I must point out that the treatment of our import duties with one country at a time is largely a nullification of the policy of protection which I believe more than a majority of the voters and of the Members of Congress, except "spot-protectionists," subscribe to. And this, I think, would still be true under Senate ratification.

I did not finish my thought when I called your attention to 1929 and paragraph 1105. I wanted to bring that in to support my thesis that in voting on single items or paragraphs or single schedules, that even stanch protectionists are somtimes outweighed in their thinking about what they think are the peculiar conditions in their constituencies. Certainly all but two of the protectionist Senators from New England's wool-manufacturing States, voted against paragraph 1105 and the rag duty, and it only became the law through the help of many southern Senators, even though some of them voted subsequently, no doubt, against the bill as a whole.

My argument is that when you are taking up one matter at a time and passing on them that way, that you cannot get a fair democratic writing of a list of import duties as a whole. I know that leads up to logrolling ideas, but I regret that. But, I am sure it is the only fair and the only democratic way to adopt a set of import duty rates. Any other system, and the present one, simply means a continuous process of whittling down of duties without regard to the amount of protection justifiable or to differences in costs of production.

If time permitted and if it were necessary, I am sure I could convince you that the trade-agreement plan is trading off agriculture to increase exports of factory products.

If the power over tariffs cannot be restored to Congress, then by all means let there be Senate ratification. That will do some good, though I still hold that it will continue to mean inexpert and unscientific reduction of duties and a negation of the policy of fair protection which I still believe a majority desires.

The CHAIRMAN. What was the price of raw wool in 1932?

Mr. MARSHALL. Some we sold out on the range as low as 8 cents, but I think the farm price in the United States as a whole was between 11 and 12 cents. Of course, that was a condition under which no protective tariff could do the producer any good.

The CHAIRMAN. That was the reason I asked you if that was the year you passed the Hawley-Smoot Tariff Act?

Mr. MARSHALL. No; that was 2 years after the passage of that act. The CHAIRMAN. Oh, yes; it was passed in 1930?

Mr. MARSHALL. Yes.

The CHAIRMAN. What is the price now?

Mr. MARSHALL. The last I have heard on the sale this year was 27 cents, the week before last.

The CHAIRMAN. It has gotten above parity price, hasn't it?
Mr. MARSHALL. No, sir.

The CHAIRMAN. What is the parity price?

Mr. MARSHALL. I am glad you mentioned that parity price business. We are having a heck of a time with the Commodity Credit Corporation loan over there, in the Agricultural Department all the time. We are up against this all the time, and Secretary Wallace in a very friendly way always admitted it, that so few of them over there know anything about the wool business at all. The trouble is with you referred to the Underwood-Simmons bill-the parity-base period of

1904 to 1919, including 1912 and 1913 when wool was placed on the free list, and it gives us a most highly inequitable base period for computing the pre-war value of our product. Other things were good then; hogs were good; corn was good; cotton, too; but wool was just in that tariff change, and it just ruins us, that parity period, every time.

The CHAIRMAN. It does not seem to have ruined you much; you seem to have gotten along pretty well by maintaining a good price for wool and not having raw wool touched by the reciprocal trade agreements, and I notice in this publication on the agricultural situation as presented here, December 1939, entitled "Brief Summary of Economic Conditions," that as against the parity price as of November, 1929, it is 23.4, but the wool people were getting at that time on raw wool 27.6, so it is above it.

Mr. MARSHALL. We would have gotten 27.6 if we were selling wool, but that is wool at Boston. There was no wool in this country at that time. We had all sold out before the war and before the price went up. I got 22 cents last year, and the market is not as high today as your report shows it was in November or December, but the grower did not get that increase in 1939, which was a price that came partly as a result of the outbreak of the war.

The CHAIRMAN. Are there any questions?

Senator JOHNSON. I would like to emphasize, if I may, the fact that Mr. Marshall is not complaining about past experience very seriously, at least, but he is apprehensive about the future and the pending legislation deals with the future entirely. We are not repealing anything in the pending legislation. The existing trade agreements will continue in full force and effect, and the only matter that is before us is whether there shall be new trade agreements. Is that not correct?

Mr. MARSHALL. Yes, sir; that is my position exactly.

Senator JOHNSON. And is it not a fact that the wool market is a very sensitive market, and the prospect of trade agreements-just even the prospect of them-unsettles the market and causes the producer heavy losses; and would it not be a fine thing for the producer if this thing could be settled and settled permanently on some kind of a permanent basis so that the prospect of unsettlement would not often be hanging over the market?

Mr. MARSHALL. That is exactly what we would like, Senator Johnson; although the old fashioned way of changing these things by congressional action as not complete stability, it was much superior to the constant threat that anything can be done in a few months or weeks without the consultation of Congress, as it is at present. We think we have a much greater measure of stability if this plan were not in effect--we would have.

Senator JOHNSON. Yes; but that is not the question that is before the Congress at the present time. The question before us now is whether we shall extend the agreements.

Mr. MARSHALL. If you do extend them, you just renew that complete instability and uncertainity and apprehension, which, as you bring out, the woolen trade is very much apprised of and takes advantage, and properly so, of every prospect there may be to reduce the duty on wool by reflecting it in the prices we get.

I believe, Mr. Chairman, that that matter that I brought out about that language in the Canadian agreement which has not been passed upon by the Foreign Relations Committee, will, on further study, commend itself to you, and that the committee should clarify that point by an amendment such as I have suggested, which will exempt section 306-a from the present provisions of the act of 1934, if extended. Again I urge that your committee adopt a policy of statesmanlike and masterly inactivity.

The CHAIRMAN. Thank you very much, Mr. Marshall.
The next witness it Mr. B. C. Budd, of Detroit, Mich.

STATEMENT OF B. C. BUDD, CHAIRMAN, EXPORT COMMITTEE,
AUTOMOBILE MANUFACTURERS' ASSOCIATION, DETROIT

The CHAIRMAN. Mr. Budd, you are the chairman of the export committee of the Automobile Manufacturers Association?

Mr. BUDD. Yes.

The CHAIRMAN. And you are appearing here on behalf of the board of directors of that association?

Mr. BUDD. Yes, sir.

The CHAIRMAN. You may proceed in your own way.

Mr. BUDD. I would like to say at the beginning that the association includes practically all of the motor-car manufacturers of this country with the exception of the Ford Co.

The Automobile Manufacturers Association respectfully urges that House Joint Resolution 407, renewing the Reciprocal Trade Agreement Act, be favorably reported by this committee and passed by the Senate.

Following its enactment in 1934, our association has consistently endorsed this legislation, believing in the soundness of its principles and its benefits to the country as a whole.

I would like to take this opportunity of emphasizing a few basic facts about our business which substantiate this endorsement.

Through a period of some 30 years, the automobile industry has worked to broaden its markets througn the development of international trade. I do not think anvone can question the success of these efforts which culminated in total business in 1929 of nearly 1,000,000 motor cars and trucks. Then, in the short time of 3 succeeding years, we saw this volume shrink to 180,000 units, a loss of 82 percent.

Naturally, we welcomed the Reciprocal Trade Agreements Act, which was designed to reverse this downward trend.

Between that period and 1937, our export business made a substantial recovery and again reached the appreciable figure of 683,000 units, a net gain from the low of a half million cars and trucks.

We do not attribute this entire gain to the Trade Agreements Act alone, but we are convinced it was a most important factor.

I would also like to emphasize that under normal conditions, between 10 and 15 percent of our total production is exported, while from 85 to 90 percent is sold in the home market.

Senator WALSH. Was that true during the depression?

Mr. BUDD. Yes, sir; it has been true right straight through.

Senator WALSH. Even during the poorest years of the depression, was your export business 10 or 15 percent of the total?

Mr. BUDD. Yes; it stayed fairly steady. It varied a little due to local conditions and foreign conditions, but that has been a fair average during that period.

Senator WALSH. You may proceed.

Mr. BUDD. The 15 percent that goes to export represents hundreds of millions of dollars and is of extreme importance to successful operations. My main purpose, however, in citing these percentages is to define the relative size of the two portions of our market and assure this committee that we give full weight to their relative importance.

It would be suicidal for us to try to increase our business in 15 percent of our market by methods which would jeopardize 85 percent of our market.

The main criticism we have heard of the Reciprocal Trade Agreements Act is that it may prove harmful to domestic agriculture. We do not share this view and, as a group, the American farmers are our best customers.

To the contrary, we believe that the duty reductions that have been made have had no serious effect on agriculture, while increased exports have widened the market for farm products.

In our industry alone, raw materials, as well as finished products from every State in the Union, go into the manufacture of cars and trucks: 15 million pounds of wool, 10% percent of our cotton, 65 percent of our leather, 53 percent of our malleable iron, 69 percent of our plate glass, and from 9 to 35 percent of such metals as tin, copper, aluminum, and lead, are consumed by this one industry annually.

In addition to the thousands of men directly engaged in the manufacture and transportation of the increased number of exported cars and trucks previously mentioned, other thousands of farmers and industrial workers are benefited through sales of the products they grow or produce, and the still wider market their incomes provide. Motorcar exports are but one example-all other exports contribute equally.

We accordingly believe that increased exports of manufactured goods means increased sales of farm produce to the people engaged in making these goods, and, in the same way, the export of farm surpluses reflects better business in the farm areas for the manufacturers. Agriculture and industry thus have a common stake in foreign trade.

Another reason why we desire the renewal of the Trade Agreements Act is that the question of the alternative is a serious one.

Certainly a policy of excessive protectionism would again lead to retaliation, reprisals, and a closing of the markets which we must depend upon for the disposal of our surplus production.

An extension of the act at this time is urged because we believe the benefits already gained will continue. We also believe other large and important markets for our products may be added to the 22 that have already signed agreements.

It is double important now, with such unsettled conditions abroad, and so many of our normal markets closed to us, that maximum sales be secured in the countries that remain open.

Senator VANDENBERG. Mr. Budd, I do not need to tell you how deeply I respect your opinions and those whom you represent nor how deeply I am interested also in automotive exports.

Mr. BUDD. I recognize that.

Senator VANDENBERG. And that I recognize the importance of it. I want to ask you a few questions to explore the subject rather than to invite any controversy, because I am deeply interested in finding out what really will encourage automotive exports.

Now, you have referred to the great recovery in automotive exports subsequent to 1932 when you hit a low, according to the figures presented to the House, of $76,000,000 in dollar value.

Mr. BUDD. Yes.

Senator VANDENBERG. The trade agreements did not become generally effective until 1936, so it would be almost the first of 1937 before they were generally effective. Your recovery from the low of $76,000,000 in 1932 reached $250,000,000 in 1936. That certainly was a substantial recovery without the benefit of trade agreements, wasn't it?

Mr. BUDD. That is right. Not that whole period, though, I do not think, Senater. The Trade Agreements Act went into effect in 1934, didn't it?

Senator VANDENBERG. It was passed in 1934, but there were no agreements negotiated in 1934, only two or three in 1935, and only four or five in 1936. I know it was spread down through the years. Your export in 1938 was $282,000,000. That was when you had had the advantage of 2 fairly full years of trade agreements. The big increase, in other words, from 76 million to 250 million would indicate, would it not, that your increased exports were due chiefly to a recovery of buying power in the world?

Mr. BUDD. Yes; I think that is generally true. In that period that you mentioned?

Senator VANDENBERG. Yes.

Mr. BUDD. Yes, I think that is right.

Senator VANDENBERG. And the increase from two hundred and fifty to two hundred and eighty-two million is the only increase which is represented by the active operation of the trade-agreements program, and I do not find that to be a truly impressive increase. Mr. BUDD. I don't agree with that.

Senator VANDENBERG. That is what I would like to have you discuss.

Mr. BUDD. In 1937, it reached a total of 360 million from 250 million in 1936. That is a 110-million-dollar increase, which is very substantial. The reason that our exports dropped again in 1938 was due to the unsettled conditions in Europe, mainly, and I think that you will all recall the Munich agreement and the nervousness that existed, and naturally people just did not buy cars in that period.

Then again, through the 1938 and 1939 period. I think that other conditions and influences have outweighed the possible advantages we might have had from the reciprocal trade agreements.

Senator VANDENBERG. In exploring your figures, which is the thing I want to do at the moment-for instance, your biggest increase is to Canada, which rises from $1,800,000 in 1934 to $12,000,000 in 1938

Mr. BUDD (interposing). These figures do not include Canada.

Senator VANDENBERG. I am reading from the table that you presented to the House of Representatives. You have Canada in the figures.

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