wool manufactures upon the domestic industry. To say that imports of wool fabrics, for example, amounted to 1,602,000 square yards in January 1939, as compared with 811,000 square yards in January 1938, may seem alarming to some. But an uncritical acceptance of such figures as representing a flood of imports fails to take into account not only that these increased imports are still only a very small percentage of our domestic consumption but also that imports immediately after the tariff reductions went into effect included considerable quantities which had been previously withheld from entry in anticipation of the reductions.

That this withholding of entries did in fact take place is quite evident from the figures. In November and December 1938, imports of woolen and worsted fabrics were smaller, even, than in the same months of 1937-and this, too, in spite of the fact that the domestic demand was stronger and consumption greater than in the preceding year. For the last 2 months of 1938, imports amounted to 905,000 square yards, valued at $643,000; whereas, a year earlier, they had amounted to 1,281,000 square yards, valued at $1,118,000. It is perhaps noteworthy also in this connection that imports since January of the present year have been receding rather than increasing, having declined from 1,602,000 square yards in January to 1,081,000 square yards in February, and 974,000 square yards in March.

In your statements you allege that these imports are a serious burden to the industry and to the workers in the industry. There are no real grounds, however, for such a conclusion; and the manner in which it is arrived at furnishes an excellent illustration of a basic weakness in your approach to the whole problem which is common to most of the attacks that are made on the trade-agreements program by industries on whose products tariffs have been reduced.

Your conclusion assumes that only a certain quantity of woolens and worsteds can be sold in the United States and that the sole question is whether the domestic industry shall supply all of the demand, or whether some part of the demandhowever small-shall be supplied by imports. What this completely overlooks, apart from differences in type and quality of the imported products on which duties were reduced as compared with the vast bulk of the domestic production, is the fact that the trade-agreements program as a whole has a definite bearing upon the capacity of the American people to buy woolens and worsteds. Yet the facts are: (1) That the general prosperity of this country is profoundly important to your industry, as to others; (2) that the rebuilding of our foreign trade is an essential phase of any program for establishment of stable conditions of prosperity; and (3) that the trade-agreements program, by removing excessive and unreasonable barriers to trade and reopening foreign markets for products of American agriculture and industry, is a major contribution to that end.

In this connection our recent tariff history is highly instructive. For it shows all too clearly what happens when tariffs are forced up to embargo levels and the foreign trade of this country is decimated in consequence of such extremism.

In 1930 the Hawley-Smoot Act was adopted, shutting out of our markets practically everything that could be produced in this country at costs not utterly prohibitive. In that act the duties on wool manufactures were still further increased, notwithstanding that they were already high enough so that imports comprised but a small part of our total consumption, and in substantial part were composed of high-priced specialties. In order to obtain these further increases, woo! manufacturers acquiesced in the imposition of embargo tariffs on the products of other industries as well. The result was a most untimely contribution to the general economic collapse at home and abroad which brought severe depression not only to our great export industries, both agricultural and manufacturing, but to all branches of our economic life, including the wool manufacturing industry.

How, actually, did the wool manufacturing industry fare in this situation? Did the workmen in the industry obtain, as a result of this tariff legislation, that additional "$4 a month," or "$48 a year" which, in your very misleading advertisement, you now claim is being taken away from each workman on account of the tariff concessions on wool manufactures in the United Kingdom agreement?

Of course they did not. The result was not satisfactory to American workers in general or to textile craftsmen, or, indeed, to anybody. În 1929, at a time when 14,307,000 square yards of woolen and worsted piece goods, valued at $17,681,000, were being imported, there were 147,000 workers employed in the woolen and worsted industry, and their weekly pay roll averaged $3,157,000. In 1932, when imports of woolens and worsteds had declined to 3,437,000 square yards, valued at $2,530,000, there were 101,000 workers employed in your industry and their weekly pay roll averaged $1,533,000. In other words, the number employed had fallen by nearly a third, and the total pay roll by more than half.

Keeping out of the domestic market almost every trace of imports of woolen goods, as part of a general tariff policy which destroyed a large part of our foreign trade and contributed greatly to the general economic maladjustment both in this country and abroad, did not prove to be a paying proposition for your industry or the workers in your industry. That imports of wool fabrics amounted on the average to only about 1 percent of our domestic consumption-as they did after 1930-was surely poor consolation for the 46,000 employees who were out of work and for the decline of more than half in the pay roll of your industry. As a matter of fact a study of the trends of national income and of domestic exports and imports over the past 15 years shows that all three tend to fluctuate in unison. For example, in 1929, when national income reached 81 billion dollars, our exports amounted to 5.2 billions and our imports to 4.3 billions. By 1932 national income had fallen to 40 billions, exports to 1.6 billions, and imports to 1.3 billions. Are not these figures sufficient evidence to any reasonable person that there is something radically wrong with the idea, which seems to be the underlying assumption of your statements, that a slight change in the small share of the domestic market supplied by imports is what makes the difference between good and bad times for the American industry?

It is idle to say that other factors besides the Hawley-Smoot Act contributed to the depression. That there were other important factors, no informed person would deny. But neither would he deny that the rapid rise of trade barriers throughout the world-a development in which our own tariff policy after the World War, reaching its ultimate extreme in the Hawley-Smoot Act, played a sinister part was an important factor in contributing to and greatly aggravating the general depression.

The third point which I set forth at the beginning of this letter was that the trade-agreements program tends to promote economic activity and employment generally in this country. What I have just said concerning our experience under the Hawley-Smoot Act shows clearly enough what happens when the opposite policy, the policy of embargo protectionism, is followed. I desire, however, to comment further with reference to the attempt in your statements to induce workers in your industry and the public generally to believe that the trade agreements program is merely an altruistic policy which aims to engender good will abroad at the expense of American industry and the American standard of living. The fact is that the trade-agreements program has been remarkably successful in restoring foreign-market opportunities for many products of our farms and factories. In the agreement with the United Kingdom alone-the main object of your unfair attacks-we obtained specific concessions on American products exports of which to the United Kingdom, Newfoundland, and British colonies in 1936 amounted to $326,000,000. It is obviously too early to judge the value of these particular concessions in terms of actual trade increases. However, it is significant that exports to agreement countries in the 2-year period 1937-38 were greater in value by 61.2 percent than the average for the preagreement period 1934-35, while exports to all other countries increased by only 37.9 percent. Agreements are now in operation with countries which in 1938 accounted for nearly 60 percent of our total foreign trade.

These are some of the facts you fail to mention which are vitally significant to the vast number of American producers of farm and factory products who must export, or shut down or operate at a loss. When these American producers lose export markets as a result of embargo tariffs here and abroad or for any other reason, then the wool manufacturing industry and other "protected" industries lose part of their domestic market, and we have what we had in 1930, 1931, and 1932.

Neither do you mention that the powers vested in the President by the Trade Agreements Act have been exercised with the utmost scrupulousness. The President has had the assistance of all the facilities of information and expert judgment available to the Government of the United States from official and private sources, and every detail of the agreements has been scrutinized by expert advisers with a degree of thoroughness such as has never before characterized the determination of tariff rates in this country.

In view of all the facts and circumstances, it seems to me that the misleading claims and inferences which are set forth in your advertised assertions cannot possibly serve any useful purpose either from the standpoint of the public generally or from that of the workers in the wool manufacturing industry.

Without questioning the honesty of your motives and convictions in connection with these matters, I am convinced that you have not taken all of the facts into

account. It is to be regretted that no opportunity was sought, before your statements were published, to discuss the whole subject with us. We would have been very happy to discuss it with you, and we are still ready to do so at any time.

Sincerely yours,

(Signed) CORDELL HULL. (The table submitted by Mr. Brown entitled "Value of International Merchandise Transactions," etc., is as follows:)

Value of international merchandise transactions wholesale price index, 40 international basic commodities reduced to uniform gold basis-The World (109 countries)

The CHAIRMAN. We will recess until 10 o'clock tomorrow morning. (Whereupon, at 1:05 p. m., a recess was taken until Tuesday, March 5, 1940, at 10 a. m.)

215171-40-40

EXTENSION OF RECIPROCAL TRADE AGREEMENTS

TUESDAY, MARCH 5, 1940

UNITED STATES SENATE,
COMMITTEE ON FINANCE,
Washington, D. C.

The committee met, pursuant to recess, in the Finance Committee room, at 10 a. m., Senator Pat Harrison (chairman) presiding. The CHAIRMAN. The committee will come to order.

The first witness is Mr. Russell B. Brown, of Washington, D. C., representing Independent Petroleum Association of America.

STATEMENT OF RUSSELL B. BROWN, WASHINGTON, D. C., REPRESENTING INDEPENDENT PETROLEUM ASSOCIATION of AMERICA

Mr. BROWN. I am appearing here in behalf of the Independent Petroleum Association of America, a national organization of independent units in the petroleum industry. I present a resolution from that association for the record.

(The resolution is as follows:)

RESOLUTION ADOPTED AT ANNUAL MEETING OF THE INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, FORT WORTH, TEX., OCTOBER 20, 1939

The conservation programs of the oil-producing States are related to a policy of balancing supply with demand in order to avoid waste. One feature of supply,

imports, is not within the power of the States. Because the amount of these imports which may enter our markets at any time is unpredictable, the careful planning of State conservation bodies may be, and has often been, defeated by unexpectedly large quantities of these imports, which have demoralized our markets and adversely affected the economics of the industry. Since the domestic producers of petroleum are making their contributions to the public revenues through the taxes they pay and are accepting production limitation as a necessary part of a sound conservation program, we believe that importers of cheaply produced foreign oil should be willing to pay a proper excise tax and to accept an equivalent limitation on the amount of foreign oil they bring into our markets: Therefore be it

Resolved by the Independent Petroleum Association of America at its annual meeting held at Fort Worth, Tex., this 20th day of October 1939, That Congress is hereby petitioned to impose an adequate tariff on imports of petroleum and its products. and that until such time as this tariff may be adopted the present excise taxes on imports of crude oil and fuel and gas oil be increased from one-half cent to 1 cent per gallon, and that new excise taxes of $2 per ton be levied upon imports of asphalt, natural or otherwise; be it further

Resolved, That Congress is hereby petitioned to adopt legislation restricting the imports of crude petroleum and its products to an amount not in excess of 4.5 percent of the consumptive demand in this country as estimated by the United States Bureau of Mines; be it further

Resolved, That Congress is hereby petitioned to repeal that section of the Revenue Act of 1932 which exempts from exicse taxes importations of crude petroleum and its products used for the supplies of vessels.