Competition: The principal competitor to china clay or kaolin in the United States is Great Britain and this competition is very serious because of the following factors: Great Britain enjoys a decided advantage in cost for materials shipped to this country. Its first advantage is that their labor rates are lower than the rates paid in the United States although recent comparative wage rates are not available. The following comparative data in the ceramics industry is iundicative of the differential in rates. The average weekly earnings and hours of work in the United States in August 1945 in the ceramic industry was $39 a week for a 42-hour week. On the other hand for the same period the average weekly earnings in the United Kingdom amounted to $16 for a 47-hour week.' Great Britain's second advantage lies in its low transportation cost and flexibility of movement. England may ship to points nearest to consumption thereby obtaining low inland freight rates as against the stationary and rigid costs of the domestic industry. Because of the fact that England imports more tonnage than it exports it follows that some of the ships would be routed to the United States without cargo. Rather than route empty ships to the United States these ships call at Fowey, Cornwall, England, for clay, and receive for this transportation the minimum ballast rate. In this connection it is to be observed that if the projected St. Lawrence waterway is ever completed it would place the United States producer at a still further disadvantage because of the low ocean transportation rates to inland ports. At the present time Great Britain is extending every effort to increase its foreign markets. There have been only slight relaxations from wartime controls and the British austerity program is still being maintained in all its severity to procure foreign exchange. Therefore, in order to maintain her markets Great Britain may resort to any means, such as dumping, subsidies, etc., to maintain or increase her markets. This will be facilitated by the present program of nationalization in Great Britain. Now that the coal industry has been nationalized the other extractive industries, such as clay, may be brought into this nationalization program and subsidies given to this particular industry. This would result in unfair competition to United States producers. Market outside of the United States: The world market, outside of the United States, for china clay or kaolin is approximately 1,000,000 tons, which is supplied principally by Great Britain. The United States has never, and is unable today, to compete under present conditions for this market. Therefore, if our domestic industry is to be in a sound condition and production maintained so that we are not dependent on foreign sources of supply for this basic raw material, the American market must be maintained for American producers. This industry, in the trade agreement negotiated with Great Britain in 1938, has already had a severe cut in tariff which became effective January 1, 1949. In the very year following this cut in tariff rates there was an increase of 25 percent in imports from Great Britain. Since 1939 the war has interfered with shipments and it is impossible to determine what might have been the full effect of this cut in tariff rates. I maintain that not only should the present rate of duty be retained but due to the differential in cost and the peculiar economics involved that the tariff rate should be increased. I earnestly request that the original tariff rate of $2.50 per ton be restored. Mr. Chairman, I would like to add to this presentation by saying that if this tariff interferes with the production of American clay it will put out of business the marginal or high-cost producers in this country. This leaves the low-cost producers in business. It results in a concentration of this business in a few large units. It may result in a reduction or shortage for the needs of this country for tis Army and for its Navy and for civilian uses. It may also result in unemployment and losses of capital funds. Mr. Chairman and gentlemen, thank you very much for this opportunity to speak. Mr. BROWN. Thank you, Mr. Winans. What proportion of your output is used for paper? Mr. WINANS. The largest percent of the total output is used for paper and I would say it would run about 70 to 80 percent. Mr. BROWN. Can you estimate how the balance of the production is distributed among its end uses? 1 Source U. S. Department of Labor press release 1945 and U. E. Ministry of Labor Gazette August 1945, pp. 130 to 139. Mr. WINANS. I would say the next largest user would be in rubber and then in ceramics. Mr. BROWN. What is the imported clay used for? Mr. WINANS. No; more for paper, I think. It is difficult to determine that because in the last few years, the imports have not been great, during the war, and just how it would be split up if we had a tremendous movement of material to this country I cannot now tell you, but it is true that a few years ago the largest part of it went into the manufacture of paper. Mr. BROWN. I had understood that it was principally used in pottery, and one reason for that was the preference of the domestic pottery manufacturers for particular formula to which they were accustomed. Mr. WINANS. There has been some preference for the use of English material for pottery, but it doesn't necessarily mean that more is used for pottery than for paper. I don't think we have ever been furnished with any statistics as to the exact break-down of the utilization of the imported clay. Mr. BROWN. But it is substantially competitive in the principal use? Mr. WINANS. Yes; it is very competitive with paper and ceramics, both. Mr. MACGOWAN. I wanted to ask about the British deposits. You said that a large part of the world market was being supplied by the United Kingdom, I believe, and that considerable quantities had come into this country. Are the British deposits so large that there is enough there for a great many years ahead? Mr. WINANS. Well, I do not know by observation, but I do understand that they are very extensive indeed. They produce practically 1,000,000 tons a year under normal conditions and they sell all of that. You see, their industry is very centralized over there. Most of the industry is in one corporation, although there are several other smaller ones. They have been very successful and very profitable indeed. Mr. MACGOWAN. Is the British product very similar to ours in composition? Mr. WINANS. Yes, sir; in its chemical analysis it is very similar. Mr. BROWN. Are there any other questions? You are interested only in kaolin and china clay? Mr. WINANS. That is right. Mr. BROWN. Thank you very much. Mr. WINANS. Thank you, sir. The SECRETARY. Mr. Harris, on behalf of the kaolin producers. TESTIMONY OF JOHN B. HARRIS, REPRESENTING THE KAOLIN CLAY PRODUCERS ASSOCIATION, INC., NEW YORK, N. Y. (The witness was duly sworn by the secretary.) Mr. HARRIS. My name is John B. Harris, from Georgia. I am speaking to you as secretary of the Georgia Kaolin Co., a member of the Kaolin Producers Association. May I say in the beginning that I am not unmindful of the beneficient purpose of these reciprocal trade agreements to promote the flow of trade between the signatory powers, but this purpose fails if the agreement constitutes the death sentence of a thriving American industry. There is grave doubt in my mind that the kaolin business can survive unless the tariff of $2.50 per ton under the act of 1930 is restored. The plant and mines of the Georgia Kaolin Co. are located at Dry Branch in central Georgia. Over 60 percent of all the kaolin of the United States is mined and processed in Georgia, mostly in the counties of Twiggs, Wilkinson, and Washington. These counties are near my home city of Macon where I was born and raised. I have had an excellent chance to observe the ups and downs of the clay business. I have seen the struggles of this infant industry in my section. In the beginning the United Kingdom furnished most of the kaolin used in the trade. For years, in the flow of trade, Great Britain would bring this clay over as ballast and deliver it with a minimum of expense to the trade along the eastern seaboard. The freight charge from Georgia to the eastern markets made it impossible to compete with Great Britain in price. For years the hills and valleys around my section were covered with the rusty machinery and rotting buildings of those who vainly attempted to meet this competition. This land is little good for cultivation and the people un successfully tried to mine it. Then this tariff of $2.50 was placed on kaolin and there was a steady rise in production. This tariff gave our people protection. Our people in these counties of central Georgia need this industry for existence. On the strength of the increased use of filler and coating clay in the paper trade, Georgia Kaolin Co. has invested large amounts in this section. Our labor costs have gone up, the cost of mining and processing has increased, the freight rates are higher and we canot now compete successfully with England without a tariff. I wish to speak briefly in conclusion in behalf of the owners of the lands in this territory. Most of the properties are leased and there are something around 200,000 acres of land leased by the kaolin companies. These landlords are looking to these payments for a livelihood. The land cannot be successfully farmed and these people of my State depend on the royalties and rentals for bread to eat. Will you seriously consider these facts in agreeing upon a treaty? Mr. BROWN. Mr. Harris, what is the demand for your product, has it generally been increasing over the past years? Mr. HARRIS. It has increased very much. It started to increase substantially in 1938 when they cut our tariff from $2.50 to $1.75. Our production didn't increase, and imports started to increase, when the war subsequently stopped. It had started to increase. But you are right, Mr. Chairman, there has been a steady increase and the trade has built itself up considerably in the last few years. Mr. BROWN. There has been considerable improvement in the quality of your product? Mr. HARRIS. That is very true. Mr. BROWN. And its adaptation to the uses of the customers? Mr. HARRIS. That is correct. Mr. BROWN. I take it that if those developments are continued there will be still greater improvement? Mr. HARRIS. We hope to improve. Mr. BROWN. What is your estimate in general expectation of the level of demand for your product? Do you expect it to continue to increase, or do you expect it to decline? Mr. HARRIS. It depends on how much competition we get. Mr. BROWN. I mean, the product as a whole. Mr. HAR.IS. We expect-you mean whether we can sell our product? Mr. HARRIS. I would say it would increase. They are finding new uses for it. Of course, as Mr. Winans said, the great proportion of it goes into the paper industry, for coating and for filler. The product is centered in central Georgia, in those three counties I have mentioned. I don't mean to say there are not other mines elsewhere, but 60 percent of it is mined right there. Mr. BROWN. I noticed that you referred to the fact that imports increased after the duty was cut. Domestic production and sales increased even more, though did they not? Mr. HARRIS. They increased, yes; but imports increased, too, and then the war came in there, Mr. Chairman, caught us in 1939 and 1940. At least, the submarine warfare became such that the English competition was not as great. Mr. MACGOWAN. Do you know whether the imported kaolin is coming in as ballast now? Mr. HARRIS. I believe it is. It is, yes. Mr. BROWN. Could you tell me what part of the country the principal paper mills using your product are located? Mr. HARRIS. In the Midwest and on the eastern seaboard up in Pennsylvania, New England and then Wisconsin, and Michigan. Mr. BROWN. Thank you. The SECRETARY. Mr. E. J. Grassmann. TESTIMONY OF EDWARD J. GRASSMANN, REPRESENTING KAOLIN CLAY PRODUCERS ASSOCIATION, INC., NEW YORK, N. Y. (The witness was duly sworn by the secretary.) Mr. GRASSMANN. My name is Edward J. Grassmann, president of the Georgia Kaolin Co. and president of Cold Spring Mining Co. Mr. Chairman; I think I can safely say that we are the largest producers of paper clay, and ceramic clay, outside of Ball Clay-I am talking about the kaolin in this country-our production of ceramic is 20,000 to 25,000 tons a year, and paper clay, probably 150,000. Now, statistics will show how small a portion of all the kaolin used in this country is used in ceramics. Therefore, you can understand that whenever the English increase their sales they must increase them primarily at the expense of the paper clay because there is only a certain market for the ceramic clays, and while it goes up and down a little each year, depending on economic conditions, the big place where the English have always struck, has been at the paper clays, when they have dumped and they have dumped at times. We went through a period after the last war when, partly because the English dumped, and then the local producers cut one another's throats to survive, the price of filler clay got down to $4 a ton, and at one time $3.60 and some of the kaolin producers did not survive and never came back. When England strikes again it will be through the Great Lakes and up in New England where they can get water shipments. They can charge anything they please. They have the bulk of their business on the continent where we cannot compete. They can charge what they please there and give it away in this country, as they have and will do again. We are under certain laws, among others the Robinson-Patman Act, and if we attempted to meeet the competition that they will give us in New England or in the Great Lakes region, we have got to cut the price for every customer in the United States, because we have got to charge the same to all for the same grade of clay or else we will spend a little time in Atlanta. Mr. BROWN. Do you have any coastwise shipping for your transportation? Mr. GRASSMANN. We have at times. Before the war we did. Into Maine and occasionally to Canada. Mr. BROWN. Does that effect any substantial saving in your transportation? Mr. GRASSMANN. It is the only way we have ever gotten anything into Canada, except during the war when the English couldn't take care of Canada. We have shipped to Canada by rail, not by water, for many years. Mr. BROWN. Why don't you use water? Mr. GRASSMANN. We are trying to use it but we have our rates. They are so high that there is even then we can't compete, we cannot meet competition through Canada and only occasionally in Maine. Now, the English have not gotten organized yet completely although the imports have jumped materially in the last 10 months of last year. They still have not had an opportunity to do their job as I think they will. Mr. BROWN. Is there a Canadian tariff on kaolin? Do you pay a tariff when you ship to Canada? Mr. GRASSMANN. I don't know. That is out of my sphere. I know we sign a lot of documents. We don't pay it because we sell f. o. b. in this country. Mr. BROWN. In your shipments the previous witness testified that there were a number of paper plants in the Wisconsin area-in your shipments to that area don't you have a clear-cut freight advantage? Mr. GRASSMANN. At the moment; yes, sir. I wouldn't say "clear cut." Where there is water shipment it is not so great. Mr. BROWN. Can you ship by barge through the Tennessee River, for example? Mr. GRASSMANN. No. We are located about 150 miles to 280 miles, dependent on the plants, from Savannah. We are not on any stream. When we do ship coastwise we ship to Savannah by rail and then by barge or vessel to the other points. The railroads arranged before the war for handling it at the Savannah port. Mr. BROWN. Do the southern paper mills use much of your product? Mr. GROSSMANN. No, sir. They are mostly craft mills. No good papers, that I know of, are made in the South at this time. Mr. BROWN. There are quite a few in the West Virginia area, aren't there? Mr. GRASSMANN. Yes. West Virginia Pulp & Paper Co. Not many in comparison with Great Lakes, the Ohio Valley, New York State, and the Maine paper mills. A very small percentage as far as tonnage is concerned. Mr. BROWN. Would it be principally in the Maine and New York areas that the British would have a great advantage? Mr. GRASSMANN. And the Great Lakes. They have come into Kalamazoo with boats and knocked us out. Mr. BROWN. At a normal price? Mr. GRASSMANN. I think it is a dumping price. Their price today is not a dumping price but they can dump and have dumped. Mr. BROWN. Of course, we have a provision in the tariff act about dumping. 99616-47-pt. 2—64 Mr. GRASSMANN. But we will go busted by the time that works out. It took about 2 years to stop it down here. The wheels don't move very fast sometimes and the pay roll goes on. Mr. WINTHROP G. BROWN, FEBRUARY 14, 1947. Chairman, Hanley Committee for Reciprocity Information, Washington, D. C. DEAR MR. CHAIRMAN: On behalf of the kaolin clay producers of the United States and, in particular, the Cold Spring Mining Co. of Cold Spring, Va., a producer which is located in Virginia, I would like to call your attention to the fact that this industry which has had a substantial development during the course of the past 10 years, is seriously threatened by any reduction in the existing duty now being levied on the importation of British clay or kaolin. Considerable testimony has been submitted to your committee on the behalf of the industry as a whole. In recapitulation, there are three important factors in considering the position of the American producer in relation to the British producer. These are namely: 1. Transportation costs. 2. Labor costs. 3. The depreciation in the pound. The market for the products of the Cold Spring Mining Co, is located largely in the northeastern and Atlantic seaboard region of the United States, which is easily accessible to the British producer and therefore, the question of transportation rates are of paramount importance. The following table depicts vividly the differences which exist in transportation rates: Comparison of carload freight rates on clay from Cold Spring, Va., to principal destination points versus imported china clay rates 1 The rate to East Walpole, Mass., is class 19 rate. This rate can be published on short notice and is therefore potential competition. The above points of destination represent approximately 62 percent of the total shipments from Cold Spring Mining Co. during 1945. With respect to the places starred in the foregoing table, it is to be noted that British ships can dock at all these destination points. Clay extracted from the Cold Spring Mining Co. is used by plants located in these cities. There is only a local switching charge on imported clays from these points of entry to the consumer plants in these cities. I therefore respectfully urge that the most careful consideration be given to all of the facts submitted to your committee by producers of this industry and not only should there not be any further reduction in the rate of duty now in effect but in view of the depreciation of the pound which has been substantial and in fact has given British producers a subsidy, consideration should be given to the question of raising the rate of duty to an effective level to compensate for the depreciation of the pound and in addition a proviso should be included that in the event of further depreciation a corresponding change in the rate of duty should be made to take care of this contingency. This is somewhat along the line of the proposal submitted by Senators Vandenberg and Millikin and agreed to by Under Secretary of State Acheson to provide escape clauses in trade agreements which would allow the United States to take the requisite action necessary to protect American producers from the harmful effects of unstable conditions existing in other areas of the world. Yours very truly, COLD SPRING MINING CO., By CURRY CARTER. |