Mr. MARTIN. But we have to judge the working out of a system by what is actually transpiring as to some specific items. Are you wholly satisfied with all developments under the reciprocal trade program to date?

Mrs. RUEBHAUSEN. Am I satisfied with all the developments under it, you say?

I believe it has increased our trade. I think that is a helping thing. Mr. MARTIN. Would you favor putting a higher protection on any item, such as I have described?

Mrs. RUEBHAUSEN. It depends again. I would have to say that I cannot answer that offhand. I think you have got to review these facts very carefully. That is why we have this committee on reciprocity set up, the trade agreements committee, where you have technical experts who can review the situation. I think that is a good thing, and I think you have got to have specialists reviewing it.

Mr. MARTIN. Thus far, I do not recall any agricultural items that have enjoyed an increased protection, and I do know that quite a number have had the tariff reduced.

I wonder if you, under any circumstances, would approve an increase in protection?

Mrs. RUEBHAUSEN. Certainly I would approve an increase if, after reviewing all the facts, I felt it was necessary.

Mr. MARTIN. I am glad to have that statement, because that is far-reaching in the agricultural field right now.

Mrs. RUEBHAUSEN. It depends on the situation.

Mr. MARTIN. I regret most of all an absolute, closed door to agriculture, because agricultural America has not forgotten the 1920's, and we must anticipate some possibility at least of a repetition of postwar conditions. If we go into this postwar period with an open mind on that point, that removes one of the big barriers I have to what is now taking place.

I am a little concerned about the policies that are now being carried out because of the history of what has been done, and I have used the illustration here of one item only for illustrative purposes, tapioca, its discovery in the starch field since the Smoot-Hawley bill was written, and the fact that our experts entered into a trade agreement with Holland to freeze it on the free list.

In the very same period of time, Holland was setting up a protective tariff against the imports of that same tapioca from their colony into Holland to protect the Holland potato growers.

I wonder if that is what you want to have carefully examined in the name of reciprocity.

Mrs. RUEBHAUSEN. As I understand the tapioca situation, we have to import most of it.

Mr. MARTIN. Yes; but it is highly competitive with corn, and I come from a corn State and I am interested in it.

I am glad to have your statement that you would be willing to review that and go into it with an open mind, possibly correcting certain developments in the field of agriculture. I used that only as an illustration.

Now in this matter of the cause of war, you have some very good statements there in your prepared statement on the matter of preserving peace.

Do you think that barriers that have been erected by Russia in trade will cause us to attack Russia?

Mrs. RUEBHAUSEN. I would not say at the present moment; no. I think it is difficult to deal with a country which indulges in state trading. As you know, we have had agreements to buy and sell with Russia for a number of years. They have worked out very satisfactorily, and I have never yet heard a businessman complain on those dealings.

I think that any nation which indulges completely in state trading has got power at its command, but I do not think Russia has abused that with use, in relation to our trade with her up until the present time.

Mr. MARTIN. Their use of the quota system is rather extensive, and do you think that will lead us to a clash with Russia?

Mrs. RUEBHAUSEN. Well, as I say, up to the present time our relations with Russia have been all right. I have not got a little crystal ball, so I do not know what is going to happen in the future.

Mr. MARTIN. Has the use of the quota system disturbed our relationship with Russia?

Mrs. RUEBHAUSEN. I think the use of the quota system is a very iniquitous thing.

Mr. MARTIN. Has it disturbed our relationship with Russia?
Mrs. RUEBHAUSEN. I do not know whether it has or not.

Mr. MARTIN. You stated that our relations have been very satisfactory.

Mrs. RUEBHAUSEN. I stated that as far as our trade directly with Russia is concerned, it had worked out very satisfactorily. As far as I know, I have never heard any complaints.

Mr. MARTIN. Notwithstanding their practices.

Mrs. RUEBHAUSEN. As far as I know, it has worked out perfectly satisfactory. If you are talking about, for instance, Russia's bilateral trade deal with Sweden, that is something else again. But as far as our direct relations in trading with Russia go, I have not heard any complaints about it, have you?

Mr. MARTIN. I would rather just get your opinion on that at this

moment.

Mrs. RUEBHAUSEN. Well, I have not.

Mr. MARTIN. Yet, they have some very drastic policies that they are following in the matter of trade restrictions, have they not? Mrs. RUEBHAUSEN. Yes; they do.

Mr. MARTIN. Is it your position that if our adoption of policies not as restrictive as Russia's is followed, it will lead Russia to take issue with us?

Mrs. RUEBHAUSEN. I would not care to answer that question, Mr. Martin. I think you have to wait and see. As you know, under the ITO, the project for State trade is put on the basis of commercial interests being dominant more than political interests being dominant. I think that is all to our good.

With any nation and state trading, they are like the chain store and the independent store. If the chain store wants to ruin the independent store that moves into a town, it probably can, but it does not have to. We have many chain stores, and many independent grocery stores, both in the same community and both having a profitable business.

Mr. MARTIN. Well, I am particularly interested in our trade relationship with other nations in the time ahead, and that this program carried out will insure peace and is necessary to insure peace.

I am trying to confine my remarks along that line, because I am decidedly interested in the matter of national defense and our foreign policy that affects our peace.

We are all struggling for the preservation of peace, but I do not want factors thrown in there out of proper balance in trying to attain that objective.

That is all I am trying to drive at here. I cannot see reciprocity in the picture where the restrictions followed by Russia seem to give rise to no alarm in our relationship or dealing with them, and yet I am given to feel that your position is that if we engage in something even less restrictive, we are carrying such a chip on our shoulder as to disturb the peace of the world.

I want to be logical in this thing, and if it is a one-way street, then I want to take out the name "reciprocity."

Mrs. RUEBHAUSEN. As you well know, Russia has not made an appearance at the trade conference. I wish she would, rather than would not, but if she does not, we certainly cannot negotiate with her at that conference. We can negotiate with the other nations, however; and you know as well as I do that if you set up a bilateral trade agreement between two countries for political reasons, the United States is shut out of that trade as well as other countries are.

I think that is something we ought to try to prevent.

That is why I feel the goal of the Geneva Conference is to try and stop those things. There are countries like Czechoslovakia, which are in a very difficult position.

They do not know whether to negotiate with us or have a bilateral agreement with Russia.

Mr. MARTIN. If we go ahead and organize all the rest of the world except Russia under ITO, you feel that will insure peace?

Mrs. RUEBHAUSEN. I cannot say it will insure peace, because naturally no trade agreement has ever insured peace. There are various factors in the situation. I mean, we are all better off if nations are healthy, just as if people are healthy. You find if you have living in the slums, they are apt to get disease more quickly.

It is the same thing with nations. If they are allowed to trade freely among each other, they are apt to be more prosperous, and thus the chance of war is less.

You cannot say that that is the only factor involved, because it is not.

Mr. MARTIN. The volume of trade alone, irrespective of conditions under which it is installed, is not in itself a guaranty of peace, is it? Mrs. RUEBHAUSEN. That is correct.

Mr. MARTIN. Is it?

Mrs. RUEBHAUSEN. No; it is not.

Mr. MARTIN. That is one far-reaching point in my mind.

Mrs. RUEBHAUSEN. There is no one thing that is a guaranty of peace. It is coupled with a good many things.

Mr. MARTIN. You feel that trade under satisfactory conditions is desirable for good relations.

Mrs. RUEBHAUSEN. Yes; it is.

99616-47-pt. 2—15

Mr. MARTIN. I agree with you wholeheartedly on that, and I do want to enter my plea for true reciprocity. Lack of reciprocity, such as I outlined in my illustration of tapioca, illustrates my point that we can make many deals in the name of reciprocal trade that are not reciprocal. The other point I wanted to make is that I want to keep the same ideal before me for peace. I do not want to use reciprocal trade in an emotional sense to cover up something that I think may or may not be conducive of war and not truly achieving the ideal of peace.

That is all.

Mrs. RUEBHAUSEN. I am glad you are working for peace, too.
Mr. REED. Are there any further questions?

Mr. Holmes?

Mr. HOLMES. I was interested in the comment you had to make concerning taxation. Without putting words into your mouth, did I understand you to say that all increased prices from taxation were passed on to the consumer?

Mrs. RUEBHAUSEN. No; I certainly did not say that. In some cases, the duties are paid abroad before they come here, and some are paid here by the exporters. Sometimes they pass directly to the consumer, sometimes indirectly. The same thing is true of the sales tax. Mr. HOLMES. Is it true that the incidence of the tax always hits directly the consumer?

Mrs. RUEBHAUSEN. I think in general that is the tendency. I do not think it is necessarily true in every case, but I think it is pretty well recognized about the sales tax that it does hit people, and I favor something like the income tax which is based more on ability to pay. Mr. HOLMES. Are there any other factors in your concept of taxation besides ability to pay?

Mrs. RUEBHAUSEN. Why, certainly, there are other factors.
Mr. HOLMES. What would be some of them?

Mrs. RUEBHAUSEN. Well, for instance, in New York State we have taxation on gasoline, which is used to maintain roads. Mr. HOLMES. You have the benefit concept, then?

Mrs. RUEBHAUSEN. That is used in New York State. There are many different theories on taxation. I think ability to pay is probably the most important consideration in taxation. There are other considerations.

Mr. HOLMES. I agree such as flexibility and convenience, economy, and so forth.

Mrs. RUEBHAUSEN. Certainly.

Mr. HOLMES. Are you aware of the conditions of incidence in taxation other than shifting the burden to the consumer? Are you aware of the principles that you have got to go into before you can make an over-all statement on shifting taxes, such as increasing costs, large or small taxes, taxes derived from monopoly, those derived in competition?

Mrs. RUEBHAUSEN. Yes.

Mr. HOLMES. You did mislead here a little, did you not, in relation to price and taxes, because they are very much more involved than just assuming point-blank they are always shifted in full to the

consumer.

Mrs. RUEBHAUSEN. I did not mean to say they are shifted to the consumer in every case.

takes the brunt of it.

I think the consumer usually is the one who

Mr. REED. Are there any further questions on either side?
We thank you for your appearance and testimony.

Mrs. RUEBHAUSEN. Thank you, Mr. Reed.

Mr. REED. I will insert in Monday's transcript a letter from the president of the Pacific Coast Clam Packers Association. They are apparently not appearing, but I wish to have this information in the record.

(The letter referred to will be found on p. 601.)

Mr. REED. Is there anybody here representing the tool-steel industry?

If not, the next witness will be Mr. Carl L. Wilken, economic analyst, Raw Materials National Council, Sioux City, Iowa.

STATEMENT OF CARL L. WILKEN, REPRESENTING THE RAW MATERIALS NATIONAL COUNCIL, SIOUX CITY, IOWA

Mr. WILKEN. Mr. Chairman, in order to save time, I could speak extemporaneously and point out some basic factors, but I would like to have my statement included in the record.

Mr. REED. It will be placed in the record at this point. (The statement is as follows:)

STATEMENT SUBMITTED BY CARL L. Wilken, oF SIOUX CITY, Iowa

Mr. Chairman and members of the Ways and Means Committee, my name is Carl H. Wilken, of Sioux City, Iowa, economic analyst for the Raw Materials National Council of Sioux City, Iowa. The Raw Materials National Council has carried on independent economic studies for a period of 10 years for the purpose of ascertaining and pointing out the relationship that exists between the different segments of our economy.

On February 5 I appeared before the reciprocity committee on behalf of the North Central States Commissioners, Secretaries and Directors of Agriculture. I am using the same statement before your committee. It expresses the facts as I see them on a subject that is the same. I have appeared before your committee at various times and you will find that this statement is in accord with my statements in the past. Propaganda has not changed the facts.

As heads of the departments of agriculture in 11 Midwestern States, this association represents a large part of our agricultural industry, the foundation of our economy. In passing I would like to point out that our agricultural industry in comparison has 10 times the capital investment of both the steel and automobile industries combined and employs 10 times as much labor. Its importance in our economy is being underestimated by many of our economists who place all the emphasis on durable manufactures which are in reality the result of prosperity in our agricultural industry. They do not seem to realize that agriculture in its livestock industry has a processing plant or in other words, small factories which process more tonnage of raw materials than all other industries in the United States. What is more important, the factory process in agriculture must take place prior to the entry of these products into our nondurable manufactures which make up approximately 75 percent of all manufacturing, trade and service both in employment and income.

On December 15, 1946, I filed with your committee a brief in behalf of the association, requesting that they be permitted to appear before your committee. The position of the association at that time, and now, is, that the reciprocal trade-agreement program with its theory of tariff reductions to promote foreign trade, has been against the best interests of agriculture and in turn every segment of our economy.

It is their studied opinion that the trade agreements as made and administered did not increase our foreign trade but that on the other hand through tariff reduc