. Mr. BE'rrs. Some sort of a subsidy? Mr. BURROWS. We can't prove it. We can prove subsidy on inland freight on exports. In other words, the French Government is sub- sidizing the freight from the farm to the port of export. They are so desperate last year they had a boatload of 70,000 boxes of apples to Venezuela. Twenty thousand of those went down without any license involved whatsoever. They went down with the idea, well, here we come. We don't know where to put them so we are sending them to Venezuela. You know what happens to 20,000 boxes of apples in Venezii~Ia when the temperature is 90 degrees and there is nobody there. They are on the butcherbiocks so to speak. Mr. BUrrS. Thank you. Mr. HERLONG. In your comment about enunciation and execution it seems that the enunciation is for the benefit of home consumption here and the execution is done for the benefit of the people overseas. Mr. Bumiows. I won't argue that point whatsoever. I think your point is well taken. Mr. HERLONG. Thank you. Mr. Conable. * Mr. CONABLE. Can you tell me if the very substantial nontariff bar- riers that you have described here are typical of other food products? Mr. BURROWS. What do you mean by other food products? Mr. CONABLE. Well, I am wondering if other agricultural products, for instance, other than- Mr. BURROWS. Other than fruit and fruit products. Mr. CONABLE. Yes-are subject to the same kind of nontariff harass- ment that you have described here? Mr. BURROWS. Well, I said fruit and fruit products. I didn't say apples and pears as you noticed. Mr. CONABLE. Yes. Mr. Buimows. And with fruit and fruit products these are the ones that-I haven't made a study or analysis of other agricultural commodities relative to nontariff barriers so I can't answer your question concretely and concisely. However, it has been well recognized that apples and pears are commodities that are grown in many countries so that you have the green front protectionist attitude in those countries. For example, Norway, well, doesn't raise a half million bushels of good apples and the rest of it is grown in backyards like our apples used to be, but this is the green front. Don't throw any apples into Norway until all the good apples and all of the backyard apples are out of the way so that wherever in these countries we have seen a continued and constant harassment and high tariffs and nontariff barriers~ par- ticularly with deciduous fruits and apples and pears are a deciduous fruit. PAGENO="0583" 5023 When you get into citrus fruit it is not quite as bad in these Euro- pean countries. Mr. CONABLE. Are you familiar with the sugar-added duties that the French have imposed in addition to the regular duty on products? Mr. BURROWS. Not as familiar as I should be. There is a person in the audience who is I am sure, Mr. Lobreck of the National Canners. Mr. CONABLE. I think it was he who described it to us. I am in- clined to agree with you, sir, that these nontariff barriers are the real villain at this point in our economic history. Mr. BURROWS. How can we get them reduced or eliminated? Mr. CONABLE. You can't get them reduced or eliminated without some very strong advocacy on the part of our Own people. That is all, Mr. Chairman. Mr. HERLONG. Thank you very much. Thank you very much for your contribution. Mr. BURROWS. Thank you. Mr. HERLONG. The next witness is Mr. Louis F. Rauth. I want to welcome you to the committee, We are happy to have you here, sir. You are a citizen of the great State of Florida and if you will identify yourself for the record and proceed in your own way we will be delighted to hear you. STATE.MENT OP LOUIS P. RAUTH, FLAVOR PICT COOPERATIVE Mr. RAUTH. Mr. Chairman, I am very happy to be here. My name is Louis F. Rauth. I am a farmer, a tomato grower in Palm Beach County, Fla. I am representing myself, Flavor Pict Cooperative and 130 other Florida tomato growers. The total employees of these 130 tomato growers are around 27,000. The Honorable Congressman Herlong has this to say in section 2 of the bill, H.R. 16416, Fresh Fruits and Vegetables Market-Sharing Act of 1968. The Congress finds that the authority of the President under the Agricultural Act of 1956 to seek to obtain agreements with other countries limiting the export from such countries and the importation into the United States of agricultural commodities has not been exercised with respect to fresh fruits and vegetables. I want to emphasize this: That here the President has the authority to do this and he has failed to do it. During the intervening years imports of certain fresh fruits and vegetables into the United States have increased to such extent as to disrupt the market for such commodities produced in the United States. This increase in imports has been caused in large part by lower costs of production in other countries, especially in the wages paid to agricultural employees, which it is the policy of the United States~to maintain at relatively much higher levels than in other countries. Because of this unfair disparity in costs of production which exists in other countries by reason of the payment of substandard wages, it is prac- tically certain that imports of fresh fruits and vegetables will continue to increase and further destroy the market for such commodities produced in the * United States. Tomatoes from Mexico have poured into the United States for the last 6-to-7 years to a point where they have destroyed the American market, and yet the President, who was given the power and designated by the Congress as the person to act, failed to do so. The President has too many things under his control. This gives him too much power PAGENO="0584" 5024 and centralizes the power, forming a bureaucratic or dictator form of government. If the people wish to have control of their Government, then the Congress must keep its power and not give it to the President. I have read and studied the new recommended administration trade bill (H.R. 17551). Farming ~s unique and different from other busi- nesses. The criteria of eligibility for adjustment assistance, explained in the proposed administration trade bill, may well serve its purpose in industry but to farming it has no value. Adjustment assistance must be given in a different form to agriculture. All vegetable crops are produced in abundance in Florida and for the tomato growers to grow other vegetable crops would only throw the whole vegetable growing industry into a turmoil. In fact, many of the other vegetable growers are also getting in a chaotic condition by the ever-increasing imports from Mexico. There is an adjustment assistance, a new criteria, not mentioned in the administration trade bill that would serve the tomato industry of Florida well. It is very simple; it would be economically sound; it would protect the Florida tomato grower from being completely eliminated. I have been to Mexico during the tomato growing season. I have as- certained the cost of growing, harvesting, and trucking Mexican to- matoes to the U.S. border at Nogales, paying the U.S. duty, and find that the total of all these charges is 2 cents per pound less than the cost of growing and harvesting tomatoes in Florida. To determine if Florida tomato growers would qualify for adjust- ment assistance I would propose the new criteria in the administration trade bill. If they qualified, then, the total tariff collected on all im- ports of tomatoes week by week would be distributed among the U.S. producers, based upon the amount of U.S. No. 1 grade tomatoes each grower shipped during that week. This is a very flexible plan, insuring the consumer of excellent qual- ity, cheap tomatoes and keeping the incentive for the Mexican grower, as well us the American grower, to produce the best quality product at the lowest price. This would have a tendency to stabilize the production in Mexico and also to stabilize the production in Florida. It would have a tendency to put on the brakes and to slow the down- ward movement of the great Mexican avalanche which is destined to crush the tomato growers in Florida. Gentlemen, it is high time that something is done for the Florida tomato grower. I point out that the President had the power to act but did nothing. The proposed new administration bill is empty and has nothing to. offer the tomato industry. I hope the Ways and Means Committee will take the bull by the horns and do something specific for the fruit and vegetable growers of America. The fruit and vegetable growers of America, with only a few exceptions, stood on their own feet during all the past years when other segments of agriculture received billions of dollars and are still receiving a handout. Yes, the vegetable grower carried his own load and even more, when the corn and wheat farmers were paid not to grow corn or wheat, yet they could convert to growing all the vege- tables they wished to grOw. PAGENO="0585" 5025 Don't make the mistake again by neglecting the fluent segment of agriculture. There are oniy two plans that will save the Florida tomato industry: the one I mentioned by adding the distribution of the tariff revenue among the producers to the administration trade bill, or adopting the House bill H.R. 16416. During the 1965-66 season, there were 8,310 acres of vine-ripened tomatoes grown in Florida. The increasing imports from Mexico de- pressed the market to such an extent that great sums of money were lost by the Florida tomato growers, causing a 35 percent reduction in acreage in 2 years, from 8,310 acres to 6,570 acres. From January 1, 1968, this year to May 1, 1968-the first 4 months of 1968-Mexico marketed one-half of the fresh tomatoes consumed in the United States. Also, Florida, some years ago, had 90 percent of the Canadian business; now Mexico has the 90 percent and Florida has only the 10 percent. The thinking 5 years ago was that the Communist countries would never produce enough food for themselves, and Secretary Freeman had great hopes to export grain to Eastern Europe. Dr. Halloway, an economist from the University of Michigan, who traveled in Russia and Eastern Europe, who knows the situation, told the DARE-De- veloping agricultural resources effectively-Conference in Florida that the hope of selling grain to Eastern Europe has vanished. With such changes in 5 years time, we can expect that Russia and the other Communist countries will be selling grain in the world markets. In India, they now have hybrid rice, which increases the yield 300 to 400 percent and also makes it possible to harvest three crops per year on the same land instead of two. Are we building up false hopes, expecting to export more agricultural products? Let me quote you some excerpts from U.S. News & World Report of March 4, 1968: You get this picture from new reports by U.S. Department of Agriculture- World farm production climbed four percent in 1967. Gains are outracing population growth. That includes India * * Harvest of grains is mounting. Wheat alone hit its second-highest mark. West Europe, Russia, the U.S. all posted sizable harvests last year. Russia has become the top cotton producer after the U.S. cut production. Forecasts is for still more records. Edible oils-peanut, soybean oils and butter, for instance-are expected to total best yet this year. Winter wheat outlook is rated on par with 1967. Washington's experts figure the world will produce more grain than can be sold for at least the next 10 or 15 years. Problem will be to bolster prices. Outlook in developing countries is growing. New strains of rice are being planted. Fertilizer use is rising. Aid projects are zeroing in on food. More countries are trying to feed themselves 100 percent-~high-cost West Europe included. Result: markets for U.S. products are beeing closed off by protection. Consumers in European Common Market are paying more. Britain, of all places, is toying with self~sufficiency in meat and animal feed * * * Gentlemen of the Ways and Means Committee, let us hold to that bird we have in our hand. Let us not turn loose the one we have, expecting to catch the two in the bush. Let us save that segment of agriculture which has been a loyal group of farmers in Florida, who have produced the fresh vegetables and citrus fruit for years and years, the health food of our Nation during the winter months without subsidy or remuneration. PAGENO="0586" 5026 It is wishful thinking that we will become a great grain-exporting Nation. The greatest endeavor, the greatest emphasis, the top-most priority of any nation is to produce food, thereby being self-sustain- ing. With all the sciences available, the future holds an abundance of food the world over. Even India has the potential to produce 600. percent more rice. Why even India will be an exporting country of grain in years to come. Mexico, sometime ago, was a customer of ours, buying wheat; but today Mexico is our competitor, selling wheat and rice on the world market. What I am trying to say is that if we have free trade we will be importing more agricultural products than we are exporting. Again 1 say, we must keep that segment of agriculture which has served our Nation so well through thick and thin and supplied us with the vita- mins our people need for health. What is causing all the unrest and turmoil in our country today? I can tell you what it is. We are turning the world upside down, trying to accomplish our goals in a short period of time, going hog wild trying to police the whole world, trying to get to the moon first, trying to have free trade the world over and do it overnight-this is causing the turmoil and unrest. If we take it slower, accomplish our goals more securely and accurately, our people will settle down and our Nation will be the better. Our Nation's goal should probably be for free trade but let us not sacrifice one group of people for the sake of another group. This is what causes unrest, bitterness, and the fall of a nation. When you keep the bird that you have in hand, that is sound practice, and the best for the Nation; but if you turn loose the biçd in your hand and you go for the two in the bush, you cause great turmoil, unrest, and bitterness in trying to catch the two in the bush. Again let me say the best thing to do for the tomato industry in Florida, the best thing for our Nation as a whole, is to pass the bill, H.R. 16416. Thank you, Mr. Chairman and members of the Ways and Means Committee. Mr. HERLONG. Thank you, Mr. Rauth, for your very fine statement. Are there questions? If not, we do appreciate your appearance before the committee. Thank you very much. Mr. RAuril. Thank you. Mr. HERLONG. The next witness is Mr. Jerry Nowinski. I under- stand Mr. Nowinski will be presented by our colleague on the com- mittee, Mr. Vanik. Mr. Vanik, will you do that? Mr. TALISMAN. On behalf of Congressman Vanik, who had a previ- ous commitment, I would like to present to the committee Jerry Nowinski, who is president of the Cleveland Greenhouse Growers Association. He will introduce his colleague. We have in our district the largest agricultural product area in northern Ohio with 500 out of 1,000 acres of grass in the United States under cultivation and last year if you remember we had a special day set aside in the House restaurant so that we could taste their products and all of you did Iknow. PAGENO="0587" 5027 So Mr. Vanik regretted that he wasn't able to be here. He had a previous commitment, but will be with these gentlemen later this afternoon. We appreciate the reception. Mr. BETTS. Mr. Chairman, I would like to welcome Mr. Nowinski to the committee since you come from northern Ohio and I am almost up there myself in your district~. I regret that I have to leave but I will come back if I can and study your statement. I will certainly read it over. Mr. HERLONG. Thank you very much. We will be pleased to hear you if you will identify yourself for the record. STATEMENT OF JERRY NOWLNSKI, CHAIRMAN, CLEVELAND GREENHOUSE GROWERS COOPERATIVE ASSOCIATION; ACCOM- PANIED BY ROGER RULTENIK AND RICHARD PRETZER Mr. NowINsKI. Thank you Mr. Chairman. I would like to introduce two fellow growers, Mr. Richard Pretzer and also Mr. Roger Rue- tenik. Mr. Chairman, we welcome the privilege to present the views of the greenhouse vegetable growers of the United States relative to H.R. 17551-proposed Trade Expansion Act of 1968-now before this committee. My name is Jerry Nowinski, president of the Cleveland Greenhouse Vegetable Growers Cooperative Association. I am also speaking on behalf of the National Association of Greenhouse Vegetable Growers, the Grand Rapids, Mich., greenhouse industry, the Ohio Greenhouse Association, the Hamilton County (Cincinnati) Greenhouse Associa- tion, and the Toledo Greenhouse Association. I operate my own green- house near Cleveland, Ohio, where I am producing tomatoes, bibb and leaf lettuce. In this brief you will find copies of letters from the presidents of the National Greenhouse Association, Ohio Greenhouse Association, Hamilton County (Cincinnati) Vegetable Growers Association, and the Toledo Greenhouse Association. These letters give additional sup- port to the serious problem of effect of imports in the greenhouse vegetable industry. (Exhibits A, B, and C.) Mr. HERLONG. Mr. Nowinski, I have just learned that there is a yea- and-nay vote on the House floor. I wonder if we may suspend for a few moments. We will be back just as soon as we can possibly get back. There is one other witness after you. If you will permit us to answer the roll we will be right back. Please excuse us. (A brief recess was taken.). Mr. HERLONG. Again pardon us for having to leave. You may proceed, Mr. Nowinski. Mr. NowINsKI. Thank you, Mr. Chairman. I would like to continue just to express our viewpoint on agriculture. VIEWPOINT ON AGRICULTURE For national security, health, and welfare of our citizens, we must have a strong and prosperous agricultural industry. A consistent food PAGENO="0588" 5028 supply is essential, and a qualified, well-trained labor force available at all times. The emphasis placed upon U.S. produced food during World War II supports this statement. The phenomenal growth of the en- tire U.S. economy has been possible due to the efficiency of American agriculture. The American housewife spends only 19 percent of her family income for food. For the best interests of our citizens, we believe a strong U.S. agriculture must be maintained. We believe that a strong U.S. trading policy will benefit the pro- ducers of agricultural products if restrictions on imports are designed to encourage and give some protection to U.S. agricultural producers. A trade policy must encourage and protect the producers of such commodities as tomatoes and other vegetables. We cannot become dependent on foreign countries for our food supply. If tomatoes grown in Mexico are allowed to be shipped into the United States and sold at prices based on the wages paid to Mexican workers, U.S. tomato growers in Florida, California, Texas, as well as local State growers and the highly specialized greenhouse tomato growers, will be forced out of business. This will be a loss to the Nation, a loss to the people that own and operate the greenhouses and a loss to the many workers who depend on the vegetable greenhouse for a living. U.S. GREENHOUSE TOMATO INDUSTRY ILLUSTRATES EFFECT OF UNRESTRICTED IMPORTS The experiences of the U.S. greenhouse tomato industry illustrates the problem which can occur when imports are permitted to enter this country with little consideration to local market conditions. Greenhouse vegetable production is one of the most specialized forms of commercial agriculture in the United States today. At the present time, there are about 1,000 acres of land in the United States covered with greenhouses for the production of tomatoes, bibb and leaf lettuce, cucumbers, watercress, and radishes. These 1,000 acres of greenhouses produce 160 million pounds, which generate $40 million annually in our economy. About 500 acres are concentrated in Ohio. The tomato is the leading crop produced in vegetable greenhouses in the United States. Horticulturally speaking, the greenhouse tomato is grown to perfection and has the finest quality of any tomato grown in the world. In 1968, to produce these fine tomatoes, it will cost a grower about $125,000 per acre to erect a greenhouse. This will give you some idea of the amount of money which the U.S. greenhouse vegetable growers have invested in their business. ($125 million). Over the years, the greenhouse tomato grower has had to face the competition from Florida, Texas, California, and other areas where tomatoes are raised out of doors. By using the latest scientific know-how and good man- agerial ability, many greenhouse growers have been able to meet this competition. Sometimes the competition was rough and the greenhouse grower sold tomatoes at prices lower than the cost of production. But, for the most part, our industry was able to exist with this competition. PAGENO="0589" 5029 The same Federal laws and regulations affect the growers in other States (Florida, California, and Texas) as they do the greenhouse grower. Manufacturers of hard goods have some control over the market and the marketing period for their products, but the greenhouse vegetable grower, as well as the outdoor farmer, has very little control over this phase of the business. Greenhouse tomatoes are perishable and they must be sold soon after harvest. An over-supply of a perishable crop at harvest can result in low wholesale prices. Since the crop is sold during a relatively short period, low prices can be disastrous to the individual grower. Due to the present trade policy, the tomato imports, primarily from Mexico, are heaviest during our marketing period. The effect of our present trade policy will be discussed later. We have surveyed some of our representative greenhouse grower members regarding production costs during 1967. The average gross cost for producing greenhouse tomatoes was $1.86 per 8-pound basket, or about 23 cents per pound. The average wholesale price was $2.01 per 8-pound basket, or about 25 cents per pound, leaving only 15 cents per basket, 2 cents per pound, or $3,000 per acre to cover management, depreciation, and profit. Obviously on a return of this nature, we cannot stay in business, we cannot meet the demand of society and we cannot attract young people who desire to enter the field of agriculture as an occupation. One further point should be mentioned, wholesale prices have re- mained constant during the past 10 years as shown below: 1957 $2.27 1962 $1. 93 1958 2. 02 1963 2. 01 1959 1. 95 1964 2. 16 1960 2. 02 1965 2.02 1961 1. 88 1966 2. 01 These wholesale prices should be compared with the official OPA established price of $2.52 per 8-pound basket (about 31 cents per pound) during World War IL1 Our production costs, like most industries, have increased rapidly since 1957, but the wholesale prices which we receive have not in- creased. Actually in terms of the buying ability of the dollar, the prices have decreased. A survey of representative growers in our industry indicates labor costs have doubled during the past 10 years. Other increases over this period are: taxes, 76 percent; repairs, 45 percent; containers, 23 per~ cent; other supplies 20 percent, and fuel 19 percent. In spite of in- creased yield per acre through improved production technology and use of labor-saving equipment, we are unable to increase our gross in- come per acre to offset these increased production and marketing costs. The increased quantity of tomato imports has been one of the factors affecting these wholesale prices. 1During the time the ceiling price was in effect, rec&rds indicate that the overall average wholesale price was near the $2.52 ceiling price. PAGENO="0590" 5030 TOMATO IMPORT SITUATION The imports of Mexican tomatoes have doubled since 1955. The following table summarizes the imports from 1955 through 19:66, for 3-year periods. Annual Average Tomato Imports in U.S. From Mea'ico for 3-year period (Thousand Years: of pound8) 1955-57 158, 456 1958-60 - 249, 011 1961-63 242, 452 1964-66 297, 166 According to a recent report (April 19, 1968) from the U.S. Depart- ment of Agriculture, "Mexico continues to encourage expanded invest- ment under its 5-year development plan, initiated in 1966. Government investment for 1968 is projected at 11 percent above 1967, and private outlays are expected to increase by about 16 percent. Agricultural policy goals outlined by the government in September 1967 emphasized accelerated agrarian reform, expanded irrigation facilities, and im- proved farm practices." 2 On the basis of this projection and other reports, whcih we have seen in trade papers and oral reports from qualified industry leaders who have been in Mexico, we expect a continued increase in tomato imports from Mexico unless some change is made in our trade policy as it affects tomatoes. The import of tomatoes from Mexico during the past 10 years has been our greatest competition. This unfair competition from Mexico, where labor and other production costs are much lower than similar production costs in the United States, demand some kind of quota restrictions or other import controls during certain greenhouse market- ing periods. To illustrate the wide discrepancy in labor costs, a recent U.S. Department of Agriculture publication reported: In 1960, the wage for unskilled labor (in Mexico) including sociaj benefits, is $1.72 for an 8-hour day, or 21~ cents per hour.3 At the present time, many of our members are paying hourly rates equivalent to and in many instances more than the Mexican daily rate. According to this same U.S. Department of Agriculture report, about 75 to 80 percent of these tomatoes are imported in the United States during February, March, April and May. These months coin- cide closely with the months when greenhouse tomatoes are in produc- tion. If we would include the Mexican shipments for December and June (other important greenhouse tomato production months) over 80 percent of the Mexican tomatoes would be coming on our markets when greenhouse tomatoes are `also being marketed. To support this point further, the official U.S. Department of Agri- culture reports on vegetables unloaded at Chicago, Ill.,~ show for example in 1967, the following situation: 2From ER'S-Foreign 222, the Western Hemisphere Agricultural Situation, Review of 1967 and Outlook for 1968, Economic Research Service, U.S. Department of Agriculture, 1968. FAS-M178, Survey of Mexican Vegetable and Melon Production, FAS, U.S. Depart- ment of Agriculture, 1966. Fresh Fruit and Vegetable Unloads in Midwestern Cities, calendar year 1967, Coasumer and Marketing Service, U.S. Department of Agriculture, 1968. PAGENO="0591" ~O31 Mewican tomatoes nnloaded at Chicago (8-paund basket equivalent) Month: January 2~5, 000 February 442,000 March 450,000 April 432,000 May 477,000 June 234,000 Similar data can be presented for other important markets like De- troit, Cleveland and Cincinnati. Representative Herlong of Florida, a member of this committee, recognizes the tomato import problems and has introduced H.R. 16936 to the 90th Congress on May 1, 1968. We, as an industry, support Mr. Herlong's bill and hope this committee will give serious consider- ation to it. SUMMARY The rapid increase of fresh tomato imports has severely affected the greenhouse tomato industry. If this trend continues, and recent reports mentioned earlier indicate it will continue, the future of this important vegetable industry is in jeopardy unless some changes are made in the U.S. trade policy during critical market periods. Certain specialized areas of the U.S. agriculture need help. Greenhouse tomato growers in the United States are unable to meet the subsidized competition from tomatoes produced in Mexico and then shipped to the United States for sale in the retail stores in our metropolitan areas.5 To illustrate the effect of these imports in wholesale prices, the ex- periences during the 1968 spring tomato season can be cited, as an example. Disease and related production problems during early spring 1968 reduced the Mexican tomato production. The imports of tomatoes from Mexico for February through May were about 50 percent less than imports for comparable periods in previous years. The whole- sale prices received by greenhouse growers during 1968 are the best prices received during the past 10 years. Also of interest, the average retail price of greenhouse tomatoes has been the same as in previous years, so the decrease in imports did not increase the cost to the consumer. GREENHOUSE VEGETABLE GROWERS CONTRIBUTIONS TO U.S. ECONOMY The greenhouse vegetable grower uses labor throughout the year. In addition to the millions of dollars he pays for supplies, the taxes which he pays are much higher than many other phases of agriculture since the businesses are located near metropolitan areas. A recent sur- vey of our members indicated their local taxes will average nearly $2,500 per acre. As mentioned earlier, we have more than 500 acres of greenhouses in Ohio alone. This money spent by U.S. greenhouse growers is reinvested in our local communities, in our States, and in our country. Also the greenhouse employees pay taxes, support their community, spend their money and are gainfully employed 12 months out of the year. The majority of greenhouse workers own their own homes, drive automobiles, and send their children to school and college. 5Exhibit D, Farmers Production Credit Association, Ashland, Ohio, Apr. 9, 1968. PAGENO="0592" 5032 His counterpart in Mexico works for less, doesn't have a home or car, and works with his children in the field on a seasonal basis. We in our small way, are contributing to full employment. Our support industries, such as maintenance, packaging, supplies, fuel, insurance and so forth, all add to this country's economy. As small business, we are contributing to make the U.S. economy strong. RECOMMENDATIONS We believe a successful greenhouse vegetable industry is in the best interests of the consumer. To have a strong industry, some pro- tection must be given to the U.S. greenhouse industry from the un- limited imports of tomatoes from foreign countries. 1. Since about 80 percent of the tomatoes from Mexico are being imported during the local greenhouse market season, we believe an adjustment should be made on the duties during this shipping season. 2. To provide for sound future growth of the entire greenhouse vegetable industry, we believe a quota system should be established to regulate the imports of tomatoes, based on the supply available and the need as outlined in the Herlong bill. Thank you, Mr. Chairman, for this opportunity to present our viewpoints on a very serious problem affecting the future of the green- house tomato industry in the United States. (The material referred to follows:) TABLE 1.-U.S. IMPORTS OF TOMATOES (FRESH) FOR CONSUMPTION, 1956-66 Calendar year Pounds Value 1966 1 1965 1964 1963 1962 1961 1960 1959 1958 1957 1956 360,600,000 269,000,000 249,200,000 242, 000, 000 236,200,000 176,200,000 312,700,000 262,700,000 264,600, 000 119,500,000 95,000,000 $52, 300, 000 29,900,000 27,700,000 20, 900, 000 17,600,000 13,000,000 23,900,000 19,900,000 20,600, 000 8,200,000 6,700,000 Month 1965-66 1966-67 December 127. 1 237.9 January February March 403.2 708.6 688.0 519.6 721.0 667.4 April May June 807.6 513.3 79.6 690.1 601.9 215.2 July 12.3 46.5 Total 3, 339. 7 3,699. 6 I Data for 1966 from U.S. Foreign Agricultural Trade by Commodities," calendar year 1966, p. 35, U.S. Department of Agriculture, July 1967. Source: ERS.Foreign ~ "Effects of Changes in Use of Seasonal Workers on United States.Mexican Agricultural Trade and Balance of Payments,' p. 11, U.S. Department of Agriculture, August 1967. TABLE 2.-U.S. IMPORTS OF TOMATOES FROM MEXICO Eln thousands of hundredweightj Source: FAS-M 178, Survey of Mexican Vegetable and Melon Production 1966, and brought up to date by correspond- ence with officials in Foreign Agricultural Service, U.S. Department of Agriculture. PAGENO="0593" 5033 TABLE 3.-TOMATOES: OHIO AND MEXICO TOMATOES UNLOADED BY RAIL AND TRUCK AT 18 U.S. CITIES IN 1966 AND 1967 From Ohio I From Mexico 2 City 1966 1967 1966 1967 Chicago, III 144 148 425 454 Cincinnati, Ohio 254 271 50 79 Cleveland, Ohio 879 835 65 93 Detroit, Mich 248 203 145 147 Indianapolis, Ind 1 36 58 Louisville, Ky 9 9 29 29 Milwaukee, Wis 14 8 30 22 St. Louis, Mo 5 4 141 154 Atlanta, Ga 1 43 24 Columbia, S.C 4 2 Baltimore, Md 14 35 58 40 Boston, Mass 2 93 44 New York, N.Y 88 94 379 263 Buffalo, N.Y 95 97 38 25 Philadelphia, Pa 39 28 131 110 Pittsburgh, Pa 243 290 38 10 Providence, R.I 9 14 2 Washington, D.C 41 50 35 43 Total 2,089 2,089 1,597 1,736 I Source: "Fresh Fruit and Vegetable Unloads," Calendar year 1967. Consumer and Marketing Service. Fruit and Vege- table Division, U.S. Department of Agriculture. 2 Represent rail and truck unloads. One load equivalent to 36,000 pounds. TABLE 4.-COMPARISON OF U.S. FRESH VEGETABLE IMPORTS AND TOMATO IMPORTS FROM MEXICO, 1957-66 (In carlot equivalentsj Fresh vege- Tomato table imports imports from from Mexico' Mexico 1966 21 555 9 964 1965 20878 7,373 1964 19,892 6,836 1963 19,786 6,665 1962 16,492 6,471 1961 12,598 1960 16,638 1959 16,682 1958 14,778 1957 8,843 `Fresh Fruit and Vegetable Shipments, C & MS-14, Consumers and Marketing Service, U.S. Department of Agriculture, Washington, D.C. (1967). ExHUSIT A HAMILTON COUNTY VROETABLE GROWERS ASSOCIATION, Cincinnati, Ohio, June 20, 1968. Mr. JERRY N0wIN5KI, * President, Clevelan4 Greeahonse Vegetable Growers Cooperative Association, Rocky River, Ohio. Da&n Mn. NowINsKI: We were pleased to hear that you will be presenting testi- mony in Washington soon before the Ways and Means Committee in the House of Representatives. The tomato imports primarily from Mexico have had a disas- trous effect on our market here. We have been unable to compete with these tomatoes which have been produced where labor costs are much lower than they are in the United States. If some protection is not given to our industry, we will be out of business here in less than five years. At the present time, we have about 55 acres of greenhouse tomatoes in the greater Cincinnati area. This represents an investment of more than $6,000,000 on basis of present replacement costs. Estimates in the Cincinnati area indicate our production, harvesting, and marketing costs are nearly $2.00 per eight pound basket. This leaves very little for a return on our investment. These costs should be compared with the selling price of some Mexican tomatoes recently on the Cincinnati market. Some of these tomatoes were being sold for e5-159 O-&8-pt. 1O-38 PAGENO="0594" 5034 as little as 130 per pound ($1.04 for an eight pound basket equivalent.) These imports have increased rapidly during the past several years. We believe in a competitive market. Most of our members are willing to take their chances and to compete with outdoor growers in Florida, Texas, California, and other southern states producing tomatoes at the same time as we do, but we believe it is unfair to try to compete with an area where daily labor costs are equivalent to what we must pay for an hour of labor. Perhaps some kind of a quota may be applicable if the tariff cannot be raised on these imports. In 1967, over 60% of the Mexican tomatoes for the entire year were unloaded in Cincinnati during three months-March, April, and May. But of probably greater economic significance to the citizens of Ohio, as well as the growers of our industry, is the very rapid increase in the proportionate amount of Mexican tomatoes coming to Cincinnati. In 1965 less than 3% of the unloads came from Mexico; in 1967 this had jumped to nearly 11%. We are sending a copy of this letter to our Congressmen from the greater Cin- cinnati area. Perhaps they may be willing to express their concern, too, on this important matter. Sincerely yours, JOHN Evzas, President. EXHIBIT B OHIO GREENHOUSE CO-OPERATIVE ASSOCIATION, Cleveland, Ohio, June 19, 1968. Mr. JERRY N0wIN5KI, Cleveland G-reenhcnLse Vegetable, Growers Cooperative Associaticm~, Rocky River, Ohio. DEAR MR. N0wIN5KI: The Ohio Greenhouse Co-operative Association asks that you represent our association in speaking before the Ways and Means Committee in support of ll~R. 17551. I sincerely hope that Congress will enact legislation to protect our industry from the growing threat of foreign imports to our land. Sincerely, HOWARD LONARDO, President. EXHIBIT 0 NATIONAL AsSOCIATION GREENHOUSE VEOETABLE GRowERs, Cleveland, Ohio, June 5, 1968. Mr. JERRY NOWINSKI, Greenhonse Industry Committee Chairman. D~R MR. N0wIN5KI: As President of the National Greenhouse Vegetable Growers Association, and of the Toledo Greenhouse Association, the Board of Directors of these organizations, as well as the representatives of the Grand Rapids, Michigan, Greenhouse Industry, would request you and your constituents to represent our industry at the hearings with the Ways and Means Committee in Washington, commencing June 4, 1968, regarding the importation of the foreign vegetable into the United States. Sincerely yours, LEONARD BzmNaER, President. EXHIBIT P FARMERS PRODUCTION CREDIT AssoCIATIoN, Ashland, Ohio, Aprit 9, 1968. GENTLEMEN: We are writing this letter to express the opinion of the Board of Directors and employees of our organization in regards to the current farm situation. In 1967 our Association loaned $24,724,718 to 3178 borrowers in our eleven- county area. Our area is quite diversified since we have counties bordering Lake Erie in which the major farm enterprise would be truck crops and grain and, of course, the greenhouse industry since Lorain and Cuyahoga counties have the largest concentration of greenhouses in the world. Our counties to the south of these are devoted primarily to dairy, cattle feeding and poultry enterprises. PAGENO="0595" 5035 During February, 1968, our Association's loans were examined under the super- vision of the Farm Credit Administration and the results indicate that 15.6% of our loan numbers which includes 22.2% of the dollars outstanding, have one or more major credit weaknesses. The most frequently mentioned weakness by the credit examiners is the borrower's repayment ability. It is our opinion that farm prices are not adequate to return the price of production in many of these enterprises, particularly in the vegetable greenhouse, poultry and cattle feeding areas. Phere are several reasons for these low farm prices, but in our opinion, one of the main ones is the inequality of the import- export situation between the United States and other nations. We do feel that it is very important that a serious study be conducted on these problems at a high level of government. Hopefully these inequalities could be resolved with a corresponding improvement in the farm price situation. This must be done in the near future if agricultural production is to remain in the hands of the farm family as we have known it traditionally. Sincerely yours, FRED CAMERON, President. JAMES DERAN, General Manager. Mr. HERLONG. Thank you very much. We appreciate your testi- mony. Are there questions? Mr. Conable. Mr. CONABLE. You have of course a particular seasonal problem because of the high cost of your product and the periods of scarcity from a seasonal point of view. Mr. NowINsKI. Yes. Mr. CONABLE. Are you asking for quotas and tarifFs too? They both seem to be in your recommendations. Wouldn't one be enough to help you, or do you really feel you need them both? Mr. N0wINSKI. We as a greenhouse industry certainly think a com- bination of the two would be very helpful. Mr. CONABLE. You would like to see the quota adjusted seasonally, would you? Mr. NowINsKI. Right, depending on the amount of imports. All of this is predicated on what other growing areas produce such as Florida and Texas and California. Our price is determined by what these other areas produce. Mr. CONABLE. I can see you have a high risk business there with lots of expenses. Mr. N0wINSKI. Extremely high risk. Mr. CONABLE. Thank you. That is all, Mr. Chairman. Mr. HERLONG. Thank you. Thank you so much for your appearance. Mr. NowINslu. Thank you. Mr. HERLONG. The next witness is Mr. Luke F. Beckman. Mr. BEYrS. Mr. Chairman. Mr. HERL0NG. Mr. Betts. Mr. BETrs. Mr. Beckman doesn't live in my district, but he lives awfully close to it. He lives in Mr. McCulloch's district. I would like to encroach upon Mr. McCulloch's prerogative to welcome him to the committee. I am sure he wouldn't object. He has been very patient waiting to be the last witness. I hope those who are still here will listen to him. Mr. CONABLE. Of course he is farther from my district but he has some good friends there. I would like to say he is the last witness but not the least. PAGENO="0596" 5036 STATEMENT OP LUKE P. BECKMAN, PRESIDENT, MINSTER CANNING CO. Mr. BECKMAN. Thank you, Mr. Chairman and I thank all of you gentlemen. Mr. HERLONG. Thank you. Will you please identify yourself for the record and proceed in your own way. Mr. BECKMAN. I know you have gone over your lunch hour and tried to finish the hearings. Mr. HERLONG. We are used to that. Don't worry about that. Mr. BECKMAN. I appreciate that very much. I have a condensed copy of what I planned in my oral testimony and with your permis- sion I will give you that and it will be much shorter. Mr. HERLONG. If you like, your entire statement will appear in the record. Mr. BECKMAN. I would like to have that. Mr. HERLONG. Without objection it will. be made a part of the record. Mr. BECKMAN. I am Luke F. Beckman, president of the Minster Canning Co., Minster, Ohio. Our firm is a small to medium size packer of canned peeled tomatoes, tomato puree, catsup, and salad mustard. In addition to my company I have been asked by 35 other tomato canners, in a total of 10 States, representing 48.4 percent of the total U.S. production last year of peeled tomatoes to speak for them at this hearing. Tomato canners, such as myself, are experiencing difficulties in marketing our products as a result of imports of canned tomatoes and tomato products. Enactment of legislation that will increase the protection for these products, either through higher tariffs or import quotas, or both, is essential. A number of the tomato processors have furnished me with their direct cost figures for 1967, and my written statement compares our costs and prices with the prices of imported canned tomatoes. The direct factor cost of canning peeled tomatoes-in Ohio, Michi- gan, New York, and Georgia, averaged $3.851 in 1967 for a case of six No. 10 cans. For your information a No. 10 can is very often compared to a gallon although it is a little smaller than a gallon. That cost figure does not include overhead, selling expense, or profit. Compared with that, we have quotations from reputable food brokers, offering canned tomatoes from Spain, delivered to all east coast points, for only $4.10 per case out of the new pack. When I talk about new rack I mean the nack in 1968. this fall in August and September. This leaves the U.S. packer only 24.9 cents per case, only 4 cents per can, over his direct factory cost, to meet Spain's competition. That is hardly enough to pay the freight from his plant to the buyer's warehouse, much less to pay for the selling costs, overhead, profit, and something to buy replacement machinery. I am also concerned about the rising imports of tomato paste, which is competitive with and can be substituted for tomato puree which our firm packs for remanufacturers of other products. In the brief time which I am allowed, I can only summarize the reasons which are set. forth in my statement as to why the United PAGENO="0597" 5037 States should increase the tariffs or other protection for canned tomatoes. First is the fact that of all the canning crops grown in the United States, tomatoes account for the largest total value. They are worth $320,218,000 at the farm before they leave for the processing plants. Tomatoes and tomato products account for the largest product volume of any commodity line in our industry. A good deal of hand labor is employed in tomato canning. In my plant in Ohio, as in other canneries in the United States, we pay the legal minimum wage of $1.60 per hour,. and much higher for most of our personnel. At the same time the price of cans went up 5½ per- cent last year. Our total costs were up in 1967 a total of 15 percent over 1966 costs. A large portion of that increase in our operating costs results from action by the Congress in raising the minimum wage. I would have you gentlemen know that in our industry never since the first wage rates were established back in 1933 and 1934 have we ever appeared before Congress and objected to the raise in the minimum wage. Also in 1967, field labor came under a minimum wage for agricul- tural workers at the direction of the Secretary of Labor. We are competing with countries whose labor costs are much lower than ours. In order to assure a supply of tomatoes of suitable quality for processing in our cannery in Minster, Ohio, we grow all of our own tomatoes. By integrating the farming and canning operations, the Minster Canning Co. is better able than many other canners to control costs. But, with only one source of income-arising out of the sale of our finished canned food products-we are unable to compete either in our farm operations or in our canning operations with the low cost imports from Spain and other countries. A number of other tomato processors have integrated their farming and canning in the same manner. The people employed in growing the tomatoes, those employed in the plant and the warehouse-all depend on our ability to stay alive in the tomato canning business. The jobs and incomes of many people in our community are jeopardized by the situation which now threatens us. I would like to propose that the tariffs on canned tomatoes and on tomato paste be increased by at least 50 percent above the rates existing prior to the Kennedy round. However, I am not at all sure that imports from low cost supplying countries can be dealt with by tariff increase alone. As the major problem at the present time appears to be the price differential between domestic canned tomatoes and tomato products and the imported products, a tariff increase would be helpful in protecting our pricing. The total imports of tomatoes and tomato products in 1967 were double the imports of 1966. Very many doublings of imports of canned tomatoes and tomato products each year could easily spell disaster to the domestic production. PAGENO="0598" 5038 In other words, if you only had 1 percent of the total consumption of tomatoes in this year that were imports and you double it for 7 consecutive years you would have 128 percent. I think it is something to think about. Some way will have to be found, in addition, to limit the volume of imports from low cost supplying countries, such as Spain, Morocco, and Mexico, Italy and France. If the committee and the Congress would favorably consider some form of quota legislation that provides for market sharing, I would ask that you include canned tomatoes and tomato paste in its provisions. (Mr. Beckman's prepared statement follows:) STATEMENTOF LUKE F. BECKMAN, MINSTER CANNING Co. I am Luke F. Beckman, President of The Minster Canning Company, Minster, Ohio. Our firm is a small to medium size packer of canned peeled tomatoes, tomato puree, catsup, and salad mustard. Our pack of tomatoes and tomato products total approximately 200,000 cases per year. In addition to my company I have been asked by other tomato canners in other states, who represent a total of 13,630,000 cases of tomatoes packed in 1967, to represent them in this hearing. Tomato canners, such as myself, are experiencing difficulties in marketing our products as a result of imports of canned tomatoes and tomato products. Imports of No. 10 cans of tomatoes are being sold in the Midwest at prices hardly above our direct factory cost. Enactment of legislation that will in- crease the protection for these products, either through higher tariffs or import quotas, or both, is essential. Since our basic problem is price rather than volume of imports, I would prefer higher tariffs rather than import quotas. The de- livered price of imported canned peeled tomatoes to the canned foods distributor's warehouse has an extraordinary effect upon the market price of canned peeled tomatoes packed in this country. Imports of canned tomatoes reached a new all-time high last year. The quantity of canned tomatoes imported in 1967 was more than 133 million pounds, an in- crease over 1966 of 29 percent. The principal supplier was Italy, which shipped four-fifths of the total. The second largest foreign supplier was Spain, which furnished more than 20 million iounds. The damaging effects from these imports are not alone in the quantities imported, but more threatening in the low prices. In the face of rising costs and rising prices here in the United States, the average unit value of imports of canned tomatoes in 1967 actujally declined, from an average of 9.2 cents per pound in 1966 to 8.4 cents per pound in 1967. The ;Minster Canning Company has a sales comparison chart upon which the inventory of saleable merchandise is listed at the market prices prevailing on January 1st. At the end of each month the actual sales are compared with the inventory and gains or losses are listed. From January 1, 1968 to June 1, 1968, our sales showed a net loss of $8,542.05 below the January 1 inventory. It would be too cumbersome to use all sizes of canned peeled tomatoes in my attempt to give you a picture of costs and selling prices over a period extending from the packing season in the fall of 1967 through June 1, 1968. For comparison purposes I will use the No. 10 can size. From Ohio, Michigan, New York and Georgia, I have received the direct factory cost figures of canning peeled toma- toes. This cost averaged $3.851 per case of 6 No. 10 cans. This cost figure did not include overhead, selling expense or profit. We have quotations from reputable food brokers, offering cages of six No. 10 cans of peeled tomatoes, packed in Spain, with or without a U.S.D.A. certificate of grade, deiivered to the buyers' warehouses between August and December, 1967, to all Eli~st Coast points for $4.10 per case. This leaves the United States packer .249~ per case over his direct factory cost to meet Spain's competition. Hardly enough to pay the freight from his plant to the buyer's warehouse, much less pay for the selling costs, overhead, profit and something to buy replacement macftiinery. The price squeeze began in December 1967 and has continued to this date. In December 1967 the average selling price of a case of six No. 10 cans of peeled tomatoes was about $5.00. It has continued a downward spiral until now it is PAGENO="0599" 5039 ~asy to purchase them for $4.00 per ease. A recent purchase was made by the U.S.D.A. for 269,700 eases of six No. 10 cans of peeled tomatoes on bids from the packers and the average price paid for them was $3347 per case. I am also concerned about the rising imports of tomato paste, which is com- petitive with and can be substituted for tomato puree which our firm packs for remanufacturers of other products. The U.S. imports of tomato paste in 1967 more than tripled in volume and almost tripled in value, from more than 50 million pounds, valued at $4.5 million in 1966 to more than 155 million pounds, valued at $22 million in 1967. Unit values increased from an average of 14.3 cents per pound to 14.9 cents per pound, an increase of 4 percent, but not equal to the cost increases we experienced. Imports from Portugal accounted for more than half of the 1967 total volume. Imports were reported from 18 foreign coun- tries. In addition to Portugal, the other suppliers were Italy, Mexico, Greece, Spain, France, Yugoslavia, South Africa, Angola, Morocco, Tunisia, Poland, Canada, Argentina, Korea and Japan. The Treasury Department was scheduled to put countervailing duties into effect on June 1, against tomato products from Italy and France to offset export subsidies available to processors in those countries. However, the countervailing duties are not a solution to the problem of import competition now confronting the tomato industry. Prior to the Kennedy Round negotiations, tomato growers and tomato proc- essors from all over the United States presented strong economic arguments against any tariff reductions. It is my understanding that, on the basis of ad- vice from various Federal departments and agencies concerned, tomatoes were placed on the list of products on which the U.S. actually intended to make no tariff reductions in the Kennedy Round. In April of 1967, when Ambassador Roth and the European Common Market representatives exchanged their "final lists" in the Kennedy Round negotiations, canned tomatoes and tomato paste were not included. The Common Market at the last moment asked Ambassador Roth to add tariff reductions on canned tomatoes and tomato paste and a few other products to the bargain. According to the best information available to us, the U.S. agreed in the closing moments of the Kennedy Round to reduce the tariffs on canned tomatoes and tomato paste in the face of the Government's intended, planned position, which had been carefully analyzed and arrived at, not to do so. On January 1, 1968, the United States began implementing reductions in the tariff on canned tomatoes and the tariff on tomato paste as a result of the Ken- nedy Round. Instead of a reduction in the tariffs on canned tomatoes and tomato paste, increased protection would have been more appropriate. Now I shall attempt to explain why, instead of reducing tariffs, the United States should increase them. First is the fact that tomatoes intended for commercial processing were harvested last year in 30 states on a total of 326.060 acres, and at a total cash farm value of $320.218,000. Of all the canning crops grown in the United States, tomatoes account for the largest total value, and tomato products account for the largest product volume of any commodity line in the canned foods industry. As our business depends on tomatoes and tomato products, and we pack other products only to spread out our overhead costs, the jobs and income of many people in our community are jeopardized by the situation which now threatens us. The Canning Industry in the United States is obliged to compete with imports from countries where wages and wage rates are considerably below the wage rates in our industry. Although the canning industry is highly automated and very efficient, a good deal of hand labor is employed in preparing the raw foods for canning. In my plant in Ohio. as in other canneries in the United States, we pay the legal minimum wage of $1.60 per hour, and much higher for most of our personnel. At the same time the price of cans went up 51/2 percent. Our total costs were up in 1967 a total of 15 percent over our 1966 costs. A large portion of that increase in our operating costs results from action by the Congress in raising the minimum wage. In contrast to the wages here of $1.60 an hour and higher, the wages in Portu- gal, for example, are about half of ours. Also in 1967 field labor came under a minimum wage for agricultural workers at the direction of the Secretary of Labor. The Minster Canning Company em- ploys approximately 250 workers during the canning season, and has a total annual payroll of more than $275,000.00 PAGENO="0600" 5040 In order to assure a supply of tomatoes of suitable quality for processing in our cannery in Minster, Ohio, we grow all of our own tomatoes. By integrating the farming and canning operations, The Minster Canning Company is better able than many other canners to control costs. But, with only one source of income- arising out of the sale of our finished canned food products-we are unable to compete either in our farm operations or in our canning operations with the low cost imports from Spain and other countries. A number of other tomato processors have integrated their farming and canning in the same manner. The people em- ployed in growing the tomatoes, those employed in the plant and in the ware- house-all depend on our ability to stay alive in the tomato canning business. As I have previously stated, it is my understanding that the United States actually intended in the Kennedy Round not to make any further tariff reduction on canned tomatoes or on tomato paste, but that it was coaxed into doing so as a political gesture even though not on sound economic grounds. The position of our Government not to reduce the tariffs on tomato products probably was arrived at even before the 1967 upsurge in imports became evident. I would like to suggest therefore that the Government's carefully arrived at economic position, not to reduce the tariffs, substantiates my argument that increased protection is in order. I would like to propose that the tariffs on canned tomatoes and on tomato paste be increased by at least 50 percent above the rates existing prior to the Kennedy Round. That would bring the rate on canned tomatoes, which was 21 percent, up to 31.5 percent, and the rate on tomato paste, which was 17 percent, up to 25.5 percent. The effect would be an increase in the tariff of .42ç~ per case on a case of six No. 10 cans of tomatoes with a value of $4.00 and would increase the tariff on a case of six No. 10 cans of tomato paste .68ç~ per case on a case valued at $8.00. However, I am not at all sure that imports from low cost supply- ing countries can be dealt with by tariff increase alone. As the major problem at the present time appears to be the price diffierential between domestic canned tomatoes and tomato products and the imported products, a tariff increase would be helpful in protecting our pricing. The total imports in 1967 were double the imports of 1966. Very many doubling of imports of canned tomatoes and tomato paste each year could easily spell dis- aster to the domestic production. Some way will have to be found, in addition, to limit the volume of imports from low cost supplying countries. If the Commit- tee and the Congress would favorably consider some form of quota legislation that provides for market sharing, I would ask that you include canned tomatoes and tomato paste in its provisions. The 13,630,000 cases of tomatoes that I referred to in the opening paragraph of this statement represents 48.4 percent of the total 1967 pack of peeled canned tomatoes. Following are the companies which asked me to represent them at this hearing: M. W. Acworth & Son, Inc., Quantico, Maryland Acme Preserve Co., Adrian. Michigan Bay Country Foods, Trappe, Maryland Bison Canning Company, Inc., Angola, New York Blissfield Canning Co., Inc., Blissfield, Michigan Bryan Canning Co., Bryan, Ohio Cherokee Products Company, Haddock, Georgia Fair View Packing Company, Inc., Hollister, California Florida City Canning Co., Florida City, Florida Golden Harvest Foods. Dania, Florida Great Lakes Packing Company, Inc., Farnham, New York H L H Products, Sanford, Florida Harrison & Jarhoe, Sherwood. Maryland Hirzel Canning Company, Toledo, Ohio Hollister Canning Company, Holli~ter, California The Home Canning Co.. Blissfield, Michigan T. Noble Jarrefl. Inc., Goldsboro, Maryland Keystone Cooperative Grape Association, North East, Pa. The Lake Erie Canning Company, Sandusky, Ohio Locknort Canning Company, Lockport, New York Markham Bros. & Co., Okeechobee, Florida Martinez Food Canners, Ltd., Martinez, California Melbourne Canning Company, Melbourne, Florida W. T. Onley Canning Company, Inc., Snow Hill, Maryland PAGENO="0601" 5041 P. M. C. Canning Co., Inc., Swedesboro, New Jersey Parker & Hughes Canning Co., Harrington, Delaware J. Richard Phillips, Jr. & Sons, Inc., Berlin, Maryland Roberts Bros. Inc., Winter Haven, Florida Sharp Canning Inc., Rockford, Ohio Stanislaus Food Products Company, Modesto, California Donald S. Stubbs Co., Street, Maryland Sun Garden Packing Company, San Jose, California The Torsch Canning Co., Frederick, Maryland The J. Weller Company, Oak Harbor, Ohio Williamsburg Canning Co., Williamsburg, Maryland Mr. BECKMAN. Mr. Chairman, that completes my testimony and I thank you for your consideration. Mr. HERLONG. Thank you very much, Mr. Beckman. Are there questions? If not, we want to again express our appreciation to you for your appearance before the committee. Mr. BECKMAN. Thank you, Congressman. (The following letters and statements were received for the record by the committee:) STATEMENT ON BEHALF OF CALIFORNIA-ARIZONA CITRUS INDUSTRY This brief is presented pursuant to the Notice of Public Hearing on the U.S. Balance of Trade, dated May 9, 1968, on behalf of the members of the California- Arizona citrus industry. STATEMENT OF POSITION The statement is made on behalf of the California-Arizona Citrus Industry by the California-Arizona Citrus League whose membership represents handlers and growers of more than 90% of the California-Arizona citrus fruit produced and marketed in fresh and processed form. Because of its keen interest in expanding citrus exports, the California- Arizona Citrus League has been actively participating in the market develop- ment program under the authority of Public Law 480 through Its contractual relationship with the United States Department of Agriculture. The industry has been participating in this program since January 15, 1962. Also, the California-Arizona citrus industry, either through the California- Arizona Citrus League or through the principal marketing cooperative, Sunkist Growers, has presented testimony at numerous hearings which were conducted by the Trade Information Committee and its predecessor committees in connec- tion with the reciprocal tariff negotiations of the United States. One of the most recent such presentations was in connection with the hearings held pursuant to the Trade Expansion Act of 1962 and the League's position as taken in those hearings was summarized and presented to member agencies of the Trade Infor- mation Agency in September 1964. A copy of that summary statement is sub- mitted for incorporation in the record of these hearings. Because of the serious need to expand citrus exports, we wish to testify at this time on the following points: 1. The value of citrus exports to the industry and to the United States. 2. EEC tariffs and non-tariff barriers which discourage trade. 3. EEC preferential treatment to non-member European citrus producers. 4. Obstacles to trade by countries outside the EEC. 5. U.S. National Fruit. Export Council policy statement. 6. Suggested points that the U.S. trade policy should include which will aid in the expansion of trade. VALUE OF CITRUS EXPORTS Exports of citrus and citrus products have been a vital part of the overall marketing plan of the California-Arizona citrus industry for many years. Our current production growth is partly predicated on the belief that we can produce citrus of such quality and quantity that will enable us to compete on a sound economic basis with other producing areas throughout the world for the markets PAGENO="0602" 5042 in the non-producing countries. In the 1066-67 marketing season our exports of fresh citrus to Canada and overseas markets approximated 24 million cartons with an f.o.b. value of about $62.5 million. It is estimated that exports of proc- essed citrus products produced in California and Arizona during 1066-67 amounted to $10 million. The value of exported citrus products for 1966-67 was below that attained in recent years due in great part to either non-tariff bar- riers or the shifting tariff relationships that occurred between suppliers due to the formation of the European Economic Community. However, for the 1966-67 season, it is estimated that total California-Arizona exports had an f.o.b. value of approximately $75 million. The estimated value of imports of like citrus com- modities amounted to $30 million during the same period. Thus, it may be esti- mated that the exports of California-Arizona citrus and citrus products in rela- tion to imports of citrus and citrus products created a favorable trade balance of $45 million. Additional exports of citrus and citrus products were made from other producing areas of the United States, the value of which would be added to the $45 million to arrive at the total net balance of trade created by the United States trade in citrus. EUROPEAN ECONOMIC COMMUNITY TARIFFS AND NON-TARIFF BARRIERS In previous presentations made at tariff hearing, the California-Arizona Citrus League made the salient point that the United States citrus industry was and continues to be placed at a disadvantage in world citrus trade by reason of the development of the Common Market. This is because citrus producing countries which are members of the Common Market will have duty-free access to the prin: cipal consuming markets of Western Europe as of July 1, 1968. In contrast, citrus exports from the United States will encounter the Common External Tariff of the EEC. The following tabulation shows the comparison between CXT rates effective July 1, 1968, and the original tariff rates of those countries which have been traditional markets for us. EEC IMPORT DUTIES: A COMPARISON OF NATIONAL RATES AS OF JAN. 1, 1957, WITH THE FINAL COMMON EXTERNAL TARIFF SHOWN ON AN AD VALOREM BASIS Rates Commodity West Germany as of Jan. 1, 1957 CXT final rates Benelux France 10 Fresh oranges 15 20-25-35 15 (Apr. 1 to Oct. 15). Fresh lemons 0 113 15 20 (Oct. ito Mar. 15). Fresh grapefruit 10 12 20 12. Citrus juices 10-17-20 15-18 30 19 (Lemon and grapefruit). 20 (Orange). Juice mixes 17-20 15-18 30 22 (with pineapple). Containing citrus 24 (other mixes). Citrus oils, not terpeneless 0 8 0-8 12. It is obvious that the effect of the development of the Common Market and its CXT is to place the United States at a disadvantage as a supplier to the principal consumer markets in contrast with Italy, a member of the EEC. And now Greece has been added to the list of citrus suppliers by reason of associate member status, and Turkey, by reason of preferential agreement. Apparently, this is not the end of the discriminatory treatment in favor of Mediterranean suppliers since negotiations are currently in the process with Turkey, Morocco, Iran, Leba- non, Israel, Tunisia and Spain. It:is our understanding that the extent of this pref- erence which is now being negotiated, ranges from a reduction of 20% in the CXT for Turkey to 80% for Morocco and Tunisia. This concept is particularly disturbing to us because it represents discriminatory practice against the United States and other citrus suppliers to the EEC such as South Africa and Brazil. This is contrary to EEC's original policy which has been to treat all third coun- try GATT participants in the same manner. We are aware that these negotiations are predicated upon the maintenance of a higher level of prices by the exporting countries so that the result of the tariff reductions are to be reflected in higher returns to growers in those coun- PAGENO="0603" 5043 tries rather than in a preferential import duty treatment. However, we frankly have little confidence in the ability of the IOEC countries to institute machinery which will effectively insure such price maintenance. If, in fact, it could be achieved, it would still result in a discriminatory situation, encouraging in a preferential way an expansion of citrus production in countries which are com- petitive with `California and Arizona with respect to certain varieties and during certain times of the year. In addition to the disadvantageous position in which the creation of the Com- mon Market has put us with respect to maintaining access to these long estab- lished European markets for our citrus, non-tariff barriers, as well, must be con- sidered equally discriminatory. It i's these barriers that must be given paticular attention because of their ability to impede or threaten to impede our continued access to markets within the EEC as well as throughout the world. Appendix I of this presentation is a summary of such non-tariff barriers affecting trade in citrus. Reference is made to the USDA publication ERS-4--60 dated September, 1963, in which approximate measurements of the extent to which agricultural produc- tion in various countries is protected through the existence of such non-tariff barriers. In the case of the United States, no protection is noted as a result of non-tariff barriers in fruit and vegetable categories. In contrast, the following percentages are noted with respect to the fruit and vegetable production by mem- bers or associates of the EEC: France 83%, Germany 60%, Netherlands 59%, Italy 26%, Belgium 88% and Greece 100%. These computations, `of course, were made prior to the effective functioning of the Common Market's reference price- variable levy system which is applicable to fruits and vegetables and particularly applicable to importations of fresh oranges and lemons. As of this date, the Com- mon Market has not acted to impose variable levies on citrus under the system and only on rare occasions have prices in the selected markets fallen `below the reference price. However, the existence of the system and its availability for use almost without notice constitutes a constant threat to `the maintenance and ex- pansion of the important `trade which has been developed with countries within the EEC. BARRIERS TO TRADE BY COUNTRIES OUTSIDE OF THE EUROPEAN ECONOMIC COMMUNITY 1. Japan Exports of citrus to Japan has been of a mixed nature in recent years. As a result of liberalizing the import restrictions on fresh lemons, the United States has been able to steadily increase its exports to this country in a very significant manner. As noted in the following table, an average of 97,000 boxes were ex- ported during the period 1958 through 1962. By 1966-67, the U.S. export volume to Japan reached 832,000 boxes; over 8 times the average before liberalization. The result has `been an important contribution to the U.S. balance of trade position. U.s. ecports of fresk lemons to Japan [Thousands of 76-pound boxes] 1958-62 average 97 1962-63 127 1963-64 (liberalized May 1964) 430 1964-65 506 1965-66 712 1966-67 832 Source: Citrus Fruit, "World Production and Trade Statistics," USDA, ~`AS, September 1967 and FT 125, 1967. On certain other citrus commodities, however, such as fresh grapefruit, fresh oranges and concentrated lemon juice, Japan continues to maintain unjustified quota restrictions. On these items, Japan either has very little production or no production at certain times of the year, to the extent that U.S. imports in general or during particular months would have little or no effects on the Japanese producer. Therefore, these restrictions must be considered arbitrary and without justification. In fact, GATT no longer supports the Japanese restrictions on the basis of a balance of payments position and every effort should be made to cause Japan to remove these quotas. PAGENO="0604" 5044 2. Mea~ico and Uentra~ and I~outh America Trade in fresh citrus and citrus products with Mexico and the Central and South American countries is an extremely difficult matter, oftentimes burdened by arbitrary restrictions instituted with little or no notice. With respect to fresh oranges, Mexico has placed an embargo on oranges entering Baja California in all but two of the last seven years. These embargoes have lasted `from as little as three days to as long as six months, and to our knowledge, have been for the sole purpose of eliminating competition while oranges produced in certain areas in Mexico are in season. Regarding citrus products, over a period of many years we have encountered nearly continuous harassments by reason of unilateral action on the part of Mexican officials. In the past, their restrictions on such items as citrus oils, juice concentrates and bioflavanoids have taken the form of increases in the official prices for duty purposes, refusal to issue permits, strict embargoes and changes in tariff schedules in such ways as to hide specific coin- modities and put them in higher tariff classifications. In contrast, the United States' doors have been open to Mexico and we have become a substantial market for their exports. The following tabulation illus- trates the significance of the increase in import value of fruits and fruit prepara- tions coming into the United States from Mexico. In 1956, Mexico accounted for 12% of the U.S. imports of these products with a value of $7,797,000. By 1966, imports had increased to the point where Mexico accounted for 26% of the U.S. imports of fruits and fruit preparatIons with a value of $34,111,000. U.S. IMPORTS OF FRUITS AND FRUIT PREPARATIONS [Dollar amounts in thousandsi From all From Mexico Percent from sources Mexico 1956 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 $67,421 $67,421 69,931 65,575 77,589 88.019 87,737 88,469 103,856 123,777 122,864 130,330 * $7,797 $7,797 6,946 9,128 11,428 15,923 15,329 16,568 21,296 29,001 27,178 34,111 12 12 10 14 15 18 17 19 21 23 22 26 Source: "U.S. Imports of Horticultural Products," FAS-M--191, USDA, FAS, August 1967, P. 9. Imports for consumption only. With regard to citrus alone, fresh oranges from Mexico amounted to nearly 400,000 70-pound boxes in 1966-67 which came in spite of one of the largest U.S. production years on record. It is estimated that Mexican imports will increase significantly this season since through June 15, 1968, 1725 carloads have been exported to the U.S. compared to only 390 carloads through the same period last year.* This expected increase can be attributed in large measure to the unfortunate short crop conditions in California and Arizona due to unfavorable weather during the blooming period and heavy frost damage to portions of the producing area during the winter of 1967-68. Nevertheless, this serves to illus- trate the point that these commodities move into the United States with the pay- ment of moderate tariffs and with no non-tariff barriers. The United States should insist on and obtain similar freedom of movement for United States produced citrus and citrus products into these countries. We are aware of the fact that for many years there has been no trade treaty between the United States and Mexico and that Mexico is not a member of GATT. This is no justification for the arbitrary and vexatious trade barriers which are maintained against im- ports from the United States and we specifically request that if this situation is not remedied, forthwith, that the government take appropriate action under Section 252 of the Trade Expansion Act of 1962. *Federal5tate Market News Service Citrus Reports. PAGENO="0605" 5045 POLICY STATEMENT OF THE U.S. NATIONAL FRUIT EXPORT COUNCIL In conclusion, we would like to make reference to the general policy statement made in March of this year on behalf of the fruit exporters of the United States by the U.S. National Fruit Export Council in hearings before the Trade Infor- mation Committee. This policy statement is one which we wholeheartedly sup- port and attach as part of our statement from the California-Arizona Citrus League. ACTION NEEDED TO ENABLE THE EXPANSION OF U.S. TRADE Also, we would like to reiterate for emphasis that part of the general policy statement of the U.S. National Fruit Export Council which outlines the several steps necessary to facilitate the expansion of U.S. trade. 1. Vigorous efforts under existing laws, such as Section 252(c) of the Trade Expansion Act of 1962, for the removal of non-tariff barriers and especially un- justifiable non-tariff barriers; and adoption of counter-measures where other nations contiflUe those practices which call for implementation of these U.S. laws; 2. Diligent pursuit of full implementation of all concessions granted to the United States in the Kennedy Round and earlier GATT negotiations; 3. A period of "wait and see" with respect to the granting of additional au- thority for negotiating further reductions in U.S. tariffs, with the possible excep- tion of minor limited authority to correct obvious inequities which inadvertently resulted from the Kennedy Round negotiations; 4. An examination of current U.S. trade practices which may be trade restric- tive in nature. 5. Re-examination of the immediate and long term consequences to the United States foreign trade from sponsorship of the "regional blocs." 6. Examination of the "most favored nation" policy of the United States. ATTACHMENT A FOREIGN NONTARIFF BARRIERS TO CALIFORNIA-ARIZONA CITRUS AND CITRUS PRODUCTS Country Item Restriction Benelux1 All fresh citrus Belgium: 12-percent turnover tax on duty-paid value; Netherlands: 5- percent purchase tax. Do.1 Citrus juices Belgium: 12-percent turnover tax on duty-paid value; Netherlands: 5- percent purchase tax or 10 percent if used for beverages. France1 do 20-percent turnover tax on duty-paid value, orange juice quotas; all can be sublect to import licensing. Germany 1 Fresh citrus except 4-percent turnover tax on duty-paid value re EEC regulation; mandatory grapefruit. retail labeling "Biphenyl." Do.~ Citrus juices Turnover equalization tax of 6 percent. Italy1 do Embargo. Do.1 Fresh citrus Phytosanitary regulations are used to establish virtual embargo on fresh citrus. This is in addition to the EEC regulation regarding biphenyl. EECI do Biphenyl regulation, retail labeling, grade and quality regulation. Inspec- tion officers have power to lower grade classification and/or prohibit imports due to quality or grade. Reference prices with compensatory levies. EEC I Trademark Additional levies for privilege of advertising well-established trademark. United Kingdom Orange juice Purchase tax of 15 percent. Do Fresh grapefruit Imports prohibited from October through November; this is prohibition on United States only. Otherwise license is required, within quota. Do Orange and grape- Within quota, requires license. fruit, canned and juices. New Zealand Fresh citrus Surtax of 9/40 on imports from GATT countries. Import license only with consent of government Australia do Import license, also imports must be in 4/5 bushel container. Norway do Turnovertaxof 11.11 percent Sweden Citrus juices 6-percent retail turnover tax. Denmark Natural strength Consumer juice: Import quotas. lemon juice. Japan Fresh oranges and Especially restrictive import quotas. grapefruit Do Citrus juices Complete restriction on some, and import quotas on some; varies signifi- cantly from time to time. Mexico 2 Fresh and processed Periodic embargoes, import licenses that are not always honored, quota citrus. restrictions. The Mexican Government has many arbitrary tariff classi- fications on citrus products which often result in duties so prohibitive as to result in virtual embargoes. I To the extent that the above listed turnover taxes are not imposed on citrus and deciduous fruits produced within the EEC countries or are not balanced with some other internal tax, then they constitute a trade barrier. See below for further information regarding the EEC diphenyl (biphenyyl) regulation. 2 A tariff consideration, Mexico. PAGENO="0606" 5046 DESCRIPTION OF THE EEC DIPHENY (BIPHENYL) REGULATION The EEC Diphenyl regulation creates a problem that is two-fold, first is that the maximum tolerance is 70 parts/million-a level that is considerably below what the United States considers "good agricultural practice," that is, 110 parts/million. At one time, Holland wished to enforce the tolerance at 30 parts/million, but they have since agreed to the now accepted EEC level. The second part of this regulation is that it requires labelling to the effect that the fruit is treated with diphenyl, the cartons must be labelled, and there must be retail labelling too. The method by which retail labelling will be done is left to the discretion of the individual countries; thus enters the problem we have with Germany. In Germany, retail labelling (by placards since 1959) states "diphenyl treated-peel unsuitable for consumption," or something similar. The retail label- ling can state only "peel treated by diphenyl" according to the EEC regulation; and therefore, the German practice, in our opinion, is not only excessive, but is now beyond the limits prescribed by the EEC regulation. Up to the present, we have had problems only with Germany and France, but the EEC as a whole is now working out the method by which analysis will be carried out. If the EEC agrees upon analysis at the point of entry, we will not have the problem that we could have if analysis takes place at retail, for this reason: Under refrigeration, diphenyl disperses slowly enough from the papers in the cartons so that we could probably operate with the maximum tolerance. However, because of the way in which the fruit is transported and stored in Europe-the fruit is not kept under refrigeration-diphenyl at the higher tem- peratures disperses to the fruit so that we could get "readings" over 110 parts/million. We have not had the problems to date with this regulation that we could have in the future simply because not all the details of inspection and labelling have been agreed to by all the member states. STATEMENT OF POSITION ON BEHALF OF THE UNITED STATES NATIONAL FRUIT EXPORT COUNCIL This brief is presented pursuant to the Notice of Public Hearing on the future of U.S. foreign trade policy, dated December 15, 19G7, on behalf of the members of the U.S. National Fruit Export Council. The following parties, for the pur- pose of this brief, represent a substantial part of the United States fruit industry which engages in exporting and is vitally affected by U.S. trade policies. California-Arizona Citrus Industry: Pure Gold, Inc., Redlands, California. Sunkist Growers. Los Angeles, California. Canners League of California, San Francisco, California. DFA of California, Santa Clara, California. Florida Citrus Commission, Lakeland, Florida. International Apple Association, Washington, D.C. National Canners Association, Washington, D.C. Northwest Canners & Freezers Association, Portland, Oregon. Pineapple Growers Association of Hawaii, San Francisco, California. California Canning Peach Association, San Francisco, California. California Grape & Tree Fruit League, San Francisco, California. Cranberry Institute, South Duxbury, Massachusetts. Florida Canners Association, Winter Haven, Florida. Florida Citrus Mutual, Lakeland, Florida. National Apple Institute, Washington, D.C~ National Red Cherry Institute, East Lansing, Michigan. Northwest Horticultural Council, Yakima, Washington. Texas Citrus & Vegetable Growers & Shippers, Harlingen, Texas. Texas Citrus Mutual, Weslaco, Texas. STATEMENT OF POSITION The U.S. National Fruit Export Council, representing non-price-supported perennial fruits and their products, has, from its inception, consistently sup- ported the principle of reciprocal trade agreement negotiations and the cause of liberalized foreign trade. Foreign trade is essential to the well-being of the United States as well as to growers, packers and processors of fruits and PAGENO="0607" 5047 other agricultural products. The export market is an integral part of our normal marketing operation-it is not a surplus removal program. Certain varieties of fruit, and grades, sizes and specifications thereof, are grown especially for the export market. Trees and vines of certain varieties were planted specifically to fill the demand from foreign countries. Exports of U.S. fruits and fruit products during the fiscal year ending June 1967 amounted to over $319,869,403, s~1d entirely for cash. These shipments make a substantial and indispensable contribution to the U.S. balance of payments picture. Our industry is concerned with the flurry of protectionistic activity which culminated in bills introduced in the Congress seeking to establish quotas and other restrictions on the importation of products into the United States. The U.S. cannot export unless it is willing to accept imports. Import quotas estab- lished by the United States, as proposed, would almost inevitably load other countries to retaliate and establish additional barriers to the too many existing obstacles to United States trade. This procedure could result in increased governmental controls and would threaten individual enterprise in the export field. While we recognize that, in some instances, import quotas may be needed and justified, such quotas should be established only under exceptional circum- stances. as a temporary emergency measure and, under carefully established procedures, following thorough investigation and mature consideration. We believe that the United States should carefully examine its current restric- tive practices, including quotas, American Selling Price system, Buy-American legislation and other trade restrictive practices with a view to reducing the same to a bare minimum. The matter of U.S. subsidies should also be examined. At the same time, the United States should forcefully insist that other coun- tries which maintain many more non-tariff barriers than the U.S. should re- move their unjustifiable non-tariff barriers in line with the Congressional decelar~tion in Section 252 of the Trade Expansion Act of 1962. Some of these manyforeign non-tariff barriers include: 1. Quotas and quantitative restriction. 2. Quota preferences. & Currency restrictions. 4. Minimum entry prices. 5. Reference prices. 6. Variable levies. 7. Border taxes. 8. Value added taxes. 9. Tariff preferences. 10. Container regulations as to size, label, etc. 11. Specialized label requirements. 12. Variant food standards. 13. Food additive controls. 14. Pesticide residue limitations. 15. Cumbersome documentation procedures. 16. Direct and indirect export subsidies. 17. Import licenses including the delayed issuance thereof and issuance to factors who are not importers. The EEC's agricultural protectionism is contrary to the spirit, if not the letter, of the GATT. Under the guise of harmonizing agricultural markets, the EEC embodies a system of import protection devices and export subsidies that are inconsistent with established and recognized principles of competitive inter- national trade. There is no question that the EEC agricultural policy is used to circumvent the provisions of GATT. Export subridies have recently been place in effect by some countries (in- cluding Italy and France) in contravention of GATT to the detriment of legiti- mate United States interests. The United States should take forceful action to correct this situation and should immediately implement the applicable anti- dumping procedures, which should be immediately withdrawn when corrective action is taken. Also, where appropriate, the United States should take effective steps to protect the trading position of American firms who are competing in world markets with products subsidized by other countries. Uniform international food laws have been suggested as a possible answer to some of the discriminatory and protectionistic food laws and regulations invoked by some countries. These food laws and regulations constitute a serious PAGENO="0608" 5048 barrier to international trade and the elimination thereof should be a principal qbjective of the United States. The U.S. should proceed carefully in this field to assure that uniform international food laws facilitate trade and do not become an effective barrier to trade. Current efforts should be directed toward enforcement of the present GATT agreements, including removal of non-tariff barriers, so that the benefits ob- tained from other countries in return for concessions given by the United States may be realized. The U.S. should insist upon full implementation of all conces- sions granted to the United States in the Kennedy Round negotiations to assure that the benefits thereof are not nullified by the continuation or establishment of unjustifiable non-tariff barriers or other discriminatory treatment as has oc- curred frequently in the past. Granting of authority to make additional reduc- tions in tariffs other than minor corrective action should be deferred until the full effect of the Kennedy Round is recognized and it appears that specific authority to negotiate further reductions is in the best interest of the United States. The "Most Favored Nation" principle has been a cornerstone of United States foreign policy for many years. At the present time the U.S. grants equal "most favored nation" treatment to all countries (whether we have trade agreements with them or not) except certain Communist dominated countries. Contractually, the United States is entitled to receive equal "most favored nation" treatment from other GATT members. As a result of the development of various trading blocs, including the European Common Market, EFTA, LAFTA, CACM, we find that the United States no longer enjoys equal treatment which would be due as under the "most favored nation" principle, but, in effect, receives "second class treatment" by facing tariff discrimination in each of these blocs. If the current trend toward trade blocs continues, the United States will soon find itself in the position of being entirely on the outside looking in, granting favors to all, and receiving "first class" treatment from few, if any. "Most favored nation" treatment should be given only to those countries who provide "most favored nation" treatment to us. It should be withdrawn from countries who dis- criminate against the United States or who do not have trade agreements with the United States. The United States should re-examine the "most favored nation" principle and its present application and consider establishment of a multi-column tariff through which treatment would be afforded various countries consistent with that they afford the United States. The following recommendations, if followed, will result in a substantial in- crease of U.S. fruit exports, thereby contributing materially to improvementof the present distressing balance of payments situation. We believe thaf the United States has failed properly to execute announced policy, to ex~ércise authority al- ready granted by existing legislation, and to insist that other countries live up to their contractual obligations. We recommend that in order to expand trade, the future trade policy of the United States, and its execution, should embrace: 1. Vigorous efforts under existing laws, such as Sec. 252(c) of the Trade Expansion Act of 1962, for the removal of non-tariff barriers and especially un- justifiable non-tariff barriers; and adoption of counter measures where other nations continue those practices which call for implementation of these U.S. Laws; 2. Diligent pursuit of full implementation of all concessions granted to the United States in the Kennedy Round and earlier GATT negotiations; 3. A period of "wait and see" with respect to the granting of additional au- thority for negotiating further reductions in U.S. tariffs, with the possible excep- tion of minor limited authority to correct obvious inequities which inadvertently resulted from the Kennedy Round negotiations; 4. An examination of current U.S. trade practices which may be trade restric- tive in nature; 5. Re-examination of the immediate and long term consequences to the United States foreign trade from the sponsorship of the "regional blocs"; and 6. Examination of the "most favored nation" policy of the United States. If the above recommendations are not followed, the consequences will be a decline in sales of U.S. fruits and fruit products abroad, a severe economic blow to the domestic fruit industry, and loss of the present substantial economic con- tribution to the United States balance of payments from fruit exports. PAGENO="0609" 5049 STATEMENT OF ROBERT M. KERR, ATTORNEY, SPECIALTY CROPS CONFERENCE This statement j:5 submitted by the U.S. Specialty Crops Conference through its spokesman Robert M. Kerr, attorney, 801 Standard Plaza, Portland, Oregon 01204. The Conference is an organization of agricultural commodity groups engaged in the production and marketing of perennial horticultural crops in California, Oregon, Washington, Idaho, Utah, Michigan, and New York State. The agricultural industries involved are those which grow, process, and handle dates, figs, filberts, sweet cherries, and walnuts. The combined average annual farm value of the production of these crops exceeds $200 million. The specific conimodity organizations on behalf of which the Conference presents this state- inent include: California Dried Fig Advisory Board and California Fig Institute, 1205 East Olive Avenue, Fresno, California. Date Packers Council, Post Office Box 764, Indio, California. National Cherry Growers and Industries Foundation, 302 North 29th Street, Corvallis, Oregon 97330. Northwest Cherry Briners Association, 302 North 29th Street, Corvallis, Ore- gon 97330. Oregon Filbert Commission, 12295 Southwest Main Street, Tigard, Oregon. Walnut Control Board, 2040 Pioneer Court, San Mateo, California. SUMMARY OF STATEMENT 1. Each of these five perennial tree-crop industries is dependent for its con- tinued existence upon reasonable protection in its domestic U.S. market from excessive imports. 2. "Adjustment assistance" such as was authorized by the Trade Expansion Act of 1962, or as proposed under the Trade Expansion Act of 1968 (HR 17551) could have no practicable application to growers of these perennial tree crops. Relocation or crop-substitution grants or loans, or retraining for new vocations, is not practicable for any of these industries, and could not possibly provide any workable or satisfactory substitute for direct protection against excessive imports. 3. Any new or renewed Trade Expansion Act which includes any program of trade adjustment assistance for those adversely affected by imports should specifically provide for participation by the Secretary of Agriculture in any factual determinations, or policy recommendations, relative to the administra- tion of such adjustment assistance as to any agricultural industry or growers, workers, and businesses engaged therein. 4. Any new or amended trade legislation should authorize accomplishment, in appropriate instances, of effective quantitative imports limitation, either through import quotas established by unilateral U.S. action or by means of international commodity arrangements. 5. A workable, fair, and promptly functioning "escape" mechanism is an es- sential provision in any legislation under which import duty rates or other imports regulations may be reduced or modified. 6. Section 22 of the Agricultural Adjustment Act of 1933 (7 USC 624) should be amended to extend to commodities not under a domestic control program. COMMON CHARACTERISTICS OF THESE AGRICULTURAL INDUSTRIES Dates, figs, filberts, sweet cherries, and walnuts, are all perennial tree crops which require high fixed investments over a long-term cycle. The principal areas of commercial prodution are in California, Oregon, Washington, Idaho, Michigan, New York State, and Utah. The combined value of their annual production greatly exceeds $200 million. Each of them must depend upon the domestic U.S. market for their sales. None of them has any present or foreseeable significant export market, with the exception of the exports of in-shell walnuts diverted from the domestic market under surplus-disposal provisions Of a federal walnut marketing order. The volume of foreign production of each of these crops far exceeds the U.S. production and is traded in the world market at prices substantially lower than U.S. prices. Costs of the foreign production continue to be far less than the mini- mum possible U.S. costs. In contrast with the American industries' dependence upon their own domestic market, practically all of the other countries which 95-159-CS-pt. 1O-39 PAGENO="0610" 5050 produce these products are and consistently have been on a substantial surplus production and export basis, and in good crop years could flood the attractive U.S. market at comparatively very low prices. Adjustment by the U.S. industry to such unlimited competition in its own essential market would be difficult at best, if not impossible, and could lead to the rapid disruption and disintegration of the U.S. industry. These industries do not seek to prohibit or avoid fair for- eign competition. They can continue to exist, however, as significant factors in the general economy of their production areas, and as an important segment of U.S. agriculture as a whole, only if they have access to a reasonable share of the domestic market and an opportunity to compete in that market at reasonable prices. These perennial tree-crop industries accordingly must continue to rely upon reasonable imports protection or limitation. The import duty rates applicable to these commodities (none of which were reduced during the recent Kennedy- Round negotiations) are modest and in no sense unreasonably protectionist. Any foreign trade policy which does not give full and realistic consideration to these facts would be a gross disservice to the U.S. growers, handlers, and processors of these commodities and to agriculture and business in general. ADJUSTMENT ASSISTANCE "Adjustment assistance" such as authorized in § 301 of the Trade Expansion Act of 1962 (19 USC, § 1901), and as that section would be amended by Title III of HR 17551, the proposed "Trade Expansion Act of 1968," would not be practicable for any of these perennial specialty orchard crops. These orchards cannot be diverted to other production without intolerable sacrifice of long years of effort and heavy investment. Much of the land now producing these crops is not suitable for economic production of any other product, or such other crops as could satisfactorily be produced in the climatic areas and on the soils in- volved already are in surplus production or face heavy imports competition. The equipment used in producing, handling, and processing these crops is special- ized, and for the most part could not be converted to other uses. The growers of these commodities thus obviously cannot satisfactorily "ad- just" to a loss or restriction of their markets. Such would require the destruc- tion of their present groves or orchards. Loss or reduction of market outlets thus would be much more serious and involve a much greater sacrifice for these domestic agricultural industries than for producers of other commodities who may more readily go into or out of production. The following comment as to the inadaquacy of "adjustment assistance" as to much of agriculture, which appears in a published analysis by the Giannini Foundation of Agricultural Economics, University of California, of the bill which was enacted as the Trade Expansion Act of 1962, is pertinent: "It is clear that the adjustment-assistance provisions of the bill, recognizing their favorable aspects in general, were not framed with agriculture in mind. One nmy appreciate the importance of the adjustment-assistance provisions for non- agricultural workers, firms and industries; but that cannot explain the apparent lack of recognition and understanding by the architects of the bill of the dif- ferential nature of the adjustment-assistance problem in agriculture. "In fact, one could believe that the agricultural adjustment-assistance prob- lems, as they are related to the Trade Expansion Act of 1962, did not enter the minds of the drafters of the legislation, and if they did, they certainly made little imprint." ADJUSTMENT ASSISTANCE-THE ROLE OF THE SECRETARY OF AGRICULTURE In any event, the Secretary of Agriculture, not merely the Secretaries of Labor, Commerce, and Treasury, should have a voice in the administration of any adjustment assistance program which may be applicable to any agricultural commodity. HR 17551 would transfer from the Tariff Commission to the President the determination of eligibility to apply for adjustment assistance, and determina- tion of whether there exist the statutory conditions precedent to such assistance. The wisdom and advisability of transferring these vital functions from the "The European Common Market, Trade Expansion Act and California Agriculture" by Sidney Hoos. March 2, 1962, Giannini Foundation of Agricultural Economics, University df California, Berkeley, California. PAGENO="0611" 5051 technical competence and objectivity of the Tariff Commission and vesting them in the politically-oriented and pressure-sensitive Executive Branch, is subject to serious question. The President's message of May 28, 1968, with which HR. 17551 was sub- mitted to the Congress, states that: "I intend to pattern the administration of this (adjustment assistance) pro- gram on the Automotive Products Trade Act of 1965. Determinations of eli- gibility will be made jointly by the Secretaries of Labor, Commerce, and Treasury." The omission of mention in this context of the Secretary of Agriculture may indicate either a lack of understanding or a disregard of the interests and hazards of American agriculture in the operation of the trade agreements program, and illustrates, in our view, the strong advisability of retaining in the Tariff Commission or a similarly reliable and objective-minded agency the fact-finding functions incident to adminisration of any adjustment-assistance program. IMPORT QUOTAS AND COMMODITY AGREEMENTS As above stated, these domestic agricultural industries now share their U.S. market to a substantial extent with imported competitive products. Present duty rates, in the light of the differences in the foreign and domestic costs of produc- tion, are no serious deterrent to such imports, but do provide a floor to the price competition from the foreign products. Prom the standpoint both of the domestic industry and the export-import in- terests, quantitative limitations upon imports might be much more realistic and more satisfactory than import duties. Production and marketing programs on both sides of the Atlantic could be developed with greater assurance. The do- mestic producers would be protected against ruinous flooding of their market in years of excess foreign production. The foreign producers not only would gain from removal of the duty rates, but would be assured of a stable outlet in the U.S. market. Any new legislation should leave the door open to international commodity agreements negotiated possibly in replacement of fixed import duties. These might or might not include import quotas, but would provide for market shar- ing both of current market volume and also of future expanded markets. This Conference sponsored an amendment to the "Food for Freedom Act of 1966" (HR 14929) which authorizes the Secretary of Agriculture to make avail- able counterpart funds to promote, and assist agricultural industries in develop- ing, international commodity agreements. The policy expressed in this measure, and in section 204 of the Agricultural Act of 1956, should be incorporated in the administration of any new or continued Trade Expansion Act. Such trade legis- lation not only should include authorization of and procedure for negotiation of such international commodity agreements, but should expressly provide for representation on the U.S. negotiating team of the domestic industry or in- dustries involved. The present HR 17551 does not do so. THE "ESCAPE" MECHANISM Any new trade-agreements legislation must, of course, include means whereby tariff protection, once relaxed, may be restored upon appropriate showing of substantial injury. Such relief must be available not only to the possibly few manufacturers or processors of the ultimate finished product involved, but also to the producers of the basic raw material of such manufacture. Specifically, the growers have a vital and necessary interest in any tariff or trade regula- tion proceeding involving their product, whether that product be in the form in which originally produced by them or in a processed or manufactured form. An example is brined or processed cherries, which is now the major outlet for the U.S. production of Sweet cherries. The tremendous volume of sweet cherries which go into brine each year (for later manufacture into glace and maraschino cherries) pass through the hands of only 47 brining establishments. The "do- mestic industry" involved certainly is not confined to those 47 firms, but includes the many thousands of cherry growers who produce the cherries involved. The definition of "directly competitive with" in Section 401(4) of the Trade Expansion Act of 1962 (19 USC 1806) relates to this subject. PAGENO="0612" 5052 SECTION 22, AGRICULTURAL ADJUSTMENT ACT OF 1933 The President's authority to limit imports under section 22 of the Agricultural Adjustment Act of 1933 (7 USC 624) is now limited to situations where exces- sive imports interfere with a government-control program. We support amend- ment of section 22, as proposed by bills now pending in Congress, so as to extend possible relief under that section to commodities not under a domestic-control program. These include, at present, sweet cherries and figs. CONCLUSION Consideration of future U.S. trade policy, and proposed continued or new trade legislation, must not disregard those United States industries, such as the five specialty tree-crop industries above named, which unavoidably are dependent upon reasonable protection from possibly ruinous unfair imports competition. It must be clearly recognized that the growers of perennial tree crops can- not be "adjusted" to loss of import protection through any type of "adjustment assistance." Reduction of present duty rates, or other relaxation of present ml- port protection, of any of the commodities on the assumption that any resulting injury to growers and others would be amply compensated for, and any disrup- tion of the industry could be satisfactorily remedied, through some type of "ad- justment assistance," is entirely unwarranted, and would be cruelly delusive. The five perennial tree crops here represented should, in fact, be excluded from any further tariff reduction legislation and negotiations. Government clear- ance and assistance for the U.S. producers of these commodities in exploring commodity agreements with producers in other countries would offer far better prospect of contributing to freer international trade, on a basis consistent with the legitimate interests of these U.S. industries, than would `tariff reductions. STATEMENT OF RON KLAMM, MANAGING DIRECTOR, `CALIFORNIA FIG INSTITUTE, AND MANAGER, CALIFORNIA DRIED FIG Anvisouy BOARD This Statement is being submitted on behalf of all Dried Fig Producers and Processors in California who produce and market 100% of California's and the United States' Dried Fig Production. It is the recommendation of these two groups that the California Dried Fig Industry be excluded from any legislative or other measures which would serve to have a detrimental affect upon an already depressed Specialty Crop Industry and that either the existing tariff rate of 41/2 cents per pound on dried figs and 5 cents on fig paste be increased or some form of import limitation be established as `a means for developing an orderly market at a stabilized price. AREAS OF U.S. DRIED FIG PRODUCTION The Dried Fig Industry of California and the United States is concentrated in the San Joaquin Valley with Ifresno, Madera and Merced Counties producing approximately 98% of the total tonnage. The balance of the commercial pro- duction is located in the Sacramento Valley, although most growers in this area have indicated that, out of economic necessity, their trees will be removed within the next `several years and the acreage devoted to more profitable crops. BEARING AND NONBEARING AOREAGR TRENDS The California Dried Fig Industry, which has a history dating back to 1769, has historically accounted for 100% of the United States Dried Fig Production. From a maximum of 47,000 bearing acres in 1930 there has been a continual downward trend to the point where present bearing acreage, as estimated by the California Crop and Livestock Reporting Service, is, 19,200 acres. Between 1930 and 1967 there were two sharp periods of acreage decline. The first such period occurred between 1930-3d, when the reduction was approximately 10,000 bearing acres; the second period occurred between 1948-52, with the decrease being 8,000 bearing acres. In the last 15 years the rate of decline has been at a more moderate rate with reduction totaling approximatelY 6,000 acres. Detailed statistical in- formation on California acreage trends, .f or the past 30 years, is shown in Table 1. PAGENO="0613" 5053 - o ~ ~ ~)r-~ 0 ~ I 0 z ~ < ~0 ~ ~ C,, >- ~ .~ C,, - L~. ~LOr~~) 00 00~0O000O 00C)0N-(~40O o E ~ I ~, ~. ~ a, I I : I a, C,) C,) PAGENO="0614" 2 C/) Ø~~U)CC) 2 ~ N) 2 -~1 0) ~ 0) D - ~0C 00 DC) ~ CD 00~~ ~ C) 00 C,, w 2 N)C~)C') ~(~) DUCU) -. ~ ~ 00 2 ~)C)J)Ø(O C')))) N)~C)~)~C) 0 ~ C) 2 C) CD ~ 0) C)) ~ U) C) DC -J CD U) CON)-)- 0040 CCC) 0)0)00 N) C) 0)) 00)0 C) U) C) 40 U) 40~ 00 N) 0040~ N) 00U)C)~"~ C) CC ~3 C) - N) 0) `0 2 - z~ -~ C- -, * P -C'- 0 C) N) C000 U) N) N) N) U) N) U) 00)0 0)0 ~ C' C)0OU)0QU)400000C)N)~00C)C))C)CD000)C)CD40U)C)~0)~~0) C', :~; ~ PAGENO="0615" C-) 2 2 D C) -a 2 D C) -1 C) 2 0 0 2 C,) c-i ~ 0 C) 01 ~ ci © ~1 C) 01 ~ 01 C) C C) C) Ci) - -C~ ~* C) 2 PAGENO="0616" 5056 PRODIJCTION AND PROCESSING LABOR COSTS It is a known fact that California Agriculture has, for a number of years, been forced to pay higher wages than other states and considerably more than our foreign competitors. Wages for field labor in the California Fig Industry have increased from 20 cents per hour in 1930 to a minimum of $1.30 per hour in 1966. To further add to the burden placed upon California Agriculture, the Industrial Welfare Commission of California ordered that the minimum wage for women to be increased, effective February 1, to $1.65 per hour and to $1.35 per hour for minors. Although Wage Order 14-68, "Wages and Working Condi- tions for Women and Minors in Agricultural Occupations", refers to only women and minors, Fair Employment and other laws call for equal pay for equal work, making any discrimination against men illegal. It is thus apparent that $1.65 per hour will be the general minimum wage this year in California Agriculture. These farm wages are far above those defined in the Federal Wage Law, which calls for a minimum rate of pay of $1.15 per hour. In an effort to keep labor costs at a minimum, many California Fig Growers are turning to mechanization wherever possible. Unfortunately, this is not the solution to all labor problems since the only cultural procedure than can be mechanized, to any extent, is harvesting. Even mechanical harvesting has certain draw-backs; namely, substantial investments for harvesting and soil preparation equipment. Additional costs of proper pruning, soil preparation, etc., nullify any labor savings in harvest. Mechanical harvesting is mainly a method of reducing peak labor demands and provides possible security against a complete lack of labor supply. Using information reported by the Foreign Competition Branch of the Foreign Agricultural Service, Table 4 points out that field labor rates in California in 1967 were 6 times greater for men and 11 times greater for women than com- parable wages in Portugal-the largest supplier of foreign fig paste to the United States. In 1968, due to the previously mentioned wage increase, per hour labor in California will be 7 to 14 times greater. TABLE 4.-COMPARISON OF AGRICULTURAL WAGE RATES IN FIG PRODUCING COUNTRIES OF THE WORLD Rural Per hour labor Per hour rates Processing plant labor Per hour rates Per hour wage rates Country wage rates men wage women wage men women Portugal Spain Greece Turkey California $0. 23 .23 . 37 .20 1.35 $0. 12 (2) .31 .20 3 1.35 (2) $0.26 (2) .25 2. 42-2. 87 (2) $0.21 (2) .25 2. 24 1 The information for Portugal, Spain, and Greece is as of mid 1967. For Turkey, 1964. 2 Not available. 3 Minimum 1967 wage rates, effective Feb. 1, 1968, $1.65 per hour. 4 Does not include State and Federal taxes, pension payments and group medical payments made by employer. These equal approximately 55 cents per hour. Reference: Foreign Competition Branch, Fruit and Vegetable Division, U.S. Department of Agriculture, Foreign Agri- cultural Service. PAGENO="0617" 5057 Table 4 also discloses that while fig processors in the major foreign fig produc- ing countries are paying .21 to .26 cents per hour, California Processors must pay a rate ranging from $2.24 to $2.87 per hour, exclusive of all fringe benefits. When fringe benefits are added, wages for packing house employees in the Dried Fig Industry of California average approximately $3.25 per hour. Such fringe benefits in other countries are non-existent. Using the most recent cost analysis work sheet of the California Dried Fig Industry, prepared by the Extension Service of the University of California, and revising only the 1963 labor figures to coincide with present rates and computing the Portuguese labor at .20 cents an hour, which in all likelihood is about average considering men and women, reveals the following: TABLE 5.-UNCAPRIFIED VARIETY OF FIGS California Portugal Preharvest labor costs per acre: Pruning $16.50 $2.00 Brush disposal 3. 00 . 60 Discing 14.60 3.20 Ridging 5. 30 . 80 Break ridges 3.98 .60 Roll-pack and land plane 3.65 . 40 Shovel 1.65 .20 Irrigate 11. 55 . 80 Miscellaneous-sucker, pipeline repair, etc 4. 00 . 80 Compensation insurance 1. 69 0 Social security tax 2. 90 0 Total, preharvest labor costs Harvesting labor costs per acre: Picking Sorting Dry yard expense Compensation insurance Total, harvesting labor costs per acre Total, preharvest and harvest labor cost per acre 68.82 9.40 24.75 3.00 16.50 2.00 16.50 2.00 2.36 0 60.11 7.00 128.93 16.40 California's present field labor costs are about 8 times greater than those in Portugal. Although this comparison has been based on the Fig Industry in Portugal, the wage rates in the other fig producing countries of the world-Spain, Turkey and Greece-as exhibited in Table 4 are basically very similar. As an illustration of how labor costs in this country could result in an even wider spread than previously indicated, we are outlining below the various steps in the production and processing of figs, as used in Fig Paste, practiced in this country and as we understand, it is practiced abroad. Cultural practices among growers in this country vary slightly and processing practices among California Packers may also vary. However, this presentation is closely rep- resentative of United States Cultural and Processing Practices. The foreign part of this tabu}~ation is as accurate as we can derive from eye witness accounts and from various statements made by factors in the Foreign Fig Industries. It can, therefore, be considered as an approximate procedure since there is some variation from country to country: PAGENO="0618" 5058 Co~1PARIsoN OF PRODUCTION AND PROCESSING PROCEDURES, DRIED FIGS USED FOR PASTE UNITED STATES 1. Extensive pruning (each orchard about every two years). 2. Dormant sprays to control scale. 3. Discing in Aldrin or Dieldrin in soil to prevent most types of larval development in soil (every four or five years). 4. Picking of caprifigs individually and dipping in fungicidal solution and replacing in caprifig trees. 5. Picking of clean caprifigs and placing in Calimyrna trees in bags with set number of caprifigs to each tree. 6. Various sprays and trapping proce- dures used for insect abatement as the need may arise. 7. Harvesting (mechanical and hand). 8. Delivery to sanitary dry yard for fumigation and sorting. Figs are fumi- gated orchard run in large air-tight bins and then sorted under strong lights on moving belt by a battery of sorters. 9. Sorted into mechantable and sub- standard lots. 10. Transportation of figs in sanitary wooden containers. 11. Substandard lots delivered to mandatory pool and sold under State control into non-human channels. 12. 1\Ierchantable lots delivered to handler and representative samples taken for inspection under control. If lot fails to pass, it goes to substandard fig pooi or is resorted. 13. Merchantable fruit is stored by packer in fumigated storage bins until sold. 14. When figs are withdrawn for paste orders, they are carefully sorted in whole form, washed and processed, sliced and then again carefully sorted by an in-line scrutiny. 15. Representative sliced samples taken at random from in-line belt and inspected. 16. If samples pass, then lot is ground, cased and shipped. If rejected, entire unit is resorted and retested. FOREIGN 1. Little or no pruning except to re- move dead wood. 2. No dormant spray. 3. No soil treatment. 4. No caprifig cleanup. 5. Erratic placement of caprifigs in trees on strings or raffia. 6. No insect abatement procedures known to be used. 7. Harvesting (hand). 8. Kept on grower premises in many types of containers without fumigation, and held until sold to packer and deliv- ery is requested. 9. No discernible sorting practice ex- cept to pick up larger sizes at packer's request for some types of consumer pack. 10. Transportation of figs in burlap bags. 11. No diversion control of any kind. 12. No discernible inspection control when fruit delivered to packer, except for size grading in some cases. 13. Same facility for vacuum cham- ber type fumigation mainly, but no ade- quate fumigable storage facilities. 14. When required for paste orders, figs are ordered from growers and in most cases dumped into grinders in whole form. Although labor costs are a prime factor in the production and harvesting of Dried Figs, numerous other items must be included to obtain an accurate com- parison between production costs and grower returns. Table 6, in addition to the previously mentioned labor costs, takes into con- sideration such items as; pesticides, taxes, insurance, boxes, depreciation, in- terest on investment and other general farm costs. PAGENO="0619" 5059 TABLE 6.-COMPARISON OF PRODUCTION COSTS AND GROWER RETURN Calimyrna Adriatic Kadotas Black Missions Preharvestcash costs Harvest costs Depreciation Interest on investment $116.85 81. 05 28. 00 35. 40 $108.83 75. 70 28. 00 35. 40 $108.83 75. 70 28. 00 35. 40 $108.83 92. 25 28. 00 35. 40 Total costs of production per acre Cost of production per ton of merchantable figs 1 Average grower return for 1966 crop per ton 261.30 348.40 290. 00 247.93 247.93 137. 00 247.93 247.93 165. 00 264.48 211.72 146. 00 1 Based on Calimyrna production of 1,500 pounds per acre; Adriatic production of 2,000 pounds per acre; Kadota produc- tion of 2,000 pounds per acre; Black Mission production of 2,500 pounds per acre. Source: 1963 dried fig cost of production worksheet prepared by the Extensive Service of the University of California, only labor costs have been revised to current wage rates. Average grower returns from official records of the Dried Fig Advisory Board. AVERAGE GROWER RETURNS Table 7, shows, by variety, the average returns on a per ton basis to growers for merchantable figs for the last 30 years. As you will notice, Growers Returns for each variety have declined the past two years. On a Varietal and Product Utilization basis (Dried Fig and Fig Paste), Table S illustrates the depressing effect foreign fig paste has bad on average price returas to growers for the past two years. In referring to the Tables 7 and 8, on a varietal basis, it is immediately appar- ent that the greater the percentage utilized as Fig Paste, in direct competition to low priced imports, the greater the reduction in grower returns. For the 1f~64 crop the $237.00 per ton average received by growers was 92% of the parity price but the $189.00 figure for 1966 (Table 9) equalled only 67% of the parity price; the lowest figure since the 19~2 season. TABLE 7.-AVERAGE ANNUAL PRICES RECEIVED BY PRODUCERS FOR DRIED FIGS, SEASONS 1937 TO 1966 INCLUSIVE [In dolla rs per ton] Year Calimyrna Adriatic Kadota Mission (1) (2) (3) (4) 1937 102 83 85 52 1938 115 81 85 53 1939 109 107 89 64 1940 120 99 84 53 1941 210 150 140 98 1942 278 218 181 130 1943 406 290 252 218 1944 390 275 256 220 1945 410 296 276 241 1946 436 360 340 282 1947 177 155 139 84 1948 220 164 146 125 1949 294 190 172 110 1950 454 340 320 190 1951 318 222 216 134 1952 258 138 130 100 1953 250 193 197 113 1954 245 187 183 123 1955 296 195 198 165 19561 241 144 147 116 1957 271 162 174 124 1958 292 213 220 159 1959 288 219 221 195 1960 329 203 221 207 1961 288 182 164 189 1962 313 165 168 157 1963 320 180 180 150 1964 334 235 248 182 1965 308 212 223 156 19662 290 137 165 146 I Prices paid for 80 percentfree tonnage. Preliminary. Sources: For years through 1958: USDA, agricultural statistics. For 1959-65: U.S. Tariff Commission. PAGENO="0620" 5060 TABLE S.-1964--60 AVERAGE GROWER PRICES, AS INFLUENCED BY PRODTJCT USAGE Calirnyrna figs: Approximately 55% of this variety is sold in consumer type packages with the balance going into Fig Paste. The average price for the 1964 crop was $334.00 per ton and in 1966 the figure was $290.00 per ton, a reduction of $44.~0 per ton or 13%. Adriatic figs: Historically 100% of the Adriatic variety of Dried Figs produced in California have been sold in the form of Fig Paste which is used in manufacturing numerous bakery items such as the popular Fig Bar. The average price for Adriatic Figs in 1964 was $235.00 per ton and within the next two-year period had decreased $98.00 per ton (42%) to $137.00. Kadota figs: In recent years approximately 90% of this variety has been utilized in the same manufacturing outlets as Adriatics. The 1964 average price to growers was $248.00 per ton and in 1966 the average return was $165.00, a reduction of $83.00 per ton or 34%. Black Mission figs: In the last ~ years approximately 35% of the shipments of Black Mission Figs have been in the form of Fig Paste, although in the last several years closer to 45% has been sold in this outlet. Average per ton returns to growers for Black Missions has decreased from $182.00 in 1964 to $146.00 in 1966-a reduction of $36.00 per ton or 20%. TABLE 9-DRIED FIGS: GROWER PRICES, PARITY PRICES, AND RATIO OF GROWER PRICE TO]PARTY PRICE, CROP YEARS 1936 TO 1966 Average price to growers (cents per pound) Parity price I (cents per pound) Ratio of grower price to parity price (percent) Year beginning Aug. 1: 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 3.85 3.40 3. 26 3.90 3. 50 5.70 8.55 14.60 12.65 13.65 13.90 6.15 6.95 8.50 14.15 9.80 4.06 3.91 3.72 3.76 3.86 4.56 5.00 5.40 5.55 5.89 7.22 8.12 8.02 10.50 13.10 13.45 95 87 88 104 91 125 171 270 228 232 193 76 87 81 108 73 1952 7.15 12.45 57 1953 1954 1955 1956 1957 7.20 8.30 10.25 6. 95 8.45 11.40 10.60 10.08 9. 68 10.04 68 78 102 72 84 1958 9.70 10.55 92 1959 10.85 10.79 101 1960 11.50 10.79 107 1961 1962 9.80 10.20 11.14 11.82 88 86 1963 9. 60 12. 27 78 1964 11.85 12.85 92 1965 9.30 13.37 70 19662 9.45 14.08 67 I Average of monthly parity prices reported by the U.S. Department of Agriculture. 2 Preliminary. Source: Statistics of the U.S. Tariff Commission and Dried Fig Advisory Board. PAGENO="0621" 5061 DRIED FIG AND FIG PASTE TARIFF HISTORY Since early in the 1950's, the California Dried Fig Industry has been seriously affected by low priced imports. The U.S. Tariff Commission quickly recognized the seriousness of this development and its eventual impact upon the domestic industry and in 1952 restored 2 cents of a 21/2 cent per pound Dried Fig Tariff Concession previously granted to countries signatory to the General Agreement on Tariffs and Trade. This restoration came after our industry submitted a peti- tion pursuant to the "Escape Clause" provisions of the Trade Agreements Act, As Amended. Each year from 1952 through 1962 the U.S. Tariff Commission initiated an annual review and investigation, and in each year reaffirmed its previously granted 2 cents per pound duty restoration. In August 1963, as a direct result of a recommendation made by the U.S. Tariff Commission to the President, pursuant to the provisions of the Customs Simplification Act, the 2 cent duty restoration was made permanent by proclamation by President John F. Kennedy, thereby continuing the duty at a total of 4~ cents per pound. TABLE 10-FIGS, DRIED, AND FIG PASTE: U.S. RATES OF DUTY UNDER THE TARIFF ACT OF 1930, 1930-67 tion Tariff paragraph and descrip Statutory rate (cents per pound) Trade agreement modification Rate (cents per pound) Effective date and trade agreement Par 740: Figs, dried i 3 3 23~j 43/i May 51939; Turkey. Mar. ~, 1950; GATT (Annecy). Oct. 17, 1951; GATT(Torquay). Aug. 30, 1952.2 Fig paste 5 Aug. 15, 1963.~ lIt valued at 7 cents or more per pound. Rate increased as a result of escape clause modification of GATT concession. Pursuantto provisions of the Customs Simplification Act,the 2-cent duty restoration was made permanent by proclama- tion of President John F. Kennedy. Fig Paste has never been the subject of a tariff concession and, therefore, not eligible for "Escape Clause" relief. However, in reviewing various annual re- ports of the United States Tariff Commission, they have repeatedly referred to a logical price relationship between Dried Figs and Fig Paste of 1/2 cent per pound as being a true relationship between Paste and Dried Figs, therefore, resulting in a continuance of a tariff rate of 41/2 cents per pound on Dried Figs and 5 cents on Fig Paste. Basically, Dried Figs and Fig Paste are the same physical commodity, except that Paste is merely ground Figs. However, all Figs suitable for Paste do not make desirable package Figs, whereas, all Figs desirable for packing are equally desirable for Fig Paste and merely require grinding. Therefore, the duties on Figs and Fig Paste are largely responsible for the form of imports and these items should, therefore, be given joint consideration. As an illustration; if the duty on Whole Dried Figs was lowered and the duty on Paste remained un- changed, more Figs would come in whole and be ground here, whereas, if the duty on Paste is ever lowered, more Figs would be ground abroad and come in as Paste. DRIED FIG AND FIG PASTE IMPORTS In the past 20 years total United States consumption of Dried Figs and Fig Paste has averaged approximately 26,300 tons, of which California supplied approximately 70%; during the last 10 year period, Dried Fig and Fig Paste consumption has averaged 28,220 tons, of which California supplied approxi- mately 62%; in the past 5 years California supplied less than 60%. It is, there- fore, apparent that imports of Dried Figs and Fig Paste are taking over a larger share of the domestic market PAGENO="0622" * 4.~ 00 CD 0 c~ ~ 00000000 C) CD C) C 3 E -~ (0 ° 4.~C) o 0) C 0~ ~ - CD CD CD 0)0)0)0)0)0)0)0)0)0)0)0)0)0)0)0)0)0)0)0) 5- - ~. 9 0)0)0)0) CD0)CD C) CCC) C) 0)0)0)00CC CCC) 0000CC C) C) ~ Q .4.) ~ 5 CC ((C 0)) .3 CDCDCDCDCDCDCDCDCDCDC)CDCDCD .9 ~ I .3 0 4.) ~) >- : CCC) (C) CO.-o CC) 0) (0 CCC) (40) (.0CC CD CD)'.) 0)00 9 - ~ a. < o. 0)C)CDCD'CDCD 9 * 0 > CD CC CO ~U) C) CO ~- = ~ .~ - 3 ~.. ~ ~ ~ ~ C/) )O'9'~ C .3 - C.) ~ °.2 ~0 **~ > * C `5 CD ,0O(000C))'~'~ .9 ~) = C)CDCC~CC~OCO 9 0/) .3 ~ ~- CD 3 ~ C/)' C)~~C(0CD00 = I :0(0(0CC-U) CD 3 ~ >~C~ I : .9 ::::::~:H 8 w a 0 8 W~)4-~ `~ ~ *9 C~ ~C~C ~ <~ ~j)~C)~ a. 8. C~ ~ 000) (000 ~ CD (0CC'JCC~) (003 ; a E03 ,9~i I C) C) *9 CD `3'~ooooo ~ ~.- ~ ~ -E .)`CD00CC00C)CDC4CC~U)00CC00C)CD'~~ ..oa. ~ ~ 4.3 ~ ~ - C')..) ~ 3 C/) 00 3 04-4 PAGENO="0623" 5063 As recently as 1949 and 1950 there were no imports of Fig Paste into this country, although undoubtedly a small percentage of the Dried Fig Imports during that period of time were eventually utilized as Fig Paste. Between 1950 and 1955 Fig Paste Imports gradually increased and reached 5,900 tons during fl~55. For the next two years, Fig Paste Imports gradually declined but in 1958 rose to 7,950 tons; followed by 8,141 tons in 1959 and the all time high of 13,334 tons in 1960. A review of Table 7 indicates that this great volume at low prices resulted in a reduction in the average annual prices received by producers for the next two years. This is particularly noticeable in the Adriatic variety where prices declined ~38.00 per ton during this period. This drastic increase in Fig Paste Imports also resulted in the United States percentage of the Fig Paste Market in this country dropping to a record low of 41%. Since 1961, Califorina's share of the domestic Fig Paste Market has ranged from a low of 43% (Table 13) to a high of 70% with the 6 year average being 52%-10% below the 1955-60 average. A review of the Table 6 shows a production cost ranging from 10.6 to 17.4 cents per pound for California Dried Figs and, when compared with Table 14, discloses that foreign fig paste can enter this country, in most instances, duty paid at a price lower than California Production Costs. When processing costs are added to California production figures, it is easily understood why imported fig paste has pre~empted such a large share of the Fig Paste Market in the United States. PAGENO="0624" C) 0 Ct~ CD CD 0 0 0 0, 0 C) 0 -J > F- C,) CD Li- w -J E C-) C) ~ *1- CD ~, 5064 - - ~D~o - - C) C~J C) r~ N-~ CD - - - - C) c~o6r-r 00 CD CD0000000000 - CJ ~ CD PAGENO="0625" 5065 TABLE 14.-FIG PASTE: U.S. IMPORTS, AVERAGE ANNUAL VALUE (In cents per poundj 1 Year beginning Aug. 1 Turkey Portugal Spain Greece Average 1951 1952 1953 13.4 11. 0 9.2 9.2 13.4 11.0 9.2 1954 1955 9.1 9.9 7.7 7.3 9.0 8.5 1956 10.0 7.7 9.2 1957 1958 12.4 11.5 7.7 8.9 94 10.3 1959 8.6 7.9 8.3 1960 7. 7 7. 0 8. 3 7. 5 1961 7.2 7.1 7.3 6.8 7.2 1962 6.8 6.5 4.9 7.9 6.3 1963 11.4 7.4 7.1 8.0 8.3 1964 1965 10. 8 14.4 7. 4 7. 1 8. 0 9.1 8.9 9.3 8. 2 9.7 1966 8.0 7.6 7.8 7.8 I These values represent for some shipments the foreign value (i.e., the f.o.b. values in the exporting country) and for others, cost-and-freight values at New York. Source: Compiled from official statistics of the U.S. Department of Csmmercs as reported in various issues of the U.S Tariff Commission dried figs report and other information reported by the Commission. The California Dried Fig Industry realizes the fact that it can not supply the needs of all Dried Fig and Fig Paste users in the United States and that imports are necessary to satisfy a percentage of this demand, although even small amounts of low priced imports can and do have a price depressing effect on the domestic industry. Any additional tonnage available in this country, after consumption requirements have been met, can only continue to depress the domestic price and, because of the large supply of Dried Figs and Fig Paste available in Mediterranean countries, this excess tonnage will, in all probability, continue in spite of the existing tariff. Generally, Dried Fig imports (Table 15) have been rather stable with two exceptions: during World War II imports were zero, however, in 1949 imports increased over 1,000 tons from the preceding year and in 1950 increased an addi- tional 2,400 tons. This increase in Dried Fig imports coincides with the down- ward modification of the tariff during those years and after the tariff conces- sions were partially restored, Dried Fig Imports returned to normal. In recent years slightly in excess of 80% of the Dried Fig Imports were of the Greek String Variety. Since Greek Strings have their own special market, they do not directly compete with the domestic product and, therefore, the consensus of opinion is that imports of Dried Figs will probably not injure the domestic industry as long as the duty remains at its present level and in the same relation to the Fig Paste Tariff. WORLD PRODUCTION AND CONSUMPTION Although it is difficult to determine the world's production of Dried Figs, a conservative estimate would place the figure between 150 and 160,000 tons. The reeap of the World's Dried Fig production figures, Table 16, does not include Spain which, according to various estimates, has an annual production of close to 30,000 tons and would, therefore, be the largest fig producing country excluded. O0-159--GS-pt. 1O-40 PAGENO="0626" tIA ~Q - o~~c.~c' CI~ ~ ~C)C)) ~ ~ ~N-~(O -` ~1) ~ t'.)N)t~) ~ OAN~.) N.)N)N.) )- ~ ?OPA NOr~PPAPN. ~P' .~ ~ )Dc~)A) ~ ~4OO~ _.=~ 0- A)~D -~ ~ A) A) -~- ~ 04C0(.n ~ NAC ~ ~ ~ ~ 01 -C CO~ C~ a C. A) ~ - -~ - AC 0 ~ ~ -. c~ ~- _~. _~ -~ ~ O' ~ C) ~> £~, (OO~'~ ~o ~ r 0 o 2 A)~ U) :1 ~ ~ ~. A). ~~-.Jcj~ N) - N) Ci' Ci'Ci) CCC) CC) A) - 2 < A ~CCDC) 2 ~. 2 -u CA 0 N) N) N)N)~-~C-~ N) N) N) N) N) N) N) N) N) C)) A). A) c_C) ~_ ~ii:-;))) ~ Ci)N)U) C)-~)~ ~N)CAN)~-JC)~: ~ 5" O -~ ~ - ~ - PAGENO="0627" 5067 To illustrate the tremendous potential quantity of Dried Figs and Fig Paste which could enter this country, reference is made to Table 17. As an example, Italy, one of the largest producers of figs in the world, has not as yet entered the United States Fig Paste Market and it has only been in the last 6 years that Spanish Fig Paste has entered this country. In Table 17, it can also be seen that the other fig producing countries of the world are unable to utilize their production tonnage in their own countries and, therefore, must rely on the U.S. Market to absorb some of the surplus at very low prices. TABLE 17.-PRODUCTION AND CONSUMPTION COMPARISON, 1961-65 AVERAGE, PRiNCIPAL FIG PRODUCING COUNTRIES OF THE WORLD [All figures in thousands of tons[ Greece Italy Portugal Turkey United States Total Production 28.3 33.3 10.7 48.4 18.9 139.6 Consumption Surplus production Percent of production Utilized in country of produc- tion 13.4 14. 9 29.5 3. 8 1.8 8. 9 12.6 35. 8 27.3 (8. 4) 84.6 55. 0 47. 3 88. 6 16. 8 26. 0 100. 0 60. 6 Source: Production, U.S. Department of Agriculture, Foreign Agricultural Service, `Dried Fruit World Production and Trade Statistics, Dried Fruit;" consumption, U.S. Department of Agriculture, Foreign Agricultural Service, "Foreign Fruit and Nut Report No. 321;" U.S. figures, combination of U.S. shipments as reported by the Dried Fig Advisory Board plus imports as reported by the U.S. Department of Commerce; Italy, 1958-62 average reported in U.S. Department of Agri- culture, Foreign Agricultural Service, "Dried Fruit World Production and Trade Statistics." Due to lack of available information Spain is not included. ORGANIZATION OF THE CALIFORNIA DRIED FIG INDUSTRY While numerous producers, processors and marketing organizations are asso- ciated with the California Dried Fig Industry, this section is to briefly name and describe several leading organizations. California Fig Institute The California Fig Institute is a non-profit organization and, although its membership is voluntary, it has the enviable distinction of including 100% of the fig growers in California as its members. This association is dedicated to the improvement, by every possible means, of the entire California Fig Industry. This association does no processing, packing or distributing of the product but works closely with growers and processors in this connection. Marketing Order for dried figs, as amended (California Dried Fig Advisory Board) The Dried Fig Advisory Board, having been authorized by the California State Director ofAgriculture, upon the written assent of the legality prescribed majority of producers and processors of Dried Figs, was established for the purpose of assisting the Director of Agriculture in the administration of the provisions of the program. Provisions of this Marketing Order, which may be utilized to achieve the objectives for which it was organized, include: Grade Standards, Mandatory Inspection (both receipts and shipments of all Dried Pigs), Stabilization Pool, Substandard Pool into which off-grade figs are diverted to various by-product uses such as animal food and inedible syrup, Unfair Trade Practices, Advertising and Sales Promotion, Research and Market- ing. Although most of the provisions of the Marketing Order are currently in operation, several of these provisions should receive special attention: (1) The Industry has imposed upon itself rigid grade standards which require mandatory inspection by a third party on both incoming (deliveries from farmers to processors) and outgoing Figs and Fig Paste (from processor to wholesaler or cooky manufacturer) to enforce these grade standards. This rigid inspection assures the consumer that he will receive a product of extremely high quality. PAGENO="0628" 5068 (2) In addition to administrative assessments paid equally by producer and processor, the industry has imposed upon itself an additional assessment to provide for advertising and sales promotion. This promotional program is cur- rently under way and hopefully will be expanded in future years to stimulate additional demand in this country for Dried Figs and Fig Products. (3) For approximately 15 years the California Dried Fig Industry main- tained its own research department for the purpose of instructing and assisting growers in improving their cultural practices. The areas of research have now been expanded to also include new product development, packaging improve- ment, improving processing procedures, microbiology studies and plant sanita- tion. These programs are supported by Industry contributions to the University of California at Davis, U.S.D.A. Western Regional Research Laboratory, Albany, California and the U.S.D.A. Stored-Products Insects Laboratory, Fresno, California. DFA of California To maintain the highest quality, the Dried Fig Advisory Board has, for a num- ber of years, employed the services of the DFA of California to serve as an independent third party inspection agency. Operating under the rigid regula- tions of the California Marketing Order for Dried Figs, As Amended, representa- tives of the DFA of California thoroughly inspect each incoming and outgoing lot of Dried Figs. Each lot of Dried Figs is inspected by a means of a 4 power inspection glass and each lot of Fig Paste is also subject to laboratory analysis. Since inspection is mandatory, under the provisions of the Marketing Order, it applies to all Figs produced and processed in California. CONCLUSION It is the position of the California Fig Industry that any tariff reduction on Dried Figs or Fig Paste would only serve to encourage greater importation of these two products into this country and would not be in the best interest o~ the domestic industry and the American consumer. Our industry is not seeking a share in the export markets outside the Western Hemisphere. We fully recognize our economic thsadvantage outside this area. We believe the European Markets, with proper development, could adequately con- sume a great percentage of the entire production of figs produced in the Mediter- ranean Area. \Ve respectfully request that the Committee give serious consideration to the areas covered in this brief in the hope the Committee will find trade regulations are necessary if American Producers and Processors of Dried Figs and Fig Prod- ucts are to have the opportunity to compete in the U.S. Markets. SUMMARY (1) Any reduction in tariffs on either Dried Figs or Fig Paste would result in serious economic injury to a domestic industry which, at the present time, finds it extremely difficult to compete price-wise with the existing tariff. (2) The existing tariff of 5 cents per pound on Fig Paste has not been deterrent to foreign imports. This is illustrated by the fact that tariff has remained constant since 1930 and in recent years Fig Paste imports have been greater than `at any other time on record. (3) Any tariff reduction would immediately result in a disorderly market situation with the domestic industry being forced `to eventually go out of exist- ence, except as a very limited type of specialty crop. With an alternative source of supply closed to the American bakery trade, which utilizes the great percentage of the domestic output of Dried Figs and Paste, foreign exporting countries con- ceivably would be in a position to take full command of the U.S. Market and, thereby, create an unhealthy market situation as a result of higher prices. (4) Dried Figs are a deficit supply commodity. Practically any other crop, planted on fig land, would be a surplus effected crop and it is inconsistent to reason and economic sense to carry out trade policies which will result in the planting of a surplus crop in the place of a crop which can not now supply the domestic market. The potential market for Dried Figs in this country is growing and the existing tariff has not, in any way, prevented other fig producing coun- tries of the world from having their full share of this market. (5) The California Dried Fig Industry is solely dependent upon the domestic `~"a rket for its sales. PAGENO="0629" 5069 (6) Fig processing plants and fig processing equipment are specialized pieces of equipment and can not be converted to any other use. The equipment in a fig plant, if the industry can not survive, would only have scrap or junk value. (7) The production Of Dried Figs is the primary business venture for growers in the California Industry. This is not the case, however, in some foreign coun- tries where, according to reliable information, figs are considered to be a second- ary crop. This is illustrated by the fact that until a few years ago farmers in Spain did not realize Dried Figs had a cash value and they were used for animal feed. (8) Any tariff reduction on Dried Figs or Fig Paste would result in a substan- tial portion of the present California fig acreage being pulled out. The removal of this acreage would immediately reduce labor requirements in an area where the percentage of unemployment is already higher than the national average. (9) Per hour labor costs in California are as much as 14 times greater for field labor and 15 to 20 times greater in processing plants than comparable wages in foreign fig producing countries. (10) Through self-help programs, financed by producer and processor assess- ments, the California Dried Fig Industry supports Research, Advertising and Quality Control Programs. To the best of our knowledge no funds are being spent by foreign producers and processors to increase consumption or improve the Industry. RECOMMENDATIONS For the foregoing and other reasons, as outlined in this Brief, and in the files and publications of the U.S. Tariff Commission, the California Dried Fig Indus- try believes it has demonstrated the special circumstances surrounding the two- like commodities, Dried Figs and Fig Paste, and therefore makes the following recommendations: (1) That the California Dried Fig Industry be excluded from any legislative or other measures which may have a detrimental affect on an already depressed Specialty Crop Industry. (2) That in view of the wide variation between foreign and domestic produc- tion and processing costs as reflected in the low selling prices for foreign dried figs and fig paste, serious consideration should be given to an increased rate of duty on each item. (3) That, as a realistic means of developing an orderly market at a stabilized price, to protect domestic fig producers from ruinous flooding of their market with excessive imports, some type of quantitative import limitation or quota be established. Foreign Producers and Processors would still be assured of a com- petitive opportunity in the U.S. Market. (4) That it be clearly recognized that producers of a perennial tree crop, such as figs, cannot be "adjusted" to loss of imports protection through any form of "adjustment assistance" such as is incorporated in the Trade Expansion Act of 1962 or any conceivable version thereof. (5) That any policy for freer trade not disregard those industries such as the California Dried Fig Industry which unavoidably are dependent upon reason- able protection from ruinous and unfair import competition. BRIEF SUBMITTED BY COMMISSIONER DOYLE CONNER, FLORIDA DEPARTMENT OF AGRICULTURE THE FUTURE OF U.S. FOREIGN TRADE POLICY: THE PERSPECTIvE OF FLORIDA AGRICULTURE In setting forth the functions, powers and duties of the State Department of Agriculture as reorganized effective in 1961, The Florida Statutes State in part as follows: [in Sec. 570.07(7)] "Extend in every practicable way the distribu- tion and sale of Florida Agricultural products throughout the world," and Fin Sec. 570.07(17)] " . . . to do all that can be done to bring relief and aid in the marketing and distribution of Florida's products." This brief is submitted in discharge of those responsibilities with due con- cern for both our export market opportunities and foreign competition in our domestic markets. Testimony was presented on my behalf at a hearing on export problems sched- uled by the Small Business Committee of the U.S. Senate at Miami, Florida, for PAGENO="0630" 5070 March 14 and 15, 1968. Later I submitted a brief of the substance that follows to the office of Special Representative for Trade Negotiations pursuant to Notice of Public Hearings, Docket No. 67-4 32 FR 17997. The testimony presented in general terms our activities, concerns and some of the problems encountered in helping to expand the export of Florida's farm products. A copy of that testimony is attached hereto as Appendix A for its pertinence to the issues raised in the Notice of Hearing to which this brief is addressed. It is directed primarily to non-tariff barriers to trade, and to Trade Promotion problems. Among the non-tariff barriers mentioned therein are: State trading and state monopolies, largely in transportation; documentation and cus- toms procedures; sanitary, safety, health and similar restrictions. Your attention is invited, also, to several additional documents appended, hereto, in which I concur: Appendix B, Senate Memorial No. 1094: A memorial to the Congress of the United States to provide for protective tariffs on imported agricultural products. Adopted by the Florida State Legislature and filed with the Secretary of State on June 21, 1967. Appendix C, Resolution of Southern Association of Commissioners of Agricul- ture: A resolution to the President of the United States, the Congress of the United States, the Secretary of State of the United States, and the Secretary of Agriculture of the United States. Adopted June 7, 1967. Appendix D, Resolution XIV, Foreign Trade, adopted by the National Associa- tion of State Departments of Agriculture at its October 1-5, 1967 meeting. Summarizing and supplementing the testimony, memorial and resolutions ap- pended hereto we hold to the following views with respect to the interest of Florida farmers in export markets: 1. The "Kennedy Round" produced benefits for Florida's major agricultural products. and we urge the continuation of such efforts to enlarge upon and ex- tend such gains to other commodities in which we have potentials. 2. We believe that non-tariff barriers especially in the fields of (a) documen- tation and customs procedures, (b) sanitary, safety, health and similar restric- tions, and (c) transportation route and rate regulations may be more important and fruitful objects of negotiation in the future than tariffs, as such. 3. More attention is needed to the interrelationshiP between (a) gains made or sought in the drive for generally freer trade and (b) aid extended to develop- ing countries. It appears that great care is needed to prevent AID activities from nullifying gains to Florida producers that would otherwise be inherent in well balanced results of negotiations toward freer trade. Some farm products of which Florida has been a major seasonal supplier of the domestic market recently have been confronted by sudden adjustment problems resulting from the spectacular rise of uncontrolled importations. To- matoes and strawberries dramatically illustrate the problem that affects other winter vegetables, as well. Both domestic niarketings and export markets, par- ticularly those previously developed in Canada, have been involved, effectively closing off the development of alternative markets. In terms of the outline of topics in the bearing notice, we are concerned, here, with problems of adjust- ment to widening disparities in costs per unit of labor, whether due to disparate labor standards, as such, or to basic labor supply and demand factors. Overall trade policy may continue to provide positive encouragement for increasing im- ports of high labor input commodities. To the extent that this may be unavoid- able, we think that an orderly process of change requires more consideration to tempering the adjustment problems of domestic producers. This should include application of qualitative and quantitative controls which will provide for shar- ing of our markets on a timely, predictable basis. Otherwise, chotic shifts occur in the short run while time consuming and generally unproductive procedures are pursued under existing judgment laden "escape clauses." We emphasize, here, the principles involved as they apply in varying degree to a considerable range of Florida farm products. The brief and testimony of the Florida Fruit and Vegetable Association will develop more detail with respect to individual commo1itiP~. Florida farmers also have a deep and legitimate concern about imports of beef and for a special reason. Our cattle producers have made great strides-expand- ing about four fold in twenty years and markedly increasing quality. Of the PAGENO="0631" 5071 slaughter cattle sold in our State auctions, 12.8 percent were good and choice in 1965 compared with only 2.2 percent in 1957, almost a sixfold increase. For feeders and stockers, 20.9 percent were good or better in 1965 compared with 1.7 percent in 1957. Our intrastate market has expanded, too, with increasing population. The in- crease in demand has been weighed heavily in favor of the higher grades of finished beef. Thus, we still find ourselves with a heavy inbound movement of finished beef along with heavy out-of-state movements of lean cattle and beef, the very grades in which imports are concentrated. Florida cattlemen are confronted with more direct and pointed price compe- tition from beef imports than are cattlemen generally and growers and feeders of prime and choice grade particularly. Our attitudes on imports are correspond- ingly emphatic, especially when they surge upward to an extent that drastically lowers prices for the grades we have to sell. Recently there has been growing concern among Florida dairymen about poten- tial imports of condensed and evaporated milk arising from the recent exemption of these products from the provisions of the Federal Import Milk Act administered by the Food & Drug Administration. Florida dairy production has outgrown our market for fresh milk and increasing quantities have become dependent on con- densed and evaporated milk as an outlet. There is general support for the passage of S612, Dairy Imports Act of 1967. The opportunity to submit this brief is appreciated and I commend other testi- mony from representatives of Florida agriculture to your careful study and all of the subjects raised to the fullest objective investigation by your committee. TESTIMONY FOR U.S. SENATE S~r~&ri~ BUSINESS COMMITTEE HEARING ON EXPORT PROBLEMS, MIAMI, FLA., MARCH 14-45, 1968 My name is John Stiles. I am Director of the Division of Marketing, State Department of Agriculture and appear on behalf of Doyle Conner, Commissioner of Agriculture who heads the Department. In setting forth the functions, pow-ers and duties of our Department, as reorganized effective in 1961, the Florida Stat- utes state in part as follows: [in Sec. 570.07 (7)1 "Extend in every practicable way the distribtution and sale of Florida Agricultural products throughout the world." OUTLINE OF TESTIMONY I want, first, to commend your committee for providing this opportunity for presenting our problems to you. Secondly, I commend to the full consideration of the Committee the more detailed testimony presented at this hearing by agricul- tural exporters and their association representatives who are directly involved in the action, and to the representatives of the University of Florida and the U.S. Department of Agriculture. Finally, I will outline our activities in support of ex- ports of Florida farm products and highlight a few of the problems in which State services are directly involved. RECOGNITION OF COMMITTEE INTERESTS Almost all exportations of Florida agricultural products are appropriately within the concern of your committee. The individual exportations and the scale of operations at destination tend to be sn1all and in most cases the exporter or potential exporters are small businessmen. Indeed most of the problems in expanding our exports, of gaining participation by additional shippers, seem to lie in this area of scale that make them of interest and concern to the Small Business Committee. In fact our work with potential exporters suggests that firms of all sizes feel like "babes in the wood" when they confront the export market for the first time! Short of making specific recommendations on the way current and prospective legislation works, I w-ould like to encourage the applica- tion of the special perspective of your Committee to all matters of foreigmi trade legislation to simplify requirements and facilitate particularly, exportations that must inherently have small beginnings. These characteristics seem to us to dominate both our Latin American efforts that tend to be associated with agricultural development in the receiving countries and our European efforts where we deal more in fancy consumer goods. As our testimony develops, we beg your indulgence for the freedom we may take in talking about export problems w-ith little distinction between those that PAGENO="0632" 5072 may he administrative or procedural-the concern of one or more agencies in implementing legislation that may, itself, be adequate and sufficiently flexible- and clearly legislative concerns. Not only is it most difficult for us to draw the distinctions, but a rather free-wheeling disclosure of activities and problems may be more helpful to the committee in coming to their own conclusions than any presumption of greater legislative expertise on our part. FOREIGN TRADE ACTIVITIES OF FDA Florida's agricultural export history is, of course, heavily laden with citrus and citrus products. In the broad view, our fertilizer and timber industries are agricultural. Products of each of these industries along with citrus and citrus products rank as our really major export products of the soil. Our efforts have been to help develop markets for all Florida agricultural products as potentials for exports are recognized and to include many agri-business interests in our activities. In undertaking these activities, we have been aided by the Matching Funds Program of USDA under the Agricultural Marketing Act of 1946. Organized activities involving the Department in its worldwide distribution responsibility really got under way with the organization of the Florida Interna- tional Agricultural Trade Council in 1963. The Latin American market has been actively pursued through this organization with emphasis on livestock and poul- try breeding stock. To facilitate communications with our Latin American countries, the Department employs a bilingual marketing specialist who acts as Secretary of the FIATC and bilingual stenographic assistance. More recently we have collaborated with the Florida Fruit & Vegetable Association and the University of Florida in sponsoring seminars and workshops on export of fruits and vegetables, especially to Europe. We also work regularly with commodity organizations and individual exporters, actual and potential, and with trans- portation and service agencies. We assist in the flow of information and market contacts and in the organization of exhibits at Trade Fairs and Food Shows. The President of FIATC, Mr. B. Edmund David, and other members will pre- sent additional testimony on the work of the organization and its members and problems they encounter. I am taking the liberty, however, to introduce into tb~i record as an exhibit, the Council's Newsletter for February, 1968, Volume I, Number 21. (Exhibit A-Submit four copies.) This Newsletter summarizes some of the activities of the Council but, further, the statistics in it on exports of livestock and poultry items from Florida illustrate a problem that I wish to discuss. When we undertake to measure our exports, we turn to the most comprehen- sive source of data, the U.S. Department of Commerce Import-Export statistics. Our Department collaborates with the Florida Development Commission in spe- cial compilations of Commerce data to provide detailed figures for Florida ports. Such data include substantial volumes of products originating in other states and much of the volume Florida produces and exports shows up in the data for ports in other states. The economic activity added to Florida by the shipments originating in other states is a very valuable part of our total interest in pro- nioting Florida's role in international trade. The services rendered to Florida exporters through ports of other states are also important to us. But we need a simpler and more complete way to get at the volume and value of Florida prod- ucts that are exported both through Florida ports and others. A number of activities of the U.S. Department of Agriculture and other agencies along with several of our own fill in some of the gaps but others remain. The data in the FIATC Newsletter on livestock exports from Florida are from certificates issued by the Animal Health Unit of USDA, the poultry statistics from certificates issued by the Animal Industries Division, Poultry Services Section of our State Department of Agriculture. The Federal-State Fruit and Vegetable Inspection Service inspects all market- lags of fresh citrus and the Florida Citrus Commission compiles export data from inspection certificates. The Commission, also, compiles exports of processed citrus from Florida Canners Association reports. Florida's substantial truck movement of agricultural products to Canada is reported through the Road Guard Stations maintained by our Department. Some other shipments are re- ported by transportation firms. Shipment data from these sources are integrated and reported by our Market News Service. None of these tabulations provide quite the same "final word" that could be supplied by Commerce through Custom PAGENO="0633" 5073 surveillance because destinations are often determined or changed after leaving the production area. Florida exporters along with those of other states would be better served if the Commerce Department series could be modified to provide summaries of exports by state of production or final manufacture. OUR LATIN ORIENTATION Florida, of course, is the gateway to Latin America, culturally and in terms of transportation. As such it is the channel for agricultural trade of other states as well as our own. Our activities in the development of export markets have focused heavily on this area, too. They relate largely to livestock and poultry that will help further the development of these countries. A prominent feature of our outreach to the south was a conference with Agri- cultural Ministers of Latin American countries, organized by our Department, which was held in Miami in September, 1966. Twenty-one agri-business firms ranging from chemical and equipment companies that supply production factors, to farmers and breeders, to food distributors joined in sponsoring this event, and it has been a stimulus to later events to which many specific exportations can be traced. The ministers of ten Latin American countries participated in this conference which culminated in the "Agricultural Declaration of Miami," a Resolution and set of Recommendations. Four copies of each of these docu- ments are now submitted for the record. (Exhibits B, C and D.) Since that time the ministers of twelve countries have formally concurred in the Declaration including Chile, Dominican Republic, Panama, and Paraguay which were not represented at Miami and excepting Mexico and Venezuela which were repre- sented. The continuing organization for the promotion of trade with these coun- tries projected in the Declaration is developing slowly. A second conference to be held in one of the other countries is being planned. Beginning well before the Ministers Conference and continuing with increasing frequency and participation have been reciprocal attendance at auctions, agri- tours, and fairs in Florida and several Latin American countries. This chain of activities will be extended by the Second Annual Latin American Beef Cattle Conference at the University of Florida on May 1 leading into their 1'~th Annual Beef Cattle Short Course. These activities early led to an awareness that inadequate port facilities were limiting the export of live animals from Florida to Latin American countries. As a result major investments were made in new facilities by the Port Authori- ties at Tampa and Miami, the latter with Federal assistance. The facilities now are not only adequate in size but functionally among the best in the country. Tampa has the only facility at which cattle can ~walk directly aboard ship. The planning of these facilities was encouraged by a substantial flow of inquiries for specific purchases, much of it transmitted through Agricultural Attaches and the Foreign Agricultural Service. As noted earlier, the Florida Department of Agriculture is authorized by State Law to pursue world wide markets. Greater service could be given to producers and shippers if all export inquiries were supplied to State Departments of Agriculture on a continuing basis directly by the Foreign Agricultural Service at the same time that they are released to breed and commodity organizations. A critical factor in efficient handling of livestock for export is the number of times and manner in which they must be handled for certification of health status, making sure that the animals loaded are those certified and for various other purposes. The techniques probably are as simple as can be expected for single or a few animals per shipment. Now, however, we are moving into com- mercial scale shipments-single and multiple truckloads. The losses of time, weight and condition due to repeated handling of individual animals in such lots could be reduced by procedures that would maintain identity by lot, such as by sealed truckloads-to-locked pens-to-ships. A related problem is that present rules prevent the shipment of any animals in an associated lot if one of them reacts positive on the Brucellosis test. Timely availability of ship or air cargo space for shipments ranging from one animal to several hundred is a continuing problem. In many instances it is necessary to charter vessels three months before shipment. This further compli- cates some of the other problems such as cancellation of shipments due to health certification problems. PAGENO="0634" 5074 The air shipment problem traces in part to several countries restricting ar- rivals to one line each, excluding both competing scheduled service and charter flights. This sharply increases shipping costs compared to those to countries permitting alternatives. On many Latin American shipments other "margins" also appear excessive. On strictly commercial transactions this may be unavoid- able. However, the problem is believed to be big enough that demand for export of livestock would be increased significantly if margins between prices received by U.S. breeders and those paid by the ultimate Latin American purchasers were carefully kept within the limits of reasonable charges for services rendered on exports involving United States programs or international credit. PERISHABLES TO CANADA AND EUROPE Our principal problem-solving concerns for exports to Canada and Europe relate to fresh vegetables and cut flowers. To a large extent, the problems arise because the perishable nature of the products requires special facilities and frequent. small units of exportations. Access to Canada by rail or truck mini- mizes these problems. As a result, the trade with Canada is well established and of substantial volume. The problems facing vegetable producers in their Canadian sales efforts include competition from Mexican imports especially for tomatoes and strawberries and demand of Canadian greenhouse tomato growers for protection from both U.S. and l\Iexican imports. Most exports to Europe of Florida vegetables and fruits other than citrus are still experimental or pilot in nature. This intensifies the problems arising from perishability and small scale. The Florida Department of Agriculture has been working closely with the Florida Fresh Fruit and Vegetable Association in the sponsorship of Export Workshops for prospective exporters and have helped to organize and present exhibits at Trade Fairs and U.S. Perishable Food Products Shows in Europe. Department personnel and Florida exhibitors participated in Fairs at London, England, and Cologne, Germany, last fall and in a perishable products show in London within the past two weeks. Some of our commodity groups are working toward consolidated shipments or shipping schedules. To really open the European market potential to our producers requires the fullest development of such efforts, similar collaboration with Florida exporters of nonagricultural products, development of facilities and extension of representation and promotional activities in European market centers. Some of the specific needs are: 1. Air-cargo schedules from Florida ports direct to European destinations. 2. Scheduled ocean freight service from Florida East Coast ports, including refrigerated space. 3. Simplification of clearance procedures. This relates largely to the complica- tions of documentation both at U.S. "exit" ports and at entry ports in Europe. It extends in part to lack of coordination between the departure and arrival hours and the limited office hours of clearance officers. 4. More efficient handling facilities at air and seaports in Florida and at destinations. 5. New packaging and handling methods to minimize shipping damage, time from field to consumer and costs. Such innovations that are adapted to domestic marketings, as well, will do most to encourage exports. The Marketing Research divisions of the Agricultural Research Service, USDA, the Florida Agricultural Experiment Station and a wide assortment of trade groups are at work on these problems. The adoption of the innovations they develop need to be accompanied by policy and procedural changes by public agencies "clearing" shipmentshere and abroad and by transportation firms. 6. Measures to limit delays inherent in misunderstandings about the grade and condition on arrival in foreign ports. Ideas that have been suggested include stationing U.S. inspectors at major European ports or conducting training schools for foreign inspectors in the requirements and techniques of U.S. inspection. There may be a need for special grades to satisfy foreign governments and buyers. PAGENO="0635" 5075 For the most part this list is a call to increased creative action and coopera- tion by potential exporters, shipping companies and the service agencies. Full contributions by the State and federal service agencies, of course, depend upon a favorable legislative climate especially toward funding needed service activities. I appreciate greatly the opportunity to appear before this committee and, again, commend to you the full consideration of problems and possible solutions detailed in the testimony of other witnesses for Florida agriculture. (Exhibit A) STATEMENT OF FLORIDA INTERNATIONAL AGRICULTURAL TRADE CoUNcIL, INC. We are told that Art Calver handled the Yucatan tour beautifully, that the group was received with the greatest hospitality and had a most interesting time over the weekend of January 6th. Commissioner Conner was on hand, and so were a goodly number of FIATC members. Quite a few AgriTours folders were distributed en route and much interest in the event was indicated. The wrap-up meeting for the 1968 AgriTours was held at the State Fair Con- ference Room, Tampa, on January 17th, and almost everyone involved was present. Charles Lykes presided. David, Feijoo, Twedell, Hammond, Jeter, Beatty, Stack, Martin and others gave reports on the activities of their com- mittees. Each item was thoroughly discussed to make sure that nothing had been overlooked. The feeling after the meeting was that we had learned a lot from last year's AgriTour and that this year's is better organized as a result. Ed David was asked again to act as coordinator during the event. A fruitful meeting was held at Gainesville on January 22nd on the subject of future short courses for Latin Americans with associated tours. Dr. Cunha had assembled a group of top University people representing Beef Cattle, Swine, Horses, Dairy, Poultry, and the Center for Tropical Agriculture. Representing FIATC were Ahlstrom, Stack, Gatrell, Lyons, Parajon, and David. This year's Latin American Beef Cattle Conference will be held at Gainesville on May 21st in connection with the 17th Annual Beef Cattle Short Course which will follow it on May 2nd, 3rd, and 4th. As this program has been completely developed, it was decided to make no changes this year. A meeting of the full committee will be held on June 5th at Gainesville to make plans for 1969. The general idea will be to hold the Latin American Beef Cattle Conference in June of 1969, instead of in connection with the regular May Florida Beef Cattle Short Course. All the other Departments, dairy, horses, swine, poultry and Tropical Agriculture, will hold special Latin American short courses at that time too, all in about three days. All this will be under the aegis of the Center for Tropical Agri- culture. We'll then have farm tours, run by PlATO, on the way back to Miami, covering areas of the State not included in the winter AgriTours program. Uni- versity personnel will be at the different farms to answer questions. After the tours, the guests will have time for a Miami holiday, during the lower-rate period there. Of course, none of the above is final or definite. It is the general idea, subject to many changes, but those present seemed to consider it most favorably. The Dade County Port Authority dedicated its new Animal and Plant In- spection and Quaratine Facilities at Miami International Airport on January 30th. Dr. Parajon was one of the main speakers at the dedication and did a very impressive job. These further should prove of tremendous value in expand- ing our Florida International agricultural business. The Florida State Chamber of Commerce has advised its members and "all concerned" that the 7th Annual Florida World Trade Conference will be held in Jacksonville, Hotel Roosevelt, on April 4th and 5th. The theme will be "Bridging the Oceans for Profit." For reservations write "Seventh Florida World Trade Conference," P.O. Box 8046, Jacksonville, Florida. 32211. Our thanks to all those who have responded so well to our request to mail in current PlATO dues. The response has been most gratifying. PAGENO="0636" 5076 U.S. EXPORTS OF SPECIFIED LIVESTOCK THROUGH FLORIDA PORTS, 1967 Country Cattle Horses Swine Goats Argentina 1 13 Bahamas 1 41 Bermuda 6 Brazil 225 43 12 Canada 255 6 Chile 2 Colombia 29 261 Costa Rica 166 2 Dominican Republic 148 5 4 Curacao 6 Ecuador 119 1 El Salvador 10 England France 1 Guatemala 125 1 44 Haiti 1 Honduras 1 1 17 Ireland 2 Jamaica 1,036 8 Mexico 18 Nicaragua 1 Panama 87 24 Peru 3 18 10 Philippine, Republic of 36 Spain 30 South Africa 2 Surinam 17 Tobago 10 Trinidad 41 26 Venezuela 3, 555 72 22 Total 6,013 248 416 18 6,695 Source: Reports of USDA Animal Health Division, Florida branch. SHIPMENTS OF CHICKS, POULTS, AND HATCHING EGGS, BY FLORIDA BREEDERS, HATCHERIES, AND DEALERS DESTINED OVERSEAS Country Chicks Eggs (dozens) Poults Ducks Other Bahamas 2,376,779 300 1,402 52 Bermuda 6, 900 200 50 Bolivia 61,385 50 Brazil 20,500 30 British Honduras 54,743 2,500 231 175 Chile 18,425 Columbia 8,725 20 Costa Rica 3,330 15,090 200 100 Dominican Republic 210,480 603,909 250 El Salvador 199, 980 34, 440 2, 050 3, 440 Ecuador 286,695 66,720 7,100 100 Guadalupe 43,290 20 Guatemala 26, 860 33, 300 3, 500 4, 800 Guyana 20, 200 23, 730 170 Haiti 196,863 200 Honduras 747,064 3,870 900 335 Jamaica 20,245 458,346 150 357 Leeward Islands 1,500 Mexicn 278, 550 3, 000 1,450 1,720 Netherlands Antilles 8, 000 Nicaragua 1,690,435 5,000 300 350 Panama 8,250 84,475 2,750 Peru 82,493 34,519 22,950 Puerto Rico 672,571 47,310 10,855 2,992 Surinam 495,680 1,500 7,055 Trinidad 158,387 585,108 1,430 1,950 Venezuela 88, 730 292, 012 10,368 41, 835 Virgin Islands 15,744 100 200 Windward Islands 22,720 5,970 Lesser Antilles 163, 273 54, 660 3, 210 969 Argentina 31,880 Paraguay British Guiana 444,650 120,310 1,434 4,950 Netherlands West Indies 224,128 3,290 201 240 Portugal 1,700 Italy 1,100 Spain 1,700 Total 8, 662,630 2, 520, 009 68, 151 75, 420 1 44,912 a A variety of pheasants, started pullets, turkey eggs, duck eggs, geese, guineas, quail, partridges, peacocks. Source: Certificate issued by Florida Department of Agriculture, Animal Industries Division, Poultry Services Section. PAGENO="0637" 5077 (Exhibit B) AGRICULTURAL DECLARATION OF MIAMI The Ministers of Agriculture of the following countries, to wit: Honorable Hugo Bozo, Bolivia; Honorable Guillermo Yglesias Pacheco, Costa Rica; Honor- able Rene David Escalante Orozco, El Salvador; Honorable Francisco Montenegro Giron, Guatemala; Honorable Victor Nevers Constant, Haiti; Honorable Julio C. Pineda, Honduras; Honorable Alberto Reyes Riguero, Nicaragua; Honorable Rafael Cubas Vinatea, Peru; Honorable Alejandro M. Osorio, Venezuela; Hon- orable Ricardo Acosta, Undersecretary of Mexico; and the Honorable Doyle Conner, State of Florida Commissioner of Agriculture, on occasion of the first Latin America-Florida Conference of Agriculture held in Miami, Florida, for the purpose of sharing experiences, promoting a closer relationship, and unifying criteria on the great agricultural problems of the Americas, Do hereby 4eclare- First: Unshakable faith in a democratic organization as the most workable means for the betterment of their people, and to safeguard the essence of human dignity; Second: Firm determination to take the necessary steps, jointly, toward the achievement of a just social order, having appropriate concern for the man who works the land; Third: Conviction that these objectives will be achieved with the necessary dispatch and within the scope desired and permitted by law, through an authentic spirit of cooperation among the peoples of the Americas; Fourth: Belief that those highly developed nations should suitably contribute, with their technical and financial support, to the common goal of the betterment of mankind in the Americas; and to urge those countries undergoing develop- ment to make the greatest possible effort of their own to take advantage of such support; and to undertake the necessary improvement in the economic, social and agricultural fields, so that the betterment and modernization of their economies becomes a reality; Fifth: Intention to meet periodically for the purpose of sharing their experi- ences, promoting a better understanding, and arriving at definite solutions; Sixth: Their pledge to work together so that these solutions, recommendations and resolutions, mutually agreed upon, are carried out without fail; Seventh: Their decision to work toward Latin American integration, a better understanding, and the closest friendship and cooperation with the United States, availing themselves of the opportunity offered by the kind invitation of the State of Florida through its Commissioner of Agriculture, Doyle Conner; Eighth: Their pledge to conduct investigations and put into effect specific meas- ures for the control of plagues, and to undertake phytosanitary campaigns or programs in order to avoid the inherent risks of epidemics; Ninth: Their conviction that many of the problems facing the marketing of agricultural commodities of this hemisphere are, because of their technical nature, common to the countries of Latin America and the State of Florida, and can be better solved through the joint efforts of the interested parties because sufficient scientific information, personnel and assistance are available in these countries; Tenth: Their intention to extend a formal invitation to the governments of the sister nations not represented at the Conference, to adhere to the principles set forth in this Declaration; to urge and encourage each one of our governments and private institutions to equally participate in the agricultural development of the American nations; and to work towards achieving a free exchange of tech- nical information, personnel and assistance between the countries of this hemi- sphere; and to combine the mutual efforts of the member countries, and to co- ordinate the exchange of technical information through the facilities of a central office of the newly created organization to be established; Eleventh: Their earnest desire that this Latin American-Florida Conference of Agriculture become a permanent Agricultural Forum of this hemisphere, and since the Commissioner of Agriculture of the State of Florida has offered the services of his staff to that end, it is hereby unanimously agreed that a per- manent organization be and it is hereby created. The basis under which said organization is to be chartered is to be submitted to the attending Ministers PAGENO="0638" 5078 of Agriculture before December 1, 1966, for their consideration, additions, sug- gestions, and corrections. The proposal, duly revised by the Ministers of Agricul- ture, shall be returned no later than February 7, 1967, so that the Charter of the organization may be finalized and executed by all parties. The permanent head- quarters of the organization shall be in the State of Florida, but the site of the Annual Conference shall be rotated between the different countries. The organization shall be known at Latin America-Florida Agricultural Organization. (Exhibit C) REsoLUTIoN We, the undersigned Ministers of Agriculture of Latin America, convened in the City of Miami, State of Florida, have unanimously agreed to give the Honor- able Doyle Conner, Commissioner of Agriculture of the State of Florida, our vote of confidence for his initiative and foresight in convoking the first Con- ference of Latin American Ministers of Agriculture, which climaxed in. the signing of a document entitled, "AGRICULTURAL DECLARATION OF MIAMI". This document is a significant step toward strengthening friendship and cooperation between the countries of Latin America and the United States in general, and the State of Florida in particular. The results of our meeting will have beneficial repercussions in the American Continents. THEREFORE, we, the Ministers of Agriculture of Latin America attending the Conference, have unanimously approved the foregoing resolution and in witness thereof set our hands and seals this 14th day of September, of the year 1966, at Miami, Florida. Hugo Bozo, Minister of Agriculture, Bolivia; David Escalante Orozco, Minister of Agriculture, El Salvador; Victor Nevers Constant, Minister of Agriculture, Haiti; Recardo Acosta, Minister of Agri- culture, Mexico; Rafael Cubas Vinatea, Minister of Agriculture, Peru; Guillermo Yglesias Pacheco, Minister of Agriculture, Costa Rica; Francisco Montenegro Giron, Minister of Agriculture, Guatemala; Julio C. Pineda, Minister of Agriculture, Honduras; Alberto Reyes Riguero, Minister of Agriculture, Nicaragua; Alejandro M. Osorio, Minister of Agriculture, Venezuela. RECoMMENDATIoNS The Ministers of Agriculture of the following countries, to wit: Bolivia, Costa Rica, El Salvador. Guatemala, Haiti, Honduras, Mexico, Nicaragua, Peru and Venezuela: and the Commissioner of Agriculture of the State of Florida; have agreed on the following recommendations: All of the Latin American Governments, the State of Florida and the United States should give their full cooperation to: 1. Motivate, actuate, support and promote the agriculture of this hemisphere; 2. Cooperate and support development projects, including concrete action in the fields of: Technical Training, Research, Extension and credit, among others, enlisting for this purposes all financial and technical assistance available; 3. Support and carry out appropriate programs in those countries where eco- nomic and social planification dictate the need and urgency to encourage and promote the broadened individual ownership of agricultural land. 4. Study and adopt, with due diligency, measures and actions which tend to improve and organize the commercialization and industrialization of agriculture in Latin America. SENATE MEMORIAL No. 1094.-A MEMORIAL TO THE CONGRESS OF THE UNITED STATES To PROVIDE FOR PROTECTIVE TARIFFS ON IMPORTED AGRICULTURAL PRODUCTS Whereas the government of the United States has established as national policy that poverty within this nation shall be elminated, that every citizen is entitled to a decent and respectable standard of living and each worker entitled to a minimum wage in excess of that earned by the citizens of any other nation; and Whereas the United States, the world's greatest agricultural nation, depends heavily upon agricultural laborers to produce the necessary food and fiber for PAGENO="0639" 5079 the sustenai~ce and clothing of our people and of other friendly peoples through- out the world; and Whereas no other nation on earth pays its agricultural workers as well or maintains such a high standard of living and healthful environment for her people as does the United States and that as a result thereof, the cost of labor for food production in the United States greatly exceeds the cost of labor in any other nation; and Whereas in our determination to provide only the most wholesome foods of the highest qualities possible for our citizens we have added to the cost of food production expensive inspection and grading services for the benefit of our consumers; and Whereas the preceding factors have resulted in an unavoidable increase in the prices of home grown agricultural products; and Whereas foreign agricultural products do not have to contend with comparable cost increasing factors and therefore are economically sold for a price lower than that of the home grown agricultural products, causing the American product to have an unfavorable competitive position; and Whereas the disparity in prices between home grown and foreign grown agricultural products induced by governmental action can only be removed by governmental action; and Whereas if remedial action is not forthcoming the American agricultural industry will expire and the American consumer, though initially paying a lower price, would eventually be at the mercy of prices set solely by foreign producers and food quotas authorized by foreign governments; and Whereas the lack of remedial action will result in American investment in foreign agricultural industries with a consequential additional depletion of the gold supply; and Whereas food has been recognized by the federal government as our most powerful weapon in the fight for peace; and Whereas the collapse of the American agricultural industry or a reduction in the productive capacity of such industry would detrimentally affect the civil defense posture of the country as the survivors of a civil defense emergency would be solely dependent upon American agricultural products for continued existence: Be it Resolved by the Legislature of the ~S'tate of Florida: That the Congress of the United States be and is hereby requested to maintain those protective agri- cultural import tariffs which currently exist, and be it further Resolved, That the Congress of the United States make a detailed determina- tion of what additional agricultural tariffs and quantitative limitations of im- ports is needed to perpetuate the American agricultural industry and that the Congress expeditiously enact such import controls, and be it further Resolved, That copies of this memorial be dispatched to the President of the United States, to the President of the United States Senate, to the Speaker of the United States House of Representatives, and to each member of the Florida delegation to the United States Congress. Effective June 21, 1967. STATEMENT OF SOUTHERN ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE, MORGANTOWN, W. VA. RESOLUTION NO. 1 A resolution to the President of the United States, the Congress of the United States, the Secretary of State of the United States, and the Secretary of Agriculture of the United States. Whereas the government of the United States has established as national policy that poverty within this nation shall be eliminated, that every citizen is entitled to a decent and respectable standard of living and each worker entitled to a minimum wage in excess of that earned by the citizens of any other nation; and Whereas the United States, the world's greatest agricultural nation, depends heavily upon agricultural laborers to produce the necessary food and fiber for the sustenance and clothing of our people and of other friendly peoples through- out the world; and PAGENO="0640" 5080 Whereas no other nation on earth pays its agricultural workers as well or maintains such a high standard of living and healthful environment for her people as does the united States and that as a result thereof, the cost of labor for food production in the United States greatly exceeds the cost of labor in any other nation; and Whereas in our determination to provide only the most wholesome foods of the highest qualities possible for our citizens we have added to the cost of food production expensive inspection and grading services for the benefit of our consumers; and Whereas the preceding factors have resulted in an unavoidable increase in the prices of home grown agricultural products; and Whereas foreign agricultural products do not have to contend with comparable cost increasing factors and therefore are economically sold for a price lower than that of the home grown agricultural products, causing the American prod- uct to have an unfavorable competitive position; and Whereas the disparity in prices between home grown and foreign grown agri- cultural products induced by governmental action can only be removed by governmental action; and Whereas if remedial action is not forthcoming the American agricultural industry will expire and the American consumer, though initially paying a lower price, would eventually be at the mercy of prices set solely by foreign governments; and Whereas the lack of remedial action will result in American investment in foreign agricultural industries with a consequential additional depletion of the gold supply; and Whereas food has been recognized by the federal goveri~ment as our most powerful weapon in the fight for peace; and Whereas the collapse of the American agricultural industry or a reduction in the productive capacity of such industry would detrimentally affect the civil de- fense posture of the country as the survivors of a civil defense emergency would be solely dependent upon American agricultural products for continued existence, Therefore, the Southern Association of Commissioners of Agriculture resolve that they do support those protective import tariffs which currently exist; and Be it further Resolved. That the Southern Association of Commissioners of Agriculture urges the Congress of the United States to make a detailed study and determina- tion of what additional agricultural tariffs and quantitative limitations on im- ports are needed to perpetuate the American agricultural industry and ex- peditiously enact such import controls; and be it further Resoive(l, That copies of this resolution of the Southern Association of Com- missioners of Agriculture be dispatched to the President of the United States, to the President of the United States Senate, to the Speaker of the United States Flouse of Representatives, and to each member of the Congressional delegations to the United States Congress of each state represented in the Southern As- sociation of Commissioners of Agriculture. Adopted June 7, 1967. REsoLwrIoN XXI MARKETING, TRANSPORTATION, AND WEIGHTS AND MEASURES, FOREIGN TRADE Whereas the United States has established a national policy of eliminating poverty and providing a minimum wage in excess of that paid to workers in any other country of the world; and Whereas agricultural producers in other countries do not have to meet high and ever increasing cost factors comparable to those facing United States producers; and Whereas it is the establishment policy of all other countries of the world to protect their domestic agricultural industries, importing products in relation to their wants and needs, while the American farmers is expected to compete with unlimited imports of many agricultural commodities in excessive volume for these importing countries; and Whereas in accomplishing the long-range goal of increased world trade, the American farmer is caught in an untenable position of non-reciprocal treatment for his products by other countries; and Whereas failure to maintain a vigorous and expanding domestic agricultural food industry will be seriously detrimental `to the civil defense posture of this PAGENO="0641" 5081 nation; and furthermore, leave the United States consumer at the mercy of supply and price policies set by foreign governments for substantial parts of their food needs: Therefore be it Resolved, That The National Association of State Departments of Agricul- ture in convention assembled at Atlanta, Georgia, October 1-5, 1967, (1) sup- ports domestic agricultural industries in their position of maintaining present levels of import tariffs for agricultural products; (2) urges the Congress of the United States to determine with advice and guidance of the States and representatives of domestic agricultural producers, what additional protec- tion and limitations are needed in light of import discrimination on the part of other nations and their ability to "over supply" the United States market; and (3) urges the Congress of the United States to expeditiously initiate legislation based on said findings. STATEMENT OF M. F. Fnosr, VICE-PRESIDENT, TEXAS FARM BUREAU We thank you for the opportunity to present TFB's ideas regarding future U.S. trade policy. Texas Farm Bureau is a general farm organization with a membership of more than 105,000 member families in our state, representing every commodity produced in our great state. Texas Farm Bureau is a voluntary, non-governmental organization and is affiliated with the American Farm Bureau Federation. The Texas Farm Bureau supports the statement presented by AFBF on June 13, 1968. Our statement today is not to duplicate their remarks but to add to them and relate more specifically some of the problems faced by our state in world trade. Imports We are in favor of expanded world trade and believe in reduced restrictions to increase the flow of products between countries. But our membership is becom- ing increasingly concerned with restrictions placed on our agricultural products by other countries and the increased flow into the United States of agricultural products from other countries. Since Mexico is on our Southern border, we are particularly concerned with the dramatic rise in imports from that country. As our costs of production have increased, the increase in agricultural imports from Mexico has been even greater. An excellent example of the effect of this combination (increased production costs and Mexican imports) is strawberry production in Texas. I live in McAllen in the lower Rio Grande Valley and am quite familiar with the situation. In 1946, Orval Stites of Donna, Texas, was shipping strawberries all over the United States. During this same year, he shipped the first plane load of strawberries to Canada. In 1960 he employed 2,000 people and harvested approximately 225 acres with gross sales of $700,000 for that year. In April of 1967, Mr. Stites, after gradually reducing his strawberry acreage to 40 acres and selling his final crop at a heavy loss, closed his strawberry business. All the other straw- berry producers in Texas had quite before he had, but the announcement that Mr. Stities had to give up was the most stunning. Here was an individual who had come to the Valley in 1931, worked hard, experimented, innovated, pro- moted his product vigorously, and had built a business of which not only Mr. Stities, but the entire area, was quite proud. We thought it rather ironic that at the same time Mr. Stites announced he had to quit his strawberry business, Senator Wayne Morse of Oregon was introducing a bill in the Senate to restrict Mexican strawberry imports to protect the Oregon strawberry growers! Mr. Stites did not quit farming. He and his son are growing cotton, grain, and tomatoes. He didn't quit. But in the last seven years over 300 growers in this four-county area have gone out of business, and unless conditions change in the near future, experts predict another 35% of the present growers will go out of business. In 1945-46 the Valley shipped 75,000 carloads of fruits and vegetables. In the 1965-66 season, total shipments were down to 26,000 carloads. Mr. Stites and we others who grow and ship tomatoes are now facing the situa- tion that he faced in strawberries. In 1943, the Valley area shipped 10,142 car- loads of tomatoes-in 1965, 1201 carloads. In 1945, approximately 40,000 acres were planted in tomatoes, this spring less than 2,000 acres. True, part of the reduction this year was because of soil conditions caused by Hurricane Beulah last fall, but under normal conditions, the tomato acreage would have been less 95-159-68-pt. 1O-41 PAGENO="0642" 5082 than 4,000 acres, or less than one-tenth of that planted in 1945. The tomato imports have become so serious that growers from other tomato producing states, such as Florida and California, are feeling the impact. On June 22, 1968, less than two weeks ago, a man from the USDA visited my packing shed where we pack and ship tomatoes, gathering information as to packing selling costs of tomatoes. He also wanted to know if we felt Mexican imports were hurting our markets. I related to him how our tomato deal bad started on an optimistic note in May, that even with our short acreage, Florida's volume was decreasing, and the market demand was strong. Yet, when we started shipping, we found that in San Antonio, only 240 miles from the Valley and usually an excellent nearby market, there were eight cars of pink Mexican toma- toes on consi9nment! Naturally, the market fell dramatically overnight. The same situation exists for many other crops, citrus, cantaloupes and other melons, onions, etc. But since we have an overall surplus in trade with Mexico, we suppose that agriculture will continue to be discriminated against. For this is not a two-way street in agricultural trade. In the 1966-67 citrus season, when the United States had the largest crop in its history and Mexico had a tre- mendous increase in its crop, the Mexican government simply placed an embargo on all citrus imports into Mexico that season. Yet the U.S., which has a one- cent per pound import duty, allowed Mexico to continue exporting into this coun- try until the'market dropped so low that exen Mexico bad to quit our markets. I say again to you that it is not a `two-way street when we are not allowed to ship chickens into Mexico because its government protects its growers. One of the largest broiler producers in Mexico told me that he averaged around 17-18~ per pound for his broilers. It has been a long, long time since American pro- ducers `have received this high a price and we could compete quite effectively in this market `but we are barred from doing so. This year the border was closed to American turkeys. We once had the privilege of participating in probably the finest foreign aid program in the United States. The money went to the very people `that needed it most-the poorest of the poor-and it wasn't given to them; they worked for it at wages fixed by the U.S. government. And they weren't paid by the U.S. govern- ment either; they were paid by American farmers. Perhaps most important of all, they learned how to farm, they learned the meaning of sanitary conditions, what education would do, and were given a ray of hope in an otherwise hopeless life. Many of them took this back home and are now using it in their daily life. This program was the Bracero program. But this program was ended. And now the farmer is faced with a labor short- age and higher production costs, and competition with goods produced by this same worker who is getting about one-eighth of what he received for working in the United States. In 1965, Mexican imports of fruits and vegetables were 400% of their 1955 imports. Evpansion of world lnarlcet8 Faced with rising imports of not only fruits and vegetables, but also of red meats; dairy products and other agricultural products, the Texas Farm Bureau several years ago began exploring the possibilities of developing foreign markets for our membership. While our progress has been slow and the problems often frustrating, we believe that the potential is great and that agricultural exports can be expanded and continue to play a most important part in our balance of payments trade surplus. In 1966 the Texas Farm Bureau was the first to successfully ship fresh chilled beef by ship overseas. This was chilled beef, not frozen beef, and it was an achievement of which we were quite proud. The beef was shipped in a controlled- atmosphere container to Germany and was the result of a lot of hard work and cooperation by interested individuals and the Texas Farm Bureau. The beef was well received and sold out in a fraction of the time that had been estimated by the receiving store. But, before this program got off the ground, the levy was raised to such a high level by the Common Market that we were priced out of the market. The Common Market has a variable levy on beef which can be changed weekly and works very effectively in stopping imports. The levy can be raised while the beef is enroute. Transportation has been a major problem in exporting agricultural products from Texas, particularly the more perishable commodities, and the rates from the U.S. are not always competitive with those from other countries. At one time the freight rate on beef was considerably lower from Argentina to Europe than from New York to Europe. The Viet Nam war has caused the U.S. gov- PAGENO="0643" 5083 ernment to take many ships, particularly those with refrigerated space, from the normal U.S.-Europe routes to service carrying goods to Viet Nam, even using some for warehouses there. The market for perishable commodities overseas often fluctuates rapidly as it does in the U.S., and if adequate transportation were available, we would move much more when the market overseas made it feasible. TFB is continuing efforts to find markets overseas for agricultural products. In each of the past three years, we have conducted market-builder tours to Europe, taking farmers, shippers, and other interested agribusiness people over- seas to meet with potential buyers and gain a better understanding of each other's problems and needs. We have developed markets for our grapefruit, onions, and to a lesser extent, many other products. We continue to explore the market for beef and variety meats, turkeys and turkey parts, pecans, hides, flax, grain, and a variety of vegetables. This year TFB's market builder tour will go to Japan, Asia and the Middle East in an effort to develop markets in coun- tries in those areas. We find restrictions in Japan on our citrus through the use of quotas. Grapefruit sometimes costs as high as $1.00 apiece in Japan, even though they do not raise this fruit in their country. The Texas Farm Bureau has participated in several trade fairs in Europe, the latest in April in London, and also visited with buyers in Stockholm and Bonn. We are also going to participate in a trade fair in London this fall. These fairs and meetings have been arranged by the U.S. Foreign Agricultural Service and have been most helpful in arousing the interest of European buyers in agri- cultural products. We do feel the FAS could keep us better posted on changes in market conditions, but we feel that we are establishing better coordination with them in our marketing efforts. We have been puzzled by the attitude of the U.S. military in our efforts to sell overseas. In the fall of 1966, we visited the military purchasing office which was then located in Orleans, France. We were given a lukewarm reception and no enthusiasm was shown towards our efforts to sell them Texas and American products, this in spite of other military people telling us they would be delighted to be able to purchase more products from home, particularly fresh beef and fresh fruits and vegetables. Some Texas agricultural products are purchased by the military on a bid basis, but apparently all of these shipments are made from the East Coast or the West Coast, and the rail freight substantially in- creases the cost of the product. There are excellent port facilities in Texas and we feel that some of the military shipments overseas could be made from these ports, resulting in substantial savings to the military and the taxpayer. Conclusions We believe that our agricultural exports can be substantially increased, but to do so the United States must be aggressive in pursuing this endeavor. Greater cooperation between government and private industry is necessary. The problems of transportation and restrictions of foreign countries must be overcome. We must be competitive in price in the world market and yet give our farmer a fair return for his product. The impact of imports of agricultural products on the American farmer is becoming greater every day. Imports of cotton textiles, beef, citrus, tomato paste, dairy products and other fruits and vegetables, seem to increase every year. We feel that administrative procedures should be improved so that quick relief can be given to protect the American farmer and also farm labor from being further placed at a disadvantage by such imports, particularly when these imports are subsidized or are a result of dumping practices. We do not believe that international commodity agreements such as the International Wheat Trade Convention can do anything except hurt the American farmer and stop us from expanding our foreign markets in these commodities. Agriculture is the largest industry in the United States and the greatest user of labor. One out of every four acres is exported, and in 1966-67 these exports were worth $6.8 billion, 22 percent of total U.S. exports. Farm Bureau believes we can raise the level of agricultural exports to $10 billions if we are permitted to compete efficiently and effectively in the world market with a minimum of restrictions. STATEMENT OF WILLIAM W. CULL, PRESIDENT OF T1~xAs CITRUs MUTUAL My name is William W. Curl and my address is Post Office Box 372, Edinburg, Texas, 78539. I am presently serving as President of Texas Citrus Mutual, a non-profit corporation organized in 1958. Texas Citrus Mutual neither produces PAGENO="0644" 5084 nor sells citrus fruit. Its principal objective is to supply its members, who are citrus producers, with information relating to all phases of the production and marketing of citrus fruit in order that they may receive their fair and proper share of the consumer's citrus dollar. Its finances are obtained from a 25 cent per ton assessment paid by members on the fruit marketed by them. It is my purpose to speak for the Texas citrus producer who for the past twenty years has been beset by killing freezes, prolonged drought and destructive hurricanes and who now faces an even greater threat-the loss of his domestic markets to citrus imported from foreign areas where costs of labor and production are far below those prevailing in the United States. IMPACT OF IMPORTS OF CITRUS FRUIT The Texas citrus grower is vitally concerned with the importation of citrus fruit from foreign areas and particularly from Mexico. The production of citrus in Mexico, principally oranges, is rapidly increasing and it is evident from the experience during the past citrus season that it will have an increasingly adverse effect upon the marketing of domestically produced oranges in the United States. The costs of producing citrus in the United States are increasing at a rate far exceeding that prevailing in Mexico and in the other citrus producing countries of the world. Over the past few years, action has been taken on the Federal level which has increased and will continue to Increase the domestic costs of produc- tion. To mention a few-the bracero program has been terminated; most farm, packing house and processing employees are now included under the federal wage and hour legislation which establishes an approximately thirty per cent wage increase for these employees between February 1, 1967, and February 1, 1969; increasing costs are being encountered by the producer in his purchase of supplies and equipment and taxes at the local, state and federal levels are ~:~~istantly rising. There is no indication that foreign costs of production have increased or will increase comparatively and, in fact, the termination of the bracero program resulted in lower wages in Mexico. Over the years, the citrus producers in Texas, California, Florida and Arizona have substantially contributed to the advertising and promotion of citrus fruits. As a result of this effort, a good demand for citrus has been developed. These same producers are paying the highest wages applicable to any commercial citrus producing area in the world and they are also paying their fair share of the taxes necessary to support our higher standard of living. The domestic citrus grower does not receive long term low interest government loans for the purpose of planting citrus orchards and financing such orchards until they be- come commercially productive, nor does the domestic citrus producer receive any government subsidy on exported citrus, citrus by-products or concentrate as is the case in many foreign countries. As a result of these actions on the part of foreign governments, the planting of citrus groves, principally oranges, has been encouraged to the point where large surpluses must inevitably occur. These countries are looking to the United States to dispose of their excess production during peak crop years and because of their much smaller costs of production, the dumping of this foreign citrus in the United States can have a catastrophic effect on the domestic citrus producer. The maintenance of a sound domestic citrus industry and the guarantee of steady employment to those who labor in the production and processing of citrus should be a paramount national objective. EXISTING TARIFF ON CITRUS FRUIT Exports of citrus fruits from Mexico have consisted mostly exclusively of fresh oranges. For customs purposes, citrus fruits were made dutiable by the Tariff Act of 1930 at the rate of one cent per pound which might be increased or decreased by Executive action under Sec. 336 of the Tariff Act of 1930 in cases where the Tariff Commission, after investigation, finds that the rate of duty fixed by statute is higher or lower than necessary to equalize the differences in the cost of production in the United States and in the principal competing countries. For all practical purposes, the duty has remained at approximately the rate of one cent per pound since 1930, although prior to January 1, 1968, the rate on grapefruit was 1.2 cents per pound for grapefruit entering between the dates of August 1, and September 30; 0.9 cents per pound for grapefruit entering during October: 1.5 cents per pound for grapefruit entering November 1, to July 31, and the duty on oranges prior to January 1, 1968, for the entire season PAGENO="0645" 5085 was 1~ cents per pound. Effective January 1, 1968, the rates of duty on grape- fruit and oranges were lowered in accordance with the Kennedy Round on the General Agreement on Tariff and Trade. Although Mexico is not a member of the G.A.T.T., the new rates for grapefruit and oranges applied to all imports except those from communist countries. According to a letter received from the United States Department of Commerce dated February 29, 1968, the rate on oranges was reduced from 1J4 cents per pound to 1 cent per pound effective January 1, 1968, and will be further reduced to 0.8 cent per pound January 1, 1970; 0.7 cent per pound January 1, 1971, and 0.6 cent per pound January 1, 1972. It is submitted that assuming the one cent per pound duty on citrus fruit fixed in 1930 represented at that time the differential in the cost of produc- ing citrus in a foreign country as compared to the United States, it no longer does. What might have been a realistic approach in 1930 has, with the pas- sage of almost forty years, become outdated. Despite the constant inflation in the United States and the decline in the purchasing power of the dollar, the domestic citrus producer is confronted with a progressive lowering of the present tariff on oranges, set in 1930, to a figure which on January 1, 1972, will be less than one-half of that existing prior to January 1, 1968. Unless the tariff is substantially increased over one cent per pound or an adequate quota system established the domestic orange producer will be unable to recover his bare costs of production and will be forced out of business as many already have been. BALANCE OF PAYMENTS With the present emphasis on balance of payments, it is evident that Mexico with its increasing citrus production coupled with its lower costs of production will increasingly drain dollars from the United States. There is now no pos- sibility of offsets by way of exports of citrus fruit from the United States to Mexico because Mexico has closed her borders to importation by that country of citrus fruit produced in the United States. This season through May 20, 1968, Mexico alone has crossed into the United States 2,261 carlot equivalents of oranges, 428 carlot equivalents of tangerines, 6 carlot equivalents of mixed citrus and 19 carlot equivalents of limes for a total of 2,714 carlot equivalents of citrus fruit. These imports represent approximately nine million dollars that have flowed from the United States into Mexico (USDA, State Market News Service, Weslaco, Texas). In addition to the large volume of citrus which has been entered into the United States from Mexico, there has been additional citrus entered from other citrus producing countries. How does the 2,714 carlot equivalents mentioned above imported from Mexico during this season compare with shipments of Texas citrus fruit? During the 1966-67 citrus season, the largest Texas shipper of fresh fruit was Edinburg Citrus Ass'n of Edinburg, Texas. This association, operating two packing houses, shipped 2,133 carlots of citrus fruit-almost 600 less than Mexico shipped to the United States this season. The 2,714 carlots of Mexican citrus that have entered the United States this season were produced, harvested and packed in Mexico, depriving from gainful employment a domestic work force in num- bers approaching the total number employed by three of Texas' highest ca- pacity packing houses. The impact of imported citrus fruit on our domestic labor force is more substantial than many realize. PERCENTAGES OF PARITY BEING RECEIVED ON DOMESTIC CITRUS FRUIT The 1966-67 citrus season, which was a disastrous one for orange growers in the United States due to the large crop, resulted in the Texas producer receiv- ing 29 percent of parity for oranges (USDA C&MS-F & V Citrus Fruits: Estimated Equivalent On-Tree Returns and Parity Prices 10-2-67). As a re- suit of Texas' much small crop than Florida's and the fact that it can be sold much closer to the producing area with a consequent savings in freight, Texas should always receive a higher percentage of parity then Florida; how- ever, such has not been the case. This season to date, Mexico crossed, as stated above, 2,261 carlots of oranges compared with only 255 carlots last season. Ex- cept for 124 cars that crossed at Nogales, all of such citrus fruit crossed the border here in Texas and sold in Texas' traditional marketing area. As a re- sult, during the present season the Texas orange producer has received only 4 PAGENO="0646" 5086 percent of parity to date while Florida growers have received 66 percent of parity (USDA C&MS-P & V Citrus Fruits: Estimated Equivalent On-Tree Re- turns and Parity Prices 3-29-68). Last season, Texas had an orange crop of 2.8 million boxes and marketed through fresh fruit channels 2,986 cars (500 boxes per car). Mexico imported through the Rio Grande Valley of Texas, 256 cars for a combined total of 3,242 cars oranges shipped from the Rio Grande Valley of Texas into its marketing area. Hurricane Beulah, which occurred in September, 1967, reduced the Texas orange crop this season to 1.9 million boxes but there has been shipped from the Rio Grande Valley of Texas 4,580 cars of oranges of which 2,319 cars originated in Texas and 2,261 in Mexico, or about 40 percent more than the total shipments last season. Were it not for the December, 1967, freeze in California which re- duced its crop and the much smaller crop occurring in Florida this season, the percentage of parity received by Texas growers would have been much lower. SuMMARY AND RECOMMENDATIONS The domestic producers of citrus fruit, faced with constantly increasing costs, cannot successfully compete with the foreign producers due to the vast differ- ential in costs of production and a wholly inadequate tariff. Larger plantings of citrus are occurring in foreign countries each year and production will vastly exceed their ability to market in their own countries this increase. The domestic producer of Texas citrus fruit is and has been receiving far below parity for his fruit. Mexico has closed its borders to citrus fruit produced in the United States while increasing its exports of citrus fruit to the United States. This action will continue to drain dollars from the United States and force the domestic producer of citrus fruit from his traditional markets. It is recommended that action be taken to establish a tariff which will fairly represent the difference in costs of production experienced in the United States and in foreign countries or a quota system instituted of the type embraced in H.R. 16416 referred to as the Fresh Fruit and Vegetable Market Sharing Act of 1968 which has been referred to this Committee. Unless such action is taken immediately, the domestic market for citrus fruit will be disrupted by constantly increasing citrus imports from foreign areas whose wage scale, costs of produc- tion and standard of living are far below those existing in the United States. STATEMENT or ALBERT E. MERCKER, ExEcuTIvE SECRETARY, VEGETABLE GROWERS ASSOCIATION or AMERICA The Vegetable Growers Association of America was founded in 1908 and has a membership of approximately 3,000 small vegetable growers in 35 States and 32 affiliate Associations in 30 States. We wish to bring to the attention of the Committee the impact that the im- port of vegetables and strawberries makes upon the United States producer and the labor used to produce those crops. We can not cite all of the impact of these imports on all vegetables but this statement relates to specific informa- tion we do have with respect to imports of fresh tomatoes and fresh and proc- essed strawberries. These producers feel the impact because of their curtailed market outlets and the effect that the competition has upon their prices. The importation of tomatoes is felt very seriously by the producers of green- house, winter, early spring and late spring seasonal tomato crops. Therefore, we support H. R. 16416, The Fresh Fruit and Vegetable Marketing Act of 1068. This bill would permit the market sharing arrangements with other countries as was pointed out in the statement by the Honorable Orville L. Freeman, Secre- tary of Agriculture, with respect to an arrangement made by the Department of Agriculture in supporting "the enactment of a meat import law of 1964 (Public Law 88-482)". This law does not impose quotas but it sets a target which imports can not exceed in any year without "triggering" quotas. Strawberries-In 1963 we imported 3,794,000 lbs. of fresh strawberries and 34,550,000 lbs. of processed strawberries, making a total of 38,344,000 lbs. In 1967 we imported a total of 21,736,000 lbs. of fresh strawberries or 570% of the fresh strawberry imports of 1963. Imports of processed strawberries amounted to 74,659,000 or 201% of the imports of 1963. PAGENO="0647" 5087 The impact on the American producers of strawberries is tremendous but there is also a considerable impact on the labor used in harvesting the straw- berries. The increased imports have reduced the acreage planted to straw- berries in the United States from 80,070 to 67,020 acres planted in 1967, a reduc- tion of 13,050 acres. The background material for U. S. Department of Agriculture Statistical Bul- letin No. 233, "Changes in Farm Production and Efficiency" states that in the United States an average of 703 man hour per acre were used annually for the production, harvesting and the processing of strawberries in 1954. It is estimated that 670 man hours per acre were used in 1959. Applying the 670 man hours per acre data to the 13,050 acre reduction, we have a loss of 8,743,500 man hours of employment by the strawberry industry, due to the reduction in acreage planted in the United States because of the impact of imports. This is only a partial picture for one must take into consideration the effect of these imports on the lessened use of the packaging, packaging materials manu- factured and other allied industries concerned with this industry. Tornatoes.-In 1963 there was imported into the United States 249,216,000 lbs. of tomatoes which compare with 389,571,687 lbs. imported during the 1966- 67 season, an increase of 59,644,313 lbs. or 56% in this short period of time. The imports of these tomatoes during the winter and spring months had a terrific impact on the prices received for winter, early and late spring tomatoes produced in the United States. In fact, prices reached such a low level in December 1967 that the U. S. Department of Agriculture announced a plentiful food pro- gram for tomatoes in order to increase fresh tomato consumption. The importation of tomatoes also had an impact on our labor situation with respect to the number of persons employed in the production of and the market- ing of tomatoes, in that we had a reduction of 12,400 acres planted to tomatoes between 1963, when 62,850 acres were planted, and 1967 when 50,450 acres were planted. According to U.S. Department of Agriculture Statistical Bulletin No. 341, "Labor Used to Produce Vegetables", 186 man-hours were used to produce an acre of tomatoes in 1959. In other words, the reduction in man-hours employed amounted to 2,306,400 man-hours. Again, we want to emphasize that the importation of these strawberries, to- matoes, and other vegetables, not only creates a hardship for the American pro- ducer but it also is curtailing the employment of labor in connection with the production of these commodities and contributing to our unemployment situation. The vegetable industry does not have any price support programs nor has it ever asked for such and no requests for assistance are contemplated. However, the potential of increased production in Mexico of fruits and vegetables is so great that in years to come the producers of greenhouse products, winter, early and late spring vegetables and fruits, may find their competition from those low cost labor producing areas becoming extremely burdensome, resulting in greater losses to our producers. On behalf of the Vegetable Growers Association of America I want to take this opportunity to express to the Committee our appreciation to state our ease and we trust that you will seriously consider the plight of the fruit and vegetable growers of the United States of America. STATEMENT OF THE U.S. Da~ PEA AND LENTIL INDUSTRY RECOMMENDATIONS This industry recommends to the Committee that every effort be made to relax and eliminate trade barriers between the United States and all other countries wishing to enter into buying and selling relationships with the United States. This industry believes that freer trade, not more restrictive trade, is the cornerstone of our future well~being, both in the agricultural and industrial spheres. Believing this, the industry raises its voice as one to oppose those who would again build walls of protectionism, be they in the form of quotas, duties or any other special measures, labeled differently but just as negative. PAGENO="0648" 5088 VOICE OF THE DRY PEA AND LENTIL INDUSTRY The following organizations sponsor and support this statement. Thus joined, these six organizations speak for 100 per cent of the United States dry pea and lentil industry. Washington Association of Dry Pea and Lentil Producers, Inc. Idaho Association of Pea and Lentil Producers, Inc. Washington Dry Pea and Lentil Commission. Idaho Pea and Lentil Commission. USA Dry Pea and Lentil Council. Pacific Northwest Pea Growers and Dealers Association, Inc. IMPORTANCE OF THESE COMMODITIES TO WASHINGTON AND IDAHO More than 5000 producers and 40 companies are involved in the growing, proc- essing and selling of U.S. dry peas and lentils. Additionally, railroads, trucking firms, dock facilities and steamship companies also have a stake in the well-being of the industry, as they play an important role in movement of product from producer to ultimate consumer. At the country level these commodities are rated as having a gross value of between 25-30 million dollars. Processing, shipping and handling would increase this amount substantially. These commodities are significant additions to the agricultural well-being of both Idaho and Wash- ington. IMPORTANCE OF EXPORTS TO THIS INDUSTRY The key to success of this industry lies in exports. More than 65 per cent of all the dry peas and over 80 per cent of all the lentils produced in the United States are sold overseas. All sales are commercially made for dollars. Dry peas and lentils are a worthy plus factor in the U.S. balance of trade picture, and will continue to remain so unless buying countries are forced to initiate retaliatory measures to cope with the advent of new trade restrictions imposed by this country. AMERICAN MusHRooM INSTITUTE, Kennett square, Pa., June 26, 1968. Hon. WILBUR D. MILLs, Chairman, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR MR. MILLS: The American Mushroom Institute, representing mushroom growers and processors in the United States, urges you to favorably consider H.R. 16936-titled the Fair International Trade Act of 1068. Canned mushroom imports over the past six years have increased steadily to such a degree that now we feel the present domestic market is at its saturation point. This past season mushroom prices to the grower were at a low ebb and many are being forced to cease their growing operations. This undue increase of foreign canned mushrooms has and will continue to mutilate our price structure unless something is done about it. The per capita consumption of mushrooms in the U.S. (less than 1 lb.) has not increased sufficiently enough to warrant such an influx of this foreign product. We urge you and your Committee to look favorably upon H.R. 16936 and offer small industries such as the Mushroom Industry in the U.S., a chance to survive. Respectfully yours, RONALD B. HUNTE, Ecvecutive Director. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., July 1, 1968. Hon. WILBUR MILLS, Chairman, Ways and Means Committee, House Office Building, Washington, D.C. DEAlt MR. CHAIRMAN: The current hearings on tariff and trade proposals are producing much valuable information on the complex relationships between our country and other trading nations. I would like to call to the Committee's attention and make part of the official record a paper from the West Mexico Vegetable Distributors Association head- PAGENO="0649" 5089 quartered in Nogales, Arizona which is in the congressional district I represent. This is an association of 44 fruit and vegetable importers. The association study is impressive. It strongly contradicts the argument that domestic produce growers face cheaper costs than do their Mexican counterparts. This Mexican-grown produce is of great importance to our friendly neighbor, to the businessmen of the Southwest and to the housewives all over America. I hope the committee members will give this document careful consideration as it sheds considerable light on the importance of maintaining a relatively free flow of fresh fruits and vegetables across our border with Mexico. Sincerely, MORRIS K. UDALL. STATEMENT OF WEST MEXICO VEGETABLE DIsTRIBUToRs AssOCIATION, A. B. CONARD, SEcRETARY-MANAGER FACTORS TO BE CONSIDERED IN MOVES TO RESTRICT THE IMPORTATION OF PRODUCE FROM MEXICO The West Mexico Vegetable Distributors Association of Nogales, Arizona, com- prised of 44 member distributors, engaged in marketing and nationwide distribu- tion of fresh fruit and vegetables in the United States and Canada all of which are imported from the West Coast of Mexico, in an effort to clarify our position with regard to moves on protectionist type legislation and bills pending in the Congress and foreign trade policies in general, wish to present the following views and facts for consideration and for the record. It has become quite evident to us that the principal objection offered and con- tinually brought out by domestic producers in the United States is the statement that goods or products produced in foreign countries, where the cost of labor is admittedly less than wages paid in our country, are being imported in increasing quantities and that domestic industries and workers are being injured by what they term unfair competition and the claim that foreign products can be im- ported at a fraction of the costs they are faced with. We believe it is important to recognize that there are more considerations in- volved in our trade policy and in the objections being raised by American pro- ducers than the relative wages paid workers in a particular industry here and in other countries. We, therefore, will undertake to not only clarify labor cost factors in our particular industry but also discuss some of the other considera- tions that must be included to round out the total picture of what is involved in the importation of our products and the cost of delivering these products to the American markets. Labor Costs: As for the question of just how cheap labor really is in Mexico, it might be well first to cover some of the fringe benefits and other programs which are related to labor and the overall costs beside the salaries themselves. The Growers Associations are taking an enlightened outlook toward the labor force through two separate programs. One, run in conjunction with the experi- mental farm system, is designed to produce skilled workers to handle increas- ingly complex farming methods. They maintain a special school and share costs half and half with the government at the Cullican valley's experimental station. It is a special six months course to train foremen and field supervisors, tractor and machinery operators, and other skilled people they need. The people who come out of these classes are assured of permanent jobs at much higher wages, 40 pesos or more, compared with the prevailing of 25 pesos, on the bigger farms. Since the large vegetable farms need workers all year round the Associations have also undertaken a basic farm housing program. The vegetable exporters ~pay a special assessment on each box shipped and put aside a special parcel of land on their property. The landis used for housing and the fund pays half of the cost of construction; the worker pays the other half and owns his own home. These projects create a family type permanent labor force such as the California vegetable shippers are trying to establish with their individual housing programs. The adults-men and women alike-work in the fields thrOugh the growing season and then a part of them move to the packing houses while the remainder handle the harvest. The work in the packing houses is easier and better paying than the field work. The packers, nearly all of them women in the Cullican area, are paid on a piece rate of 45 to 50 centavos per box of tomatoes while the other shed workers are paid an hourly rate of three to four pesos. Good packers earn wages, which by Mexixtn standards are fantastic-12 to 20 pesos per hour with the 95-159-OS--pt. 1O-42 PAGENO="0650" 5090 possibility of even higher earnings on double pay overtime. Based upon this it can be seen that beside the actual cost of labor the cost of housing and training of the workers is considerable. Beside this there is a cost for schools, not only for the training of labor, but the cost of education for the children of the workers as well. The cost of building and maintaining these schools is borne by the growers with teachers furnished by the government. Added~ to this is the cost of land~for housing plus half the cost of the actual house and the fact that some personnel are paid on a yearly basis even though the season is of six months duration. During the peak of the season many of the workers are brought in each morning from as far away as thirty to fifty miles and returned to their homes each evening, which is expensive as many of the growers in the United States who have to haul their workers for these distances very well know. It should be pointed out that from the standpoint of output the Mexican worker is inferior to the farm labor in use in the United States and that it takes several of the Mexi- cans to equal one of the workers normally employed in the U.S. Equipment costs: Another very important cost factor to be considered is the cost of the equipment required in the growing of a crop in Mexico. These costs are exorbitantly high. This is an area where the U.S. grower enjoys a tremend- ous advantage. The government program on machinery and auto imports puts purchase prices for trucks, tractors, and parts 60-100 per cent higher than the U.S. prices. For a pick-up truck the U.S. farmer can buy in the U.S. for $1,800.00 to $2,000.00 the cost in Mexico may run $3,200.00 Dls. and added to this the approxi- mately 40 per cent higher cost for autos, cultivating equipment and tractors plus the 30-40 per cent additional cost for parts and the fact that each grower has to practically carry his own inventory of spare parts for repair and maintenance, because there is no telephone to reach to call the non-existent dealer a few blocks away as is enjoyed by the American farmer. Packing materials: The American farmer has another distinct advantage when the packing material factor is considered. In the U.S. the material, or shook handlers, set up their own box making machinery, or independent opera- tors make contracts for making up the boxes at the shippers shed, and the sup- pliers call on the shippers every day or so to see what materials will be required, with the shipper being billed at the end of the month for the supplies he has al- ready used. In Mexico, this is not possible and the grower has to purchase at least half or at times his entire requirements for the season even before the crop has been fully planted. In the case where a Mexican shipper who ships half a million or more packages during the season, and most of the large operators gen- erally have all needed materials on hand before the season starts for which their costs are the same as in the U.S. and in Mexico, the terms are cash on delivery. This involves a large investment plus extra warehouse space for storage. Production and packout: In this area we will endeavor to point out some of the factors involved as to the reason for less production and packout than can be realized by a grower in the U.S. In the case of Tomatoes, which is the principal vegetable produced for export, the average production on the West Coast of Mexico is 1,500 boxes per hectare which at 24 pounds per box results in 14,400 kilos or 36,000 pounds per hectare or 14,400 pounds per acre of exportable toma- toes; While the production could reach as high as 25,000 kilos it would have to be with the addition of the culls. However, Mexico does not have the market for second grade tomatoes or culls that prevails in the U.S. due to the fact that~ex- port and import duties, freight and other charges make it prohibitive. For this reason the growers associations in Mexico establish and maintain a strict quality control which permits only shipment of first quality fruit resulting in the pack~ ing of only 30-45 per cent of the fruit picked, which in some cases may only be 25 per cent but perhaps will average 40 or less. The balance of 60 per cent or more, classified as culls or No. 2's are sold on the domestic market at from 8.00 to 12.50 pesos (.64~ to $1.00 U.S. Cy.) for a 65 to 70 pound crate. This price includes the cost of the crate which is a very crude container costing around 4.00 pesos (.32~ Ti'S. Cy.). It can readily be seen that this is far from being a profit- able operation. The growers associations in Mexico have placed a great deal of emphasis on high quality and as a matter of fact the export quality and grade restrictions are higher than those specified by the U.S. Department of Agricul~ ture in their import requirements. Penalties are imposed on the growers for vio- lations which are enforced by the representatives of the Associations at U.S. ports of entry. The growers in the U.S., if one considers the factors mentioned, can realize a far greater production and resulting packout and are in a position to find a m~trket for their No. 2's in far greater returns. PAGENO="0651" 5091 Duties: One very important cost factor is the matter of American import duties, which on tomatoes ranges from 1.5~b per lb. during December, January and February to 2.1~ per lb. during the heavy shipping season. On the basis of 22 to 24 lbs. per two layer flats this amounts to approximately .46~ per flat or approximately .70~ per three layer lug of 33 lbs. Statistics show that Mexico ships more or less half each two layer flats and three layer lugs which will aver- age roughly .580 per container for American duty. This is in addition to approxi- mately 5~ per lug for Mexican Export Tax. This of course is a cost that Ameri- can growers do.not have. Freight costs: A most important cost factor which should not be overlooked is the transportation freight costs from the shipping point in Mexico to the U.S. border. From the Culiacan area which is 600 miles south of Nogales, Arizona the freight amounts to $520.00 U.S. Cy. per trailer, which on a load of half each flats and three layer lugs will average around .430 per package U.S. Cy. As freight to the middle West and eastern destinations in the U.S. is the same from either Nogales, Arizona or California, the California farmer would have another .43~b per lug advantage. From the standpoint of a shipper in the State of Florida, he would likewise have an advantage due to the shorter distance and less freight costs to the large metropolitan cities and distribution outlets in the U.S. It has been estimated by many that the American farmer can grow an acre of tomatoes for what it costs the Mexican farmer in American duties, Mexican duties and freight from growing areas to the border alone. Border crossing and handling charges: In this area we again have costs which the U.S. grower does not have. The handling of the crossing of a shipment of vegetables from Mexico requires the services of both a Mexican Customs House Broker and an American Customs House firm. They naturally charge a commission and take care of all the necessary paperwork and labor involved in getting a load cleared through the various inspections they must undergo. Some of the expenses covered by the Mexican Customs broker for the shippers account are Mexican Federal Export Taxes, Confederation charges, Production Taxes, Association fees, truck compound parking fees in addition to their commission. As for the American Custom House Broker who takes over the task at the point of entry as far as clearance through the U.S. Customs is concerned he of course makes a charge for commission and in addition pays the U.S. Import duties for the shippers account along with labor charges for Inspection in Nogales, Mexico and in Nogales, Arizona, plus a charge for entry documents and certificates of inspection. Marketing and distribution: During the primary shipping season from the West Coast of Mexico (November-June) the only large source of fresh tomatoes for the U.S. and Canada are Mexico or Florida. Each year the USDA Con- sumer and Marketing Service publishes a report which shows totals of fresh fruit and vegetables unloaded in 41 key cities of the U.S. These figures do not show total movements from origins shown however, they do provide the best nationwide information that is available which indicates sources of supply for the various commodities. These cities represent over 60% of the total popula- tion living in urban areas. It was found that 71.1% of the population of these 41 cities lives east of the Mississippi River. 28.9% live between the Mississippi River and the West Coast. This same report showed that of the total of 37,729 tomato unloads in 1966, 11,436 or 30% came from Florida, 11,329 or 30% came from California, 6,259 or 16.5% came from Mexico and the rest, 23.5% came from many other areas of the U.S. When this is further reduced to a seasonal study and we take into consideration only the period of November to June, Florida and Mexico are the only important sources of tomatoes. During 1966, 82% of all l~fexican tomato unloads went to cities west of the Mississippi. Only 18% went east of the Mississippi. That same year, 90% of all Florida tomatoes went east of the Mississippi River with. 10% shipped to areas in the West. In view of these facts it becomes clear and apparent that we are not in competition with Florida shippers. Simply, Mexican tomatoes supply the west. Florida tomatoes supply the east. Summary and conclusions: It cannot be denied that statistics show a sizable increase in the last ten years of imports of fresh fruits and vegetables from Mexico for consumption in the U.S. and Canada, however, it is a well known and established fact by those in the industry that the production of fresh fruits and vegetables in the U.S. during the winter months, when West Mexico is in production, will not begin to supply the domestic needs and were it not for PAGENO="0652" 5092 imports from other sources outside U.S. the American public would be subjected to either the choice of paying exhorbitant prices or going without fresh produce. It is important to note and we well knw that when producing areas in the U.S. are in heavy supplies, imports are prohibitive and West Mexico cannot compete. We have found from many years experience that it would be useless to try and impose quotas or limit imports of fresh fruit and produce because in the case of Mexico, the law of supply and demand in the U.S. automatically regulates the volume that can be shipped from Mexico and still show any kind of a profit. At times of the year when fresh produce is plentiful in the U.S. we automatically remain out of the picture and can only market our products during periods when domestic production in the U.S. is low. It is at these times we can come in and fill the gap. An important controlling factor contributing to the supply and demand is weather conditions both in the growing areas and in areas of distribu- tion as well. We would like to make a point which relates to all the attempts to restrict the importation of foreign goods and particularly those aimed at curbs to reduce the importation of fresh fruit and vegetables from Mexico. It is true that labor in Mexico is paid considerably less than labor in this country. But with tariffs and all of the other charges and factors we have mentioned the delivered price of Mexican produce is actually higher than that of the produce grown in the State of Florida and it is important to consider that it is only in Florida that this produce finds any competition during the winter months when it is put on the market. Why, then, should there be any objection to the importation of this produce? The answer lies, not in the cheap foreign labor, but in the additional competition provided by abundance. If the housewives of America had fewer tomatoes, cucumbers, stringbeans, peppers, peas, eggplant and other fresh vege- tables to choose from, they perhaps would be willing to pay more for them which is perhaps what the only state in America producing when we are in production would like to see happen. If this is what they are seeking and pushing for, then it becomes evident that their motives are selfish and what they really want is a greater profit with utter disregard for the consumer. We never have had a commodity control program in fresh produce and we sincerely hope we never do get into that. We also hope that the U.S. Government will not attempt to re- duce production by the arbitrary cutting off of Mexican produce particularly through a wholly false appear to the impact of "cheap foreign labor" on our domestic economy. Finally, we believe it should be brought out that domestic producers have claimed that foreign imports and competition is causing unemployment in some industries and areas and with respect to this we might mention that while Mexi- cans grow, pick and pack our produce in Sonora and Sinaloa, Mexico, American workers are provided jobs in Arizona and throughout the U.S. and Canada and many are dependent on these jobs during our shipping season. Jobs are provided in the U.S. through the sale of farm equipment, fertilizer, insecticides, pesti- cides, seed and other American products used in the growing of this produce. Many other Americans are employed in allied industries in the shipping and handling of the produce on its way to the markets, such as rail and truck trans~ portation lines, in the terminal markets, brokers, commission merchants, chain stores and markets. We should not lose sight of the relative advantages enjoyed by the jobs we gain in turn. The U.S. Government is also realizing a revenue as a result of these importations and the Arizona Customs District, the records show, collected during the fiscal year ending in June of 1967 $12,399,123.81. Grow- ing and prosperous America sorely needs this offseason supply of foodstuff, especially during the winter season when domestic production is insufficient in quantity. The Mexican crop fills a vital need. VINYL MAID, INC., West Springfield, Mass., June 17, 1968. Hon. WILBUR D. MILLS, Longworth House Office Building, Washington, D.C. DEAR SIR: This letter is in support of the following bills soon to be considered by the House Ways and Means Committee: H.R. 11247; H.R. 11286; and H.R. 11743. These bills concern the import and tariff of packed olives. I am a small businessman supplying containers to the olive packers on the East Coast. My business is in jeopardy due to the present unfair tari~ schedules on PAGENO="0653" 5093 packed olives. I strongly urge you to take positive action with respect to correct- ing the unfair tariff schedules which allow Spanish olive cartels to package, label, and ship to the United States, and sell the packed olives for less than they can be packed here at home. This is grossly unfair to the American businessmen and to the American con- sumer. In addition, in the area of consumer protection, the U.S. standards for quality are something of which we can be justly proud. We have inspectors and established packaging procedures~ to protect the American consumer; we have little or no control over packaging procedures used outside of this country. WTould you please vote in favor of these Bills and correct this unfair tariff schedule. Thank you very much. Very truly yours, WENDELL B. SHEARER, President. STATEMENT OF ROBERT C. LIEBENOW, PRESIDENT, CORN REFINERS ASSOCIATION, INC. The Corn Refiners Association ~is a national organization of the American wet corn milling industry. Members of the Association operate 12 plants in Illinois, Indiana, Iowa and Missouri. Our industry is the Nation's largest food and indus- trial user of corn, America's most important single crop. Its purchases of corn throughout the year are a major factor in maintaining farmers' prices in the cash corn market. Our members' products-principally corn oil, starch, corn syrup, corn sugar (dextrose) and other starch derivatives-are used throughout American indus- try, particularly in the manufacture of paper, textile, food, drugs, and adhesives. They are also essential to national defense. They are used in the manufacture of explosives,~ airplane engines, tanks, shells, and hand grenade casings. They are used in missiles, uniforms and mess kits and are a part of every meal a serviceman eats from the barracks to combat rations in the field. The Association supports expanded trade among all nations on a fair and equitable basis. It would point out, however, that a serious imbalance of trade can result where Our efforts to free trade are met with the barriers to trade erected by other industrialized nations. Exactly this situation now exists with regard to tapioca starch. We are the only major industrial nation that does not have a duty on the import of tapioca starch. This fact, coupled with the variable levy trade barriers of the European Common Market, creates here in the United States a kind of vacuum into which the world's output of tapioca starch has flowed in ever- increasing quantities. The tapioca starch thus imported competes directly with our domestic production of corn starch. This competition means that our trade with the few nations which produce tapioca is being financed through the profits and jobs of the American industrial firms affected. The duty free status of tapioca, tapioca flour and cassava (from which the tapioca starch is made) was bound into our tariff schedules by the GATT nego- tiations of 1047. Since that time imports of tapioca starch have increased by 300 percent from around 100,000,000 pounds in 1948 to over 300,000,000 pounds in 1967. The ten-year average of tapioca imports from 1958-1967 is more than two and one-half times the average of the previous ten-year period, and imports have exceeded 300,000,000 pounds in each of the last three complete years. The United States Tariff Commission investigation of the starch industry in 1959 demonstrated that the increased imports of tapioca starch had a telling effect on customers of the American corn refining industry. Open market sales of domestic corn starch to adhesive and dextrine manufacturers, for example, amounted to only about 20 million pounds in 1958. This was just slightly more than the amount of imported starch sold to such manufacturers.1 These losses occurred despite the fact that the American wet corn milling industry had achieved a high degree of efficiency and ability to compete. Thailand is currently the principal exporter of tapioca starch. (U.S. Tariff. Commission Summaries of Trade and Tariff Information, Schedule 1, Vol. 6, 1966, p. 139.) Brazil is the second niajor supplier of the product, but many less- developed nations have the potential to produce tapioca starch-notably 1 United States Tariff Commission Report on Starch, Investigation No. 332-37, March 1960, p. 38. PAGENO="0654" 5094 Indonesia and several countries in Africa. Prior to World War II, Indonesia was the world's major tapioca starch exporter and with the return to political and economic stability, Indonesia could export even more tapioca starch than Thai- land does now. Because domestic starch industries in Europe are sheltered by high tariffs and variable levies, any increase in tapioca exports from these coun- tries must inevitably flow to the United States. European protectionism has become an even greater obstacle in recent years because of the movement to a Common Agricultural Policy (CAP) within the European Oommon Market. The CAP has significantly stiffened barriers to tapioca starch imports throughout this six-nation area. It provides nearly com- plete protection for farmers in the EEC by using a variable levy system to elimi- nate the competitive price advantage of imported agricultural products. The levy system even applies to products the EEC does not produce, if they compete in any way with domestic production. All tapioca products, therefore, are sub- ject to the levy system, some-notably tapioca starch-receive higher levies than others. These levies contain a variable component that is calculated to offset the dif- ference between the price of the imported product and the price of the competing Common Market product. (Regulation No. 160/66, Trading System for Certain Goods from the Processing Agricultural Products, Official Journal No. 195, Oct. 28, 1966, p. 3361, as subsequently amended.) As a result of this new EEC- wide system, some member countries have recently raised their duties on tapioca and tapioca starch. As of February, 1968, the total EEC levy on tapioca starch was equivalent to 58 percent ad valorem 2-a striking contrast to the duty-free treatment accorded tapioca starch imports into the United States. Also the EEC levy can be raised still further, if necessary, to continue to keep out Thai and Brazilian exports of tapioca starch; The member countries can raise the tapioca starch levy if the c.i.f. price of tapioca starch declines, or if internal grain prices are increased. In Japan, also, a potential market for tapioca `starch is `blocked because the gov- ernment strictly controls tapioca starch imports through the device of import licenses. Japanese imports of tapioca starch were negligible until the past few years, and even now they are a small fraction of the volume of U.S. tapioca imports. The remedy which the United States `should pursue in this and similar cases seems clear enough. Its negotiators should have the authority and responsibility to negotiate the removal of unreasonable foreign tariff barriers, and this au- thority should be strongly backed up in our tariff laws. Considerations of basic fairness dictate that American industries which have absolutely no tariff protection against imports should have the assistance of the United States Gov- ernment in seeing that other countries are not able to take unfair advantage of us. In addition, and equally important, this approach is consonant with two funda- mental goals of the United States: expansion of free world trade, and greater access to foreign markets for products of less-developed countries. The United States has long maintained that the welfare of the less-developed countries de- mands a universal reduction in tariff barriers blocking their exports, rather than in preferential trade arrangements and reduction in duties by only some coun- tries. This policy should be applied here. The American corn refining industry has been seriously disadvantaged by the flood of tapioca starch imports. Our industry has borne the brunt of a unilateral free trade policy in the face of contrived protectionist trade barriers abroad. We are hopeful that this situation can be relieved by reducing other countries' duties. If it cannot, and if tapioca starch imports into the United States continue to rise, the only fair solution would be to either impose a duty on tapioca imports as we have done on all other major competitive starch imports or to adopt a quota for such imports. 2 Ci.f. prices European ports from Thai tapioca starch in February, 1968, was $136.40 per metric ton. The tapioca starch levy, which is based upon the corn levy, was $79.19 per metric ton. This levy as a percentage of the c.i.f. price is 58 percent. The tapioca starch levy is calculated as follows: First, there is a fixed element of $17.00 per metric ton. Second the variable element as required in the Common Agricultural Policy regulations is 1.61 times the corn levy for the particular month in question. In February the corn levy was $38.63 per metric ton. This times 1.61 yields a variable element of $62.19 per metric ton. The sum of these two elements-$62.19 and $17.00 per metric ton yields the total levy, of $79.19. ` PAGENO="0655" 5095 NIcHoLsoN & Co., INc., Cambridge, Mass., June 24, 1968. Mr. JOHN M. MARTIN, Jr., Chief Counsel, Committee on Ways and Means, Longworth House Office Building, Washington, D.C. GENTLEMEN: We are submitting our written views to be included as a part of the record of public hearings, which will be conducted by the Committee on Ways and Means on the general subject of tariffs and trade proposals. We are identifying ourselves as the largest United States importers of Glue, Inedible Gelatin, and Animal Glue ~valued under 40~ lb., Tariff Item 455.40. We are also importers of large quantities of the following dutiable items :-Dextrine, Vegetable Glue, Fish Glue, and Edible Gelatin. In previous hearings before the United States Tariff Commission and the Trade Informatien Committee, we have constantly asked for a reduction in the duty on Tariff Item 455.40. The simple fact is that the duty on this item, even after considering the full effect of a 50% reduction due to the Kennedy Round, which supposedly will be effected in 10% increment cuts per year over a 5 year period, is still too high. About 25 million pounds of Inedible Gelatin are imported into the United States each year, in relationship to a domestic production of approximately 90 million pounds. The fact is that the imported quantities in- volved do not impose any threat to domestic production, and that most of the qualities involved are not even produced in the United States due to insufficient production facilities and lack of raw materials. The imports of Item 455.40 are an augmentation to domestic supplies, and our records show that we sell approxi- mately 5 million pounds yearly to domestic glue manufacturers. It has always been our contention that the duty on this commodity should be abolished. We also recommend, and have recommended on several occasions, that the duty on Fish Glue valued ufider 40ç~ lb., Tariff Item 455.36, should be eliminated. This product is not even produced in the United States and is used as an additive in the manufacture of gummed sealing tape, a very basic industrial packaging product. The result of the duty on Fish Glue is that the increased cost is passed along to the manufacturer, and ultimately to the industrial user, and finally to the consumer. We think it is hardly fair for duties to be continued on a product which is not even produced in the United States. As regards Dextrine, Tariff Item 493.3000, the current specific duty is 3.0~ lb. This highly prohibitive rate was established as a result of the "Chicken Tariff War", and in spite of the settling of the Chicken Affair, and the beginning of duty cuts as a result of the Kennedy Round, this item was left unchanged. One of the primary sources of Dextrine is Holland, where special qualities of Potato Dextrine are manufactured and exported to the United States. These types of Potato Dextrines are not produced in the United States, and United States manufacturers of Starch and Dextrine are not even interested in manufacturing them. The amount of Dextrine coming into the United States is still increasing, in spite of the prohibitive duty, and it is being brought in by United States manu- facturers as well as converters like ourselves. The product is definitely needed here because of its special qualities, and again, the only result of the highly prohibitive tariff rate is that the ultimate consumer pays more for his product. Clearly the above examples show in effect, that once the United States Govern- ment establishes a duty, it is practically impossible to get the rate changed, and the Government seems to ignore the specifics of a given tariff item, plus the needs and problems of the importer and the ultimate user. There is no doubt that some systm of regular review should be established, and that interested parties should be allowed to present their views. Then the Tariff Commission, in the best interests of the United States, should be able to make the decision to modify or eliminate the duties where applicable. The Congress is generally concerned with Legislative matters of far greater importance, and should transfer the responsi- bility for tariffs to an Administrative Agency. Naturally, we must confine our comments only to products which we are~ intimately familiar with, and we hope you will see the parallel in other indus- tries when you consider all of the information which you receive. If there is any further specific information which you wish us to submit, we will be happy to provide it on your request. Very truly yours, JOHN E. MURRAY. Jr., Vice President. PAGENO="0656" 5096 CHURCH OF ST. TERESA, THE LiTTLE FLowEa, Munhail, Pa., June 3, 1968. WAYS AND MEANS COMMITTEE, House of Representatives, House Office Building, Washington, D.C. DEAR CONGRESSMEN: Regarding the discussion which you are or will be con- ducting regarding tariffs and import quotas, I would like to express my rather strong opinion against any imports or tariffs. This is no time for an isolationist policy or for self-seeking. This is no time for this, and I really thought that we had gotten beyond this stage where we iust think of ourselves. I would hope that you will act in accordance with these wishes. Sincerely yours, Fa. JOHN OESTERLE. SAN FRANcISCO, CALIF., May 22, 1968. WAYS AND MEANS COMMITTEE, House of Representati'ves, House Office Building, Washington, D.C. GENTLEMEN: According to press information, I understand that you will begin committee hearings on Tuesday, June 4th, relative to the Balance of Trade between the United States and foreign nations. As a citizen of the United States, I should like to go on record as favoring free trade and as low a schedule of tariffs on importations as possible. My understand- ing is that numerous groups and vested interests in the United States are actively furthering a movement to increase tariffs and thus discourage the import of products which they consider are in unfair competition. Such moves, in my esti- mation, could easily lead to a repetition of the injurious tariff conditions brought about in the United States by the passage of the Smoot-Hawley tariff act of 1930. We have been gradually approaching a state of freer trade throughout the world and I believe entirely to the benefit of world economic and political con- clitions. Let us not change this trend. Sincerely, GERRIT P. VANDER ENDE. STATEMENT OF OLIVER WILLIAMS, NEW YORK, N.Y., TRADE FOR A FREE WORLD SUMMARY OF RECOMMENDATIONS 1. Stop our Reverse Tariff Import Subsidy. Cease pegging the price of gold and foreign currency. This would make the Balance of Payments even. 2. Refresh our national thinking about trade by changing the official designa- tions "Favorable" and "Unfavorable" Balance of Trade to "Export" and "Im- port" Balance of Trade. 3. Proceed on a unilateral program of free trade. The best move for anti-com- niunism would be a doubling of American farm production in trade with our hungry potential customers around the world. COMMENT 1. Balance our international payments An influential opinion on trade is the statement of July 9, 1968 by the Senate Finance Conimittee that "the-growth in steel imports is-a threat to-our bal- ance of payments." Our international payments would balance promptly if we ceased controlling the .price of gold and the rates of foreign exchange. Milton Friedman has pub- lished a revealing analysis of this. We have not attempted to control prices within the country, by edict, and the average price level has more than doubled since 1934. In that year we arbitrarily set the gold value one dollar at one thirty- fifth of an ounce of gold. In 1944 foreign money rates were pegged on the same base. If we had let gold alone, a dollar would now buy much less gold, just as it buys less of other things. It would buy less foreign money and foreign goods. PAGENO="0657" 5097 The recent great outflow of our gold-not a loss but a sale-indicates that we are forcibly overvaluing the dollar abroad, in effect subsidizing imports of steel and other products in a "Reverse Tariff" process. This underpricing of imports is increasing the demands for quotas against goods from overseas. To give in to these voices would bring retaliation. This would hurt some of our most profitable industries, those which have the advan- tage of capital rather than handwork-machine aided production at a low cost- per-unit and with high wages-per-hour. Tractor harvested wheat is an example of such output. Karl Hobson of Washington State University spoke on the situation on Decem- ber 12, 1907, before the annual meeting of the American Farm Bureau Federa- tion. He said that foreign customers take more than half of our wheat, that we are in danger of losing most of this market and that this could spell financial ruin for most of our wheat farmers. It would be unwise in the extreme for the United States to further obstruct trade, to enact a travel tax which might ruin the hotel business of our European hosts, to deflate segments of our own economy by high interest burdens-to risk causing world-wide unemployment-just to postpone a crisis of truth about the value of the dollar. The dollar represents the strength of American productivity. It is worth a great deal. We do not need to pretend that it can buy as much gold as it could thirty-four years ago. 2. A new viewpoint for trade Foreign money is valueless to us if we do not use it. The benefit of exports is in the goods and services received in exchange for them. As Howard S. Piquet, Chief International Economist of the Library of Congress, pointed out on June 5, 1908 at a conference sponsored by the Committee for a National Trade Policy, every mature investing country will receive more merchandise than it sends away if it is to get returns from its overseas holdings. We mistake the benefit of trade if we reach for the yardsticks of foreign money while barring the yardage of tangible goods from abroad. Let us adopt a fresh attitude-that of the Yankee traders. It would help us succeed if we changed the official designations "Unfavorable" and `Favorable'~ Balance of Trade to simply "Export" and "Import" Balance of Trade. 3. Free trade for a free world Many thousands of Americans and countless Vietnamese have died in a war which is ostensibly being fought for freedom. Yet we will not accept things which the Vietnamese can make in free exchange for the American products which they need. We acquiesce in the economic defeat of curbing our wheat production. We are apathetic about our failure in world leadership to give undeveloped countries a chance to feed their starving peoples and work their way out of communism or dictatorship. Let us increase the parity price of a bushel of United States wheat by lowering the tariff-increased cost of the things from overseas which our farmers could buy. Instead of taxing ourselves to limit crops let us aim to double the number of bushels which we harvest. Our industries could supply the road-making machinery and the water-works for a self sustaining world with free trade to phase out aid. We must break the deadlock of fear of an unlimited wealth of imports by removing our trade barriers unilaterally, confident that others will follow our demonstration of the success of free enterprise. First, however, we must end our pegging of the rates of exchange of dollars and foreign money. Otherwise we would not be allowing a shortage of foreign money exchange to dampen two-way trade with countries keeping up barriers against our goods. We would be paying a subsidy to force trade over these barriers. As Henry C. Simons wrote, tariff legislation is politically the first step in the degeneration of popular government into the warfare of each group against all. Against the tariff, all other forms of "patronage" seem minor. American protec- tionism is the utterly unrealistic prescription for the future. If we try to main- tain it, it will drive other nations into wholly different schemes of commercial policy which in turn will produce radical changes here. The collectivist trading of national monopolies is essentially a power contest, imperialist in the worst sense, and conducive to lower real income and militarism everywhere. If we, as the leading power, let the world go that way, we must organize for global economic war. PAGENO="0658" 5098 MEMORANDUM FROM WALTER HARNISCHFEGER, MILWAUKEE, Wis. With reference to the hearings of the U.S. Senate Committee on Ways and Means on the matter of tariffs and quotas, I am pleased to submit my reactions based on over fifty years of experiencein themanufacturing industry. * It is my considered opinion that our entire Tariff Act should be revised and we should withdraw our membership in GATT as I believe that our membership in it is unconstitutional. Furthermore, our tariff administration should be taken out of the hands of the Executive who does not have the necessary time to do an effective job and should be taken out of the State and Commerce Departments. It should be supervised by a nonpartisan tariff commission who would have full power to act promptly on all fundamentals. Furthermore, all tariffs should be set industry by industry after hearings by experts who know costs and trading conditions. Any industry that wants and can live under free trade should have it. By the same token, particularly those industries which have a high labor content should have reasonable protection. One of the most serious matters in connection with GATT is that it is being administered by people who have had very little practical experience in the manufacturing industry, and secondly, they average commodities and manufac- tured goods which results in a dislocation of one industry after another. Further- more, most of the countries that are involved in GATT are setting up restric- tions in many areas against American exports. I believe in international trade. By the same token, there must be some re- strictions, recognizing our high labor costs. It is impossible to put everything in one pot-a selective analysis by experts in industry is the only practical solution. With our present imbalance of trade and flight of gold, this is one of the most important matters which should have our immediate attention. BUFFALO, N.Y., May 15, 1968. JOHN M. MARTIN, Jr., Chief Counsel, Committee on Ways and Means, Longworth Honse OjJZce Bvilding, Washington, D.C. SIR: Repeated here is merely the summary of the submission appearing in the Senate Finance Committee Compendium on U.S. trade policies (February 7, 1968). Below are further remarks relating to the Brussels Definition of Value. SUMMARY Valuation of imported goods subject to ad vahorem rates; the Brussels defini- tion of "value." Commodity classification systems and the collection of statistical data on im- ports and exports. One system for both imports and exports. Administering the U.S. system of duty assessment. Consolidation of valuation and classification proceedings. Statute of limitations. Rules of evidence: Burden of proof. A uniform rule for valuation and classification. A look at some provisions of H.R. 18533 (The Customs Administrative Act of 1966), 89th Congress, second session. A look at some provisions of the Tariff Act of 1930, as amended, which are not treated by H.R. 18533. Sources: "Customs Valuation," Doe. 7500 (1960), Customs Co-operation Council, 40 Rue Washington, Brussels 5, Belgium. Volume 31, Federal Register, page 2878, February 17, 1966. Volume 101, Treasury Decisions, No. 7, page 81, March 2, 1966 (unbound pamphlet). Volume 171, United Nations Treaty Series, page 322. A criticism of the Brussels Definition is that "place" is "the port or place of introduction into the country of importation." Valuation being on the basis of C.I.P. place of entry, freight and insurance would unduly increase customs values. F.O.B. port of shipment is advocated. The criticism is a cogent one, in view of the existence of the Atlantic and Pacific Oceans on either side of the United States. PAGENO="0659" 509*9 Hence, Article 1(2) (a) of the Brussels Definition, in the United States, would read, "(a) that the goods are treated as having been delivered to the buyer at the port or place of exportation to the United States." With this modification, adoption of the Brussels Definition of Value is hereby recommended for the reasons set forth in the Senate Compendium. Yours respectfully, BEDRO5 ODIAN. Mr. HERLONG. This completes the testimony to be received in this hearing. During the course of the hearing the committee has received extensive testimony from more than 300 witnesses covering some 35 major industry groups. The first two volumes will contain testimony of the administration witnesses presented during the first week of the hearing. Subsequent volumes will contain the record for the balance of the hearing. The record of the hearing will remain open until the close of business Friday, July 12, 1968 and any statements to be submitted for the record or any material requested for submission should be submitted not later than the close of business on that date. Thank you. The committee is adjourned. (Whereupon, at 1 :13 p.m., the committee was adjourned.) (~) PAGENO="0660"