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then available. As the capacity of the world to consume more wheat, as that increases, the operations of the Wheat Agreement will permit an expansion of production of the commodity on an equitable basis among all the countries.

Mr. VORYS. Is the equitable basis a percentage basis?

That is, under the agreement, do we get an increasing percentage of our present production, as world needs increase?

Secretary BRANNAN. That is right. Related back to the early historic production and export pattern of the commodity. There is even flexibility with respect to those.

In the cases of some of the exporting countries, the capacity to produce more is limited as compared with what they are now producing and exporting.

Mr. VORYS. For instance, right now our capacity to export is far greater than that permitted by the Wheat Agreement, is it not?

Secretary BRANNAN. I would say we could probably export another 100,000,000 bushels year after year than perhaps the Wheat Agreement calls for, but on the other hand, we right now are experiencing in the western part of this country some drought, some attack of the green bug, and some other abnormal situations, which make any of us and all of us, as a matter of fact, feel reasonably comfortable about the fact that we have a 400,000,000 bushel carry-over in this country.

Mr. VORYS. How is the price arrived at for wheat? For instance, what is it today?

Secretary BRANNAN. By negotiation, it was from a low price of $1.40 to a top of $1.80. It is $1.40 minimum and a top of $1.80. It has been selling all this year at the top price rather than the low price.

Mr. VORYS. That is negotiated by all of the countries?

Secretary BRANNAN. That is right, the exporters and the importers. The exporters agree to export and the importers agree to buy at any level between those prices, whatever the world market justifies.

Mr.VORYS. And how are the quantities determined? By individual negotiations of exporters?

Secretary BRANNAN. That is right. After the total needs of the importers have been set by the importers, then the exporters agree among themselves upon a division of the total exportable demand. That, of course, is all subject to the over-all agreement of the consumers and the producers under the general terms of the agreement. Mr. VORYS. Is the price set by majority vote of all of the countries, or by unanimous vote, or how?

Secretary BRANNAN. It is really a unanimous proposition because they did not have to sign in the first instance. The range was set by what amounts to unanimous agreement.

Mr. VORYS. In the original agreement?

Secretary BRANNAN. Yes.

Now, the agreement could have gone into force and effect, I think after about two-thirds of the countries who participated in the original negotiation signed the document but for all practical purposes, it amounted to a unanimous agreement of the countries which finally do participate.

Mr. VORYS. That is, there is a formula in the agreement when you sign it that works out the way you said?

Secretary BRANNAN. Yes.

Mr. VORYS. However, as to the actual price within those limits, how is that achieved?

Secretary BRANNAN. That is negotiation each year.

Mr. VORYS. Who negotiates with whom? What individuals?
Secretary BRANNAN. Individuals, yes; countries.

Mr. VORYS. Is it a private affair or a governmental affair?

Secretary BRANNAN. It is a negotiation between the importing and exporting countries within an organizational framework, set up by the agreement itself.

Mr. VORYS. And I presume under a formula; but let us take an example. We are an exporting country. If I was there I would say, "Let us have it at $1.85," if that is the top. I imagine Britain, an importing country, would say, "We want it at $1.25."

Who decides between Britain and myself?

Secretary BRANNAN. The limits have been set in the agreement. The agreement simply provides that the United States as an exporter agrees to export the amount that is allotted to it under the agreement at not less than $1.25, not less than the low limit.

Let me ask Mr. Andrews to explain it again.


Mr. ANDREWS. In the agreement, there was negotiated between all the countries a bottom limit and a top limit for the total amount of wheat in the Wheat Agreement. Then market conditions determine the fluctuation between them.

In other words, this year, with world market conditions such that wheat outside the agreement is selling above the agreement price, the agreement wheat has moved between private traders and importing countries at the $1.80, allowing for quality differentials and location. However, as the world supply of wheat builds up and the market price goes down, naturally the price within the agreement is going to go down. When it gets to $1.20, then the United States can call on the various countries to take agreement wheat at that price, no matter how low the nonagreement market price may fall.

At the present time they can call on us to deliver at $1.80.

In other words, at the top price, we have got to sell at $1.80. That is still about 25 cents below the present world price of wheat. When the world price hits the bottom, the importers have to take it from us at the low point of the agreement price range. Each country has a quota. They can buy anywhere within the agreement from any country that has wheat to sell at any time, between the $1.20 and $1.80. Only when you reach the $1.20 do these quotas actually become effective in supporting price. Then the United States walks over to England, Belgium, and all these countries and says, "Here is your wheat; pay us $1.20 for it."

Mr. VORYS. It is only at the bottom or the top where there is a compulsory feature.


Chairman KEE. May I interrupt there? I would like to understand this fully myself.

As I understand, between the limits of the Wheat Agreement, the price is regulated by market conditions?

Mr. ANDREWS. That is right.

Mr. VORYS. Is our support price geared in any way to the International Wheat Agreement?

Secretary BRANNAN. No, sir.

Mr. VORYS. What is our support price on wheat, now?
Secretary BRANNAN. Around $2.20.

Mr. VORYS. If it is selling internationally at $1.80, we have a 40-cent subsidy?

Secretary BRANNAN. That is about right, except that United States wheat has been selling above support, so that this year's subsidy has averaged about 50 cents.

Mr. JUDD. Will the gentleman yield?

Mr. VORYS. I yield the floor.

Mr. JUDD. Our support price is $2.20 and the maximum under the Wheat Agreement is $1.80, but there are other countries, exporting countries, whose market price is below $2.20, are there not? Australia and the Argentine, don't they have wheat to sell at less than $2.20? Secretary BRANNAN. Canada and Australia have some to sell outside of the Wheat Agreement.

Mr. JUDD. If the people can buy it for $2.10 in these other countries, they do not buy it from us at $2.20.

Secretary BRANNAN. Outside the agreement-what supplies are outside the agreement. However, as a matter of fact, the supplies outside of the agreement are still moving at above the agreement price.

Mr. JUDD. Do you mean they can't get as much as they want at $1.80?

Secretary BRANNAN. That is right.

Mr. JUDD. I thought you said that when it got to $1.80, they can say, "We want so much," and you have to deliver?

Secretary BRANNAN. Up to our obligation to ship under the Wheat Agreement.

Mr. JUDD. Is the total amount the importers want in excess of the total of quotas that have been allocated around the world?

Secretary BRANNAN. That is right. They always do that in order to reserve themselves some bargaining position and to take advantage of a low market, if one develops.

Mr. JUDD. That is the reason for the trade outside the quotas?

Secretary BRANNAN. That is one reason for it. There are one or two countries that have stayed outside the agreement, you see. The iron curtain countries have stayed outside of the agreement and so has the Argentine, for the time being.

Mr. JUDD. We are delivering at $1.80 all we are supposed to deliver under our quota?

Secretary BRANNAN. That is right.

Mr. JUDD. And beyond that we are selling some at $2.20 a bushel? Secretary BRANNAN. That is right, or at a higher price while the market is above our support level.

Mr. JUDD. Have you offhand the approximate figures in those two categories?

Secretary BRANNAN. Under the agreement this year's quota is 235,000,000 bushels.

Mr. JUDD. 235,000,000 bushels is our quota at $1.80?

Mr. ANDREWS. That is right.

Mr. JUDD. That is where the subsidy comes in, you pay the difference between the $1.80 and approximately $2.20 on that amount of wheat. Secretary BRANNAN. That is right, or more if the market is above support.

Mr. JUDD. How much is outside the quota ?

Mr. ANDREWS. Somewhere between 100,000,000 and 140,000,000 bushels, I believe.

Chairman KEE. Mr. Burleson

Mr. BURLESON. I have no questions, Mr. Chairman. I am just glad to see the Secretary.

Chairman KEE. Mr. Jackson

Mr. JACKSON. Mr. Chairman, my questions will be very basic in as much as we grow no wheat out in Beverly Hills. They will probably be more basic in fact, than the questions of the gentleman from Ohio. Mr. VORYS. You mean elementary.

Mr. JACKSON. Here is a memorandum from the Secretary of State under date of April 27, addressed to the President. It sets forth as one of the prime objectives of the ITO charter, "To bring about the orderly marketing of staple commodities at prices fair to the producer and consumer alike."

As I understand it, that is also a purpose of our domestic program at the present time.

Would this not of necessity, and in the long run, result in the setting up of a global proposition by agreement for production and marketing quotas and for planting allocations, and all the other things that enter into the domestic sitution as pertains to these commodities today in his industry?

Secretary BRANNAN. I do not think it would of necessity, because the normal market situation and normal supply and demand situation may take care of many of the commodities without any kind of agreements or arrangements.

Mr. JACKSON. But on some commodities it has been found, has it not, that the law of supply and demand no longer operates, or is considered by some economists to be inoperative to the extent that it has been found necessary to embark upon a vast program of agricultural subsidies; that is the basic reason; is it not?

Secretary BRANNAN. I think you could put it another way: That the supply situation has been such, in the case of several commodities, that a very abnormal situation would be created in the world if the countries did not choose to sit down and have some agreement and understanding about it.

Mr. JACKSON. Of course, my primary concern, Mr. Secretary, is for a private trader-call him the rugged individualist, if you want towho wants to raise his wheat and sell it as he pleases. What would happen to him under such an international system of control?

Secretary BRANNAN. The man under the Wheat Agreement today produces his wheat under reasonable assurances from his Government that when he takes it to the market place he will receive a fair price for it. His rights are not interfered with in any way, shape, or

form. That wheat then moves through all the normal channels of trade. These are not government-to-government agreements, in terms of the handling of the commodity. The commodity moves through the normal channels of trade, and as a matter of fact, in the negotiation of the Wheat Agreement, the grain trade representatives were there and I believe it is fair to say they acquiesced in the mechanical arrangements by which the business was handled by and through them.

As a matter of fact, today the United States is not exporting the wheat moving under the Wheat Agreement or outside of the Wheat Agreement. It is moving through the normal channels of trade, through the normal exporters, the normal millers that were handling it traditionally in this country over the last half-century or more.

Mr. JACKSON. Of course, as this readjustment comes about internationally; as a greater measure of production and a greater measure of rehabilitation is achieved in agriculture as well as in many other fields, is it not quite probable that there will commence to evidence itself, a considerable surplus in a great many different fields; not only in agriculture, but in manufactured products as well?

It appears to me that eventually there must come out of all this, a complex global system of production and marketing quotas and agreements and allocations-how much can be planted, when, wherewith other evidences of total state direction.

I say this not in a spirit of contention at all and again acknowledge that agriculture is a field about which I know very little.

Secretary BRANNAN. I am somewhat at a loss, Mr. Jackson, as to just what point you want me to direct my reply to.

Mr. JACKSON. Perhaps it is more of a comment than a question, but the one great matter of concern to me is this fear of an international agreement, or international agreements, that will place government in so dominant and controlling a position with respect to the private trader that unless the citizen acquiesces in allocations, quotas, and agreements, he will not be able to operate in the markets of world trade. Secretary BRANNAN. Mr. Jackson, you are entitled to be apprehensive about that but for my part I see no apprehensions in the negotiations that have been carried on so far, that any such result should be anticipated.

I do not believe, in the case of the one commodity in which we have worked out an international agreement-namely, wheat-that the representatives of the trade are apprehensive about it. They will appear before the committee, I assume, and tell you so, if they are apprehensive. However, they did not-I think without any exception-they did not oppose the Wheat Agreement and as a matter of fact, supported it when it last passed through the Congress.

Again I say to you that they are now handling the wheat as they did before and the benefit to them is very obvious, that they have an assured market within the price ranges.

Mr. CARNAHAN. Would the gentleman yield?

Mr. JACKSON. Yes, surely.

Mr. CARNAHAN. Is the American farmer selling more or less wheat as a result of the Wheat Agreement?

Secretary BRANNAN. The prewar exports of the United States of wheat averaged about 50,000,000 bushels. We have, since the war, and under the Wheat Agreement, been exporting, as Mr. Andrews said, well over 250,000,000 bushels annually.

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