The attempt was made in the House to compel the Treasury to follow the plain meaning of that language by writing in section 2 (c) of the bill before you, Mr. Chairman. This provides for an amendment of section 303 by inserting after the words "corporation shall" in the first sentence the words "through multiple official rates of its' exchange in terms of United States dollars or otherwise."

The reason for that was that it was attempted to make clear in the law that a multiple rate of exchange could be a bounty or grant.

The Treasury has avoided the issue, as it seems to me, by the argument that sometimes a rate of exchange, a multiple rate of exchange, is used for the purpose of raising revenue where it is used as a penalty. But the important facts, so far as we are concerned, I think, were confessed to this committee in the testimony of Mr. Southard.

I am reading the following sentences from his testimony. After having described some of the methods, the purposes for which a multiple rate might be used, he said (reading):

This is not to say that multiple rates of exchange may not be used in order to bestow bounties or grants. As I have indicated earlier, the Treasury has always felt that it is possible for a foreign country to utilize a multiple exchange rate system in order to bestow such bounties or grants.

There is the nub of this whole argument.

I submit that the facts before us demonstrate beyond peradventure of doubt that the 72-peso rate has been used as a bounty or grant to stimulate the exportation to the United States of wool tops.

I want to file for the record a letter which I received from the United States Tariff Commission. At the same time that I wrote to the Treasury Department I wrote to the Tariff Commission requesting the Tariff Commission to report the facts with respect to the effect of the multiple rates of exchange. I should be glad to file this with the reporter for the record.

The CHAIRMAN. Yes, sir; we will be very glad to have you do so. (The document referred to is as follows:)

UNITED STATES TARIFF COMMISSION,

April 28, 1952.

Hon. JOSEPH C. O'MAHONEY,

United States Senate.

DEAR SENATOR O'MAHONEY: Pursuant to the request in your letter of March 7, I am transmitting herewith a memorandum with respect to preferential exchange rates in Argentina and Uruguay and the effect upon the United States imports of wool tops. The memorandum does not undertake to discuss the effects of the multiple-exchange-rate practices of Argentina and Uruguay upon the combined imports of raw wool and wool tops and upon the wool-growing industry of the United States.

We are preparing for you material on the multiple-exchange practices of Nazi Germany and of Spain in recent years with respect to almonds for export to the United States. As soon as this material is ready, it will be sent to you. With best wishes, I am

Sincerely yours,

OSCAR B. RYDER, Chairman.

PREFERENTIAL EXCHANGE RATES IN ARGENTINA AND URUGUAY AND THEIR EFFECT UPON THE UNITED STATES IMPORTATION OF WOOL TOPS

INTRODUCTION

Large imports of wool tops from Argentina and Uruguay during 1951 and indications of even larger imports in 1952, particularly from Uruguay, at prices substantially below those of United States producers have materially contributed

to the current depressed condition of the domestic top-manufacturing industry. The effect of the increased imports has been accentuated because worsted business in the United States has been poor for over a year, and signs of an upturn are not yet evident.

Domestic production of wool tops in January 1952, which amounted to 14.7 million pounds, was about 11.5 million pounds less than in January 1951. Uruguayan official data on export sales indicate that approximately 10 million pounds of wool tops were sold to United States customers during the first quarter of 1952, and will probably be delivered by the end of June; in January-February 1952, imports from Uruguay were 1.7 million pounds. Imports from Argentina, nearly all of which were warehouse withdrawals, were 0.5 million pounds in January-February 1952.

The South American exporters have been able to sell tops in this market at prices below those of domestic tops of comparable grades through the application of preferential exchange rates. Wool tops may be exported from Argentina at a rate of 7.50 pesos to the dollar as compared with a rate of only 5 pesos to the dollar on exports of raw wool. Uruguayan wool tops may be exported at a rate of 2.35 pesos to the dollar and raw wool exports may be effected at a rate of only 1.519 pesos to the dollar. Thus Argentine tops have had an advantage of 50 percent and Uruguayan tops have had an advantage of about 55 percent over their raw material. One result of this situation has been the offering of South American wool tops in the United States at prices approximately the same as those of South American raw wool of corresponding grades; in some instances the tops have been sold for lower prices than the wool.

UNITED STATES INDUSTRY AND TRADE

Wool tops, an intermediate product in making worsted yarns, are combed wool sliver from which the shorter fibers (noils) have been removed by the combing process. Tops are marketed in recognized grades, identical with the grades of wool from which they are made; they are easily transported and enter extensively into national and international commerce. In the United States about two-thirds of the wool tops are combed by integrated mills for their own use or for sale and about one-third is produced by commission combers for so-called topmakers who sell their tops to worsted yarn spinning mills.

Summary of United States production and trade.-United States annual production of wool tops fluctuated appreciably in the period 1947-51, averaging a little over 300 million pounds in 1947-48, decreasing to 197 million pounds in 1949, increasing to 283 million pounds in 1950, and decreasing to 217 million pounds in 1951. The large increase in 1950 over 1949 may be attributed to the sudden upturn in business occasioned by the outbreak of hostilities in Korea, and the subsequent decrease in 1951 resulted from the fact that buyers' inventories were built up in anticipation of shortages which did not materialize.

United States exports of wool tops were large during World War II and in 1946 and 1947 because many countries which normally export large quantities of tops were unable to do so during this period because of war damage, enemy occupation, and other adverse economic conditions. Since 1947 domestic exports have been negligible.

During the 1930's and the 1940's, up to 1948, United States imports for consumption represented a small fraction of 1 percent of total United States production of wool tops. Prewar imports were not strictly comparable with the bulk of domestic production and were largely confined to tops of high grade and value, or tops of fiber not widely used in this country, such as camel hair and alpaca. Since 1947 imports have tended to increase substantially, and have been of grades (56's and 64's) and qualities competitive with the wool tops produced in the United States. Imports in 1951, amounting to 10.4 million pounds, were nearly 5 percent of domestic production in that year, and the ratio of imports to production, on a quantity basis, in the first quarter of 1952 was probably 10 to 15 percent.

Table 1 shows United States production, exports of domestic merchandise, and imports for consumption, specified years, 1937 to 1951.

TABLE 1.-Wool tops: United States production, exports of domestic merchandise, and imports for consumption, specified years, 1937-51

Source: Compiled from official statistics of the U. S. Department of Commerce.

United States production.-The production of wool tops in the United States has decreased considerably since the latter part of 1950. The worsted industry experienced a sudden upsurge in orders immediately after our troops went into Korea, when buyers increased their inventories to record levels as a hedge against expected shortages, and the individual consumer stocked up on clothing for the same reason. When it became apparent that clothing was going to be readily available, buying dropped off and fabric dealers and apparel manufacturers endeavored to reduce their inventories to normal requirements. For more than a year the top-producing industry has operated at considerably less than capacity, many plants have been operating on reduced shifts, and some have shut down.

Table 2 gives the production of wool tops in 1950-51, and in January 1952, by weekly averages.

TABLE 2.-Wool tops;1 United States production, by weekly averages, 1950–51 and January 1952

Machinery activity.-Another indication of the depressed condition of the domestic top-producing industry is given by official data on the hours of operation of combing machinery. Combing activity in January 1952 was at a postwar low. Table 3 shows weekly averages of the hours worsted combs were operated, by months, 1950-51, and January 1952.

TABLE 3.—Activity of worsted combs in the United States, by months, 1950–51, and January 1952

United States tariff.—The duty on wool tops was 37 cents a pound plus 20 percent ad valorem in the Tariff Act of 1930; the specific rate was intended to be compensatory for the duty on raw wool. Subsequent reductions were made as a result of the trade agreement with the United Kingdom (1939), and under the General Agreement on Tariffs and Trade at Geneva (1948) and at Torquay. The present rate, 274 cents a pound plus 64 percent ad valorem, became effective June 6, 1951. The ad valorem rate has been reduced the maximum allowable under present law.

United States imports.—Imports represented a negligible portion of United States consumption of wool tops until 1951, when they amounted to 10.4 million pounds and were equal to nearly 5 percent of domestic production, of which 7.6 million pounds, equal to 3.5 percent of domestic production, were from Argentina and Uruguay.

Before World War II, the United Kingdom, France, and Belgium were the principal suppliers, and those countries continued to be important suppliers in postwar years. Wool tops from Argentina and Uruguay, however, entered the domestic market in substantially increased quantities in 1950 and in much larger quantities in 1951; those two countries supplied 63 percent of the total imports in 1950 and 73 percent in 1951. United States imports for consumption, by principal sources, specified years 1937 to 1951, and January-February 1952, are shown in table 4.

TABLE 4.-Wool tops: United States imports for consumption, by principal sources, specified years 1937 to 1951 and January-February 1952

2 Less than 500 pounds.

3 Includes 83,000 pounds, valued at $71,000, in 1943, and 143,000 pounds, valued at $146,000, in 1947, from Canada.

Includes 202,000 pounds, valued at $295,000, from Italy, and 156,000 pounds, valued at $132,000 from Canada.

5 Includes 275,000 pounds, valued at $398,000, from Italy, and 213,000 pounds, valued at $309,000, from the Netherlands.

Includes 213,000 pounds, valued at $267,000, from Italy, and 164,000 pounds, valued at $228,000, from the Netherlands.

7 Less than $500.

8 Calculated on the exact (i. e., unrounded) figures.

Source. Compiled from official statistics of the U. S. Department of Commerce.