the latest period for which statistics are available. The following allocations of the tariff quota are set forth in the proclamation: United States of Venezuela. Kingdom of the Netherlands (including its overseas territory) Republic of Colombia Other foreign countries_ Percent 71.9 20.3 4.0 3.8 The domestic petroleum industry and the Venezuelan trade agreement Concession to Venezuela on petroleum. --By the terms of the trade agreement concluded with Venezuela, effective December 16, 1939, the import excise tax on crude petroleum, topped crude, and fuel oil was reduced from one-half cent to one-fourth cent per gallon, equivalent to 101⁄2 cents per barrel. In order to safeguard the domestic petroleum industry the quantity of crude petroleum, topped crude, and fuel oil which may enter the United States at the reduced rate may not exceed 5 percent of the total quantity of crude petroleum processed in refineries in the continental United States during the preceding calendar year, as ascertained by the Secretary of the Interior. This 5-percent annual quota established by the trade agreement is approximately equal to the ratio between imports and domestic production of these oils following the levying in 1932 of the one-halfcent-per-gallon excise tax and the present time. All imports in excess of the established annual quota are subject to the full one-half-cent-per-gallon excise tax. The concession on petroleum granted to Venezuela constitutes the most important consideration granted to that country. United States imports from Venezuela consist chiefly of crude petroleum, topped crude, and fuel oil. On the other hand, Venezuela granted concessions benefiting American farm and factory products which made up 36 percent of our total exports to Venezuela in 1938. Among the more important American products on which reductions in duty were obtained by the United States are cigarettes, lumber, furniture, and fresh and canned fruits. Imports of crude petroleum, topped crude, and fuel oil are small in comparison with domestic production and exports. The total quantity of imports in 1938 of taxable crude and fuel oil amounted to 29,700,000 barrels compared with exports of 121,100,000 barrels and domestic production of 1,660,000,000 barrels. This does not include 22,500,000 barrels exempt from excise tax used for supplies of ships in foreign trade, and entered in bond for refining and reexport. In other words, United States imports of these oils constituted only 2 percent of total domestic production for 1938. On the export side, shipments of these same oils to foreign countries during 1938 constituted 7 percent of domestic production and were more than 300 percent greater than imports. Petroleum industry benefits from trade agreements. It is significant to note that whereas a concession on petroleum has been granted in only 1 agreement-the moderate reduction in the excise tax which was granted to Venezuela concessions expanding opportunities in foreign markets in which our domestic petroleum industry can sell its products have been obtained in 12 agreements. Five countries reduced the duties on petroleum products, 4 countries bound the rate of duty against increase, 2 countries bound petroleum products on the free list, and 1 country bound the rate of duty and increased the quota. Examples of the various petroleum products affected by more favorable export opportunities obtained through trade agreements are gasoline, lubricating oil, petroleum residues for heating, benzine and benzol, lubricating greases, kerosene, and various petroleum oils and greases. Switzerland granted a concession on petroleum residues for heating purposes, benzine and benzol for motors. Swiss imports of these products from the United States increased, respectively, between 1935, the preagreement year, and 1938 from $35,000 to $1,361,000; from $1,039,000 to $2,077,000. Sweden granted a concession on gasoline and that country increased its imports of gasoline between 1934, the preagreement year, and 1938 from $3,051,000 to $7,071,000. The Netherlands guaranteed not to change the duty-free status of lubricating oil. Its imports from the United States between the preagreement year 1935 and 1938 increased from $840,000 to $1,125,000. Canada, our most important foreign market for petroleum products, reduced the duty on lubricating oils, engine distillates, and gasoline. Imports from the United States by Canada of these products increased respectively between the preagreement year 1935 and 1938 from $2,605,000 to $3,122,000; from $7,000 to $71,000; from $1,501,000 to $5,219,000. The petroleum industry's most important and profitable market is, of course, the home market. There are certain benefits shared by the domestic petroleum industry derived from the trade-agreements program which, though less tangible are nevertheless real. Such benefits flow from an improved domestic market. Imports and exports mean more work for all the people employed in transportation: railroads, busses, trucks, ships, and in merchandising, stores, markets, insurance companies, as well as more work for the people engaged in the manufacture of the great variety of commodities that are bought and sold. Such activity at home strengthens and increases purchasing power all along the line and creates expanded markets at home for petroleum products. Prices that our domestic petroleum industry has received for its products have been highest during periods when foreign trade-imports and exports-has moved in large volume. In such periods domestic industrial activity has been brisk and in addition to higher prices, the petroleum industry has experienced greater demands for its products. 21 CONCLUSION 1. The present tariff disguised as an excise tax on imported crude petroleum (heavy asphaltic) and fuel oil runs counter to national policy, and is passed on to the American consumer. 2. The import tax on crude oil which falls only on heavy asphaltic crude is added to the cost and price of asphalt; the passed-on tax in the form of increased asphalt price is paid by the Federal Government, by States, counties, and cities and the State highway departments have been forced thereby and continue to be forced to materially decrease the mileage of improved roads. 3. The tax on crude and fuel oil is passed on to consumers, primarily lifting the cost of bunker fuel oil by more than the amount of the tax and with the constantly growing demand is creating a serious scarcity of this product along the Atlantic coast to the detriment of the United States Navy and the American merchant marine. 4. The existing tariff or excise tax on imported crude and fuel oil is in effect a tax upon government itself. The CHAIRMAN. I desire also to insert in the record a statement submitted to the committee by Mr. J. D. Battle, executive secretary, National Coal Association. STATEMENT SUBMITTED TO THE SENATE FINANCE COMMITTEE, MARCH 4, 1940, BY J. D. BATTLE, EXECUTIVE SECRETARY, NATIONAL COAL ASSOCIATION, IN OPPOSITION TO HOUSE JOINT RESOLUTION 407 The bituminous coal industry, speaking through the National Coal Association, opposes the proposal to extend for a further term of years the delegation by the Congress to the Executive of authority to alter tariff rates and excise taxes on imports through the device of so-called reciprocal trade agreements. We believe that the original delegation of this authority by Congress was most unwise, that the exercise of this authority by the executive branch of the Government has been in many instances detrimental, and that the expiration of this authority this coming June, as was originally specified, would be a blessing. We most respectively submit that to sanction the negotiation of international trade agreements which alter tariffs and taxes and which become binding upon the United States without any express approval of Congress or any ratification by the Senate, as is the constitutional requirement with respect to treaties between this Government and any other government, violates both the letter and the spirit of our form of representative constitutional Government. The interest and concern of the coal industry in the reciprocal trade-agreements program and policy and the present proposal for its continuance is both general and specific. Our industry has a large stake in the future of this country and its social and economic progress and prosperity. Our industry supplies at least half the Nation's fuel and energy requirements, an indispensable half. Our industry is the largest employer of labor in the United States except for the railroads. More than half a million men are directly dependent upon coal mining for their livelihood and at least twice as many more are directly dependent. Our industry has a capital investment in excess of $3,000,000,000 and an annual cash turn-over in the neighborhood of $1,000,000,000, and in addition provides the railroads with more than a fifth of their freight revenues. 21 See Cong. Record, Feb. 23, 1940, p. 2961, Extension of Remarks of Hon. John E. Rankin. So the owners and operators of coal mines and their army of employees have every reason to wish for better business and more of it for all industries and business in the United States. Thereby is our general interest in the economic and trade questions that are implicit in the resolution now before your committee. We simply do not agree that this reciprocal trade agreement program to date has proven a boon to United States industry and United States agriculture in general, and our industry knows from painful experience that in specific matters the practical application of the program has been disappointing and prejudicial. Our industry's specific concern with this program related to two reciprocal agreements which have eventuated, one with the Dominion of Canada and the other with the Republic of Venezuela. United States producers of bituminous coal have exported to Canada a sizable tonnage for a great many years, ranging from a high of 15,000,000 tons in 1923 to a low of 7,000,000 tons in 1932. Canada has always been our principal "foreign market" for United States coal. Exports to other countries have been relatively slight in the aggregate, seldom amounting to 1,000,000 tons per year. United States bituminous coal to Canada is subject to an import duty of 75 cents per ton, whereas English coal comes into Canada under a preferential rate of 35 cents. Canada in recent years has granted large subventions to her own producers of coal. This situation presented a splendid opportunity for the reciprocal trade policy to prove itself as a mechanism for reducing trade barriers, but the fact is that the agreement finally concluded with Canada left the 75-cent duty on United States coal and the English preferential rate untouched, and contained no word whatever concerning subventions. The agreement did indeed eliminate a 3-percent excise tax on duty-paid value which Canada had heretofore applied to all imports and coal shared in this "relief," which in the case of coal was of microscopic proportions. It is also to be noted that since the advent of the war Canada has made some modifications in her own subventions to her own coal producers in the Province of Ontario, and our State Department claims the credit for this and offers it as another evidence of the "benefits" which have accrued to United States coal producers. The facts as to the subventions do not substantiate any such claims. The reciprocal trade agreement with Canada from the standpoint of coal turned out to be exceedingly small change, whereas the reciprocal trade agreement with Venezuela was a real stab in the back. Coal and fuel oil are highly competitive. Imports of crude and fuel oil principally originating in Venezuela are laid down in Atlantic coast and Gulf ports at prices below the competitive reach of United States oil and coal. These oil imports have made a bad matter worse from the standpoint of coal's competitive situation. Congress, taking cognizance of this situation and perceiving the obvious need of stemming this inflow of Venezuelan oil as a means of protection to our own oil and coal producers, imposed in 1932 an excise tax of one-half cent per gallon on imports of crude and fuel oil. Bills have been pending in the present Congressand strongly advocated--to increase the rate of this tax. There is no valid argument for the reduction of this tax. There is no excuse for its reduction, except the excuse that it was the only means at hand to bestow a boon upon Venezuela. The trade agreement with Venezuela cuts this excise tax in half with respect to oil imports, within an annual quota limit which is fixed much higher in total amount than any imports of oil heretofore experienced. Imports in excess of this quota (if any) will take the half-cent per gallon rate of the present law, and the agreement covenants further against any increase in our own present excise tax on oil imports, thereby undertaking to forestall (so long as the agreement remains in force) any action by Congress on the present or any future bill to increase this excise tax. In reality the benefit of this reduction in the tax accrues to the American companies who control the importation of this Venezuelan oil, and it appears to be going to result in subtracting $3,000,000 or more annually from the Treasury's tax revenues and adding this amount to the treasuries of the oil companies. The reduction in this excise tax on imported oil which the Venezuelan agreement proclaimed not only has cut off any prospect of relief from the impact of these oil imports upon coal, but this action in our view was clearly beyond the intended scope of the authority which Congress has delegated to the Executive. We submit that Congress never intended or supposed that the reciprocal agreements could or would comprehend any alteration in excise import taxes. We respectfully urge, therefore, for the reasons hereinbefore set forth, that the present resolution be rejected by this committee. We couple with this petition a supplementary plea that in the event the resolution be favorably reported to the Senate, it be so amended as to exclude all excise taxes from the delegated authority, and also that a provision be included requiring submission to and ratification by the Senate of any future reciprocal-trade agreements as a condition precedent to their taking effect. Respectfully submitted. NATIONAL COAL ASSOCIATION, STATEMENT OF W. L. MONRO, PRESIDENT OF THE AMERICAN WINDOW GLASS CO., PITTSBURGH, ΡΑ. Mr. MONRO. Mr. Chairman and gentlemen of the Senate Finance Committee, I appear before your committee representing the American Window Glass Co., of Pittsburgh, Pa., of which I am president, to present to you our views regarding the further extension of the Reciprocal Trade Agreement Act which is now being considered by you. At the outset I deem it best to advise you that we are opposed to any extension of that act as now framed, for reasons which I will submit to you. The CHAIRMAN. Did you oppose its enactment in 1934? Mr. MONRO. You also gave me an assurance that I had nothing to fear from the passage of the act. The CHAIRMAN. In actuality, can you say that you were hurt? Mr. MONRO. I think I will show you that before I get through. The CHAIRMAN. All right; proceed. Mr. MONRO. When the Belgian reciprocal trade agreement was under consideration I appeared before the Committee for Reciprocity Information on October 29, 1934, as president of and in behalf of the Window Glass Manufacturers Association, which has since been dissolved. At that hearing I presented as concise and careful summary as possible of the economic conditions which we thought justified our contention that no further concession should be made in the rates of duty on window glass. I pointed out that President Hoover, by proclamation effective January 1, 1932, had reduced the rates of duty on "cylinder, crown, and sheet glass" 25 percent below the rates of such duties in the Tariff Act of 1930. This reduction had been recommended by the United States Tariff Commission in a report to the President as being necessary to equalize the difference in the costs of production of the domestic articles and the like or similar foreign articles when produced in the principal competing country, which was found to be Belgium. In my argument I pointed out many factors which justified our contention that since that proclamation had gone into effect the costs of producing window glass in this country had very materially increased in excess of any increase in the costs of producing window glass in Belgium. Many details were furnished by me showing not only the large increases in the rates of labor but also the large reduction in the hours of labor that had taken place in this country since 1932. Evidently the facts presented in that argument, showing how seriously any further reduction in the rates of duty would affect the window glass industry in this country, were sufficiently cogent to warrant a decision, by whatever authority has the right to make those decisions, not to make any change in the duty on window glass. When the Czechoslovakian reciprocal trade agreement was being considered I again appeared before the Committee for Reciprocal Information on October 25, 1937, on behalf of eight different window glass manufacturers including, of course, the American Window Glass Co. of which I was also then president. In my argument before that committee I presented certain facts regarding the production of window glass by Czechoslovakia and showed that unquestionably the costs of production in Czechoslovakia of window glass were less than the costs of production in Belgium. I pointed out also that notwithstanding the increased freight rates from Czechoslovakia to our various ports of entry as compared with the rates from Belgium to the same ports of entry, Czechoslovakia was still able to undersell Belgium in this country. This, therefore, clearly showed that the cost of production of window glass in this country was much higher than the price at which Czechoslovakia was able to deliver its glass to our various ports of entry. Accordingly, I argued that in view of the fact that when the subject of window glass was under consideration in the proposed Belgian reciprocal trade agreement, that the facts did not warrant any change in the then existing rates of duty; that, therefore, there was still less justification for any change in the rates of duty in the reciprocal trade agreement with Czechoslovakia. Nevertheless, in spite of the facts as presented showing the lower costs of production in Czechoslovakia than in Belgium, the authority which makes the decisions regarding these trade agreements decided to further reduce the duty on window glass 30 percent below the rates then prevailing under a proclamation of President Hoover. Accordingly, when the Czechoslovakian reciprocal trade agreement went into effect the duty on window glass was 471⁄2 percent below the rates of duty provided in the act of 1930. Senator KING. Did Belgium get the benefit of that reduction? Mr. MONRO. Every country on the face of the globe got it except Germany. In presenting the argument in connection with the hearing on the Czechoslovakian proposed agreement, I called the attention of the Committee for Reciprocity Information to the fact that if their decision not to reduce the duty in the reciprocal trade agreement with Belgium had been based on the large difference in the comparative costs of production in the United States and Belgium, and of the consequent injury to the industry in this country, that a further reduction than that provided in the Hoover proclamation would be ruinous to the industry in view of the greatly increased labor costs in this country, that there was no justification for any reduction in the duty in the Czechoslovakian agreement if differences in cost of production or injury to the window glass industry was to be considered in the Czechoslovakian agreement. As I said before, notwithstanding these facts the duty was decreased 30 percent. This lowered rate of duty took effect under the terms of that agreement on the 16th day of April 1938, and remained in effect until it was suspended by Presidential proclamation on the 22d day of April 1939, after Germany had absorbed Czechoslovakia and taken over the entire window glass industry of that country. |