We are going to insist Mr. O'NEAL. That is the definite answer. on section 22 and section 32 being safeguarded. Mr. MARTIN. Can you tell me what agricultural items we may expect to export in greater quantity? Mr. O'NEAL. You are going to have a large volume of tobacco, a large volume of wheat, you are going to have a large volume of hog products as we had in the past, we are going to have a large volume of fruits and vegetables. I would like to say right here, there are two lists of items, to show you back in the twenties, just why we did not have reciprocal treaties and what Germany did and Britain and a lot of other nations did. Mr. MARTIN. Can we expect any exchange of lard for vegetable oils? Mr. O'NEAL. I do not know. I will say this, that the Secretary of Agriculture handled it in a wonderful way during the war. Mr. MARTIN. We cannot rely on wartime economy. Mr. O'NEAL. We cannot rely on wartime economy, but, of course, those things take great ability and that is the reason we insist that the producers help formulate these policies. Mr. MARTIN. My State is rather interested in the production of butter. Mr. O'NEAL. Sure; lard, butter, and things of that sort; that is true. Mr. MARTIN. Now, there is an agreement, as I recall it, where Britain has agreed to buy New Zealand butter at 38.8 without 2 tariff. Our price is somewhat higher than that, 65 cents. How can we prevent England from taking the profit on New Zealand butter by shipping it into the United States, especially if this price protection is extended to imports? Mr. O'NEAL. Congressman Hope's bill, as I say, if you extend the section 22 privileges to the commodities in this program, should take care of it. Mr. MARTIN. All my questioning here is, of course, to develop the point that agricultural America has some real reason for concern in observing the developments under the proposed International Trade Organization. Mr. O'NEAL. Sure. Mr. MARTIN. I know you are fully aware of those problems but we are watching for results and I think I can say safely that reciprocity is not antagonistic to our interest in the Middle West, but there are many things going under the name of reciprocity. It seems to be a one-way street and far from reciprocal. Mr. O'NEAL. Farmers know by experience what happened after the other World War and they are just hoping that the Congress of the United States under your leadership will work out a program so that we do not have that again, and we know that we have got to trade. We know that to be a fact. We have got to trade. I want to read at this point what one of our distinguished Presidents said back in 1922, and I am quoting Warren G. Harding in a statement to Secretary Hughes: I am well convinced that the adoption of unconditional most-favored-nation policy is the simpler way to maintain our tariff policy in accordance with the recent enacted law (Tariff Act of 1922) and is probably the sure way of effectively extending our trade abroad. That is a pretty sound philosophy as a safeguard against what you have called attention to. I have another statement, Mr. Chairman, that I would like to put in. Mr. KNUSON. You may do so. Mr. O'NEAL. It shows that with high tariffs what the results were with hogs and all the other commodities and I would just like to straighten out one question. In addition to the direct concessions obtained, there is a mostfavored-nation provision in each trade agreement which automatically extends to American products reductions or limitations on tariff rates granted by the agreement country to countries other than the United States. For example, lower tariff rates on some 600 items formerly extended by Canada to France, but not to the United States, now apply to American commodities. It is estimated that approximately 20 to 25 percent of the persons engaged in farming and fishing and 15 percent of the wage earners in manufacturing industries in California owe their jobs to the export trade of the State. Now, Mr. Chairman, I would greatly appreciate it, if it is not asking too much, to put that statement in the record. Mr. KNUTSON. If there is no objection, it will so be ordered. (The information is as follows:) HOW HIGH TARIFFS HURT UNITED STATES EXPORTS Following World War I, nations resorted to almost every conceivable trade restriction. Even free-trade Britain used tariffs, import quotas, and preferential treatment for Empire countries. Most nations devalued their currencies, making it harder for imported goods to be sold in their own markets, and making it easier to export goods to foreign markets in competition with other nations. Wheat. Our exports (200,000,000 bushels annually) virtually disappeared. Germany increased tariff against our wheat from 42 cents per bushel to $3.84; France from 53 cents to $1.49, and then a virtual embargo; Italy from 73 cents to $1.69. Many European nations also put into effect milling regulations and import quotas which affected United Sttaes products adversely. Pork products.-We lost our foreign outlets for the equivalent of 8,000,000 hogs. Britain imposed a 10-percent duty against our lard; also applied a quota system favoring British Empire countries. Our sales of hogs to Britain decreased greatly, but Canada's increased over three times from 1932-34. Germany applied exchange controls against our lard and pork, and little or no allocations of money were made available for purchase of our products. Germany traded with European countries which had exchange clearance agreements. Cuba, next to England and Germany as a market for our hog products, virtually prohibited imports of our lard. Cuba increased the duty against our lard the equivalent of $1.45 to $9.60 per 100 pounds. Cuba also imposed a consumption tax of $1 per 100 pounds. Apples. The average import duty levied on American apples imported by European countries increased from 12 cents a bushel in the 1930-31 season to 60 cents per bushel in 1935-36 season. Import license taxes and other barriers also were established. Germany, which allowed no dollar exchange for purchase of American apples, was practically lost as a market for United States apples. Britain, our largest export market for apples, imposed a duty equivalent to about $1.45 per barrel and 44 cents a bushel against our apples, but admitted apples from Empire countries duty-free. Our export of apples to Britain dropped from 8,000,000 bushels annually during the 5-year period, 1926-30, to 3,500,000 bushels in 1933-34. Denmark, Belgium, and Argentina, and France reduced their takings of U. S. fruit. Tobacco.-100,000,000 to 150,000,000 pounds of our tobacco were displaced in foreign markets from 1920 to 1932 due to trade restriction by foreign countries. Mr. KNUTSON. We thank you for your appearance here. Mr. MILLS. Mr. Chairman, at this point in the record I would like to include statements by Messrs. Schultz, Shohan, and Erickson, including a table prepared by the Tariff Commission and another prepared by the Department of Commerce. Mr. KNUTSON. You have permission to do so. (The information is as follows:) THE EFFECT OF THE Trade AgreEMENTS UPON AGRICULTURE (By T. W. Schultz, C. J. Shohan, and A. Erickson) During the hearings on the extension of the Reciprocal Trade Agreements Act in January 1940 a vast amount of material was presented before the Ways and Means Committee. Included in the testimony and placed in the record were a series of economic studies by members of the staff of Iowa State College of the effect of the trade agreements upon American agriculture. The general findings were as follows: 1. Talk by politicians and propagandists to the contrary notwithstanding, nobody has been "sold down the river," by the trade agreements. 2. Trade between the countries with which agreements had been made had increased more than had trade with nonagreement countries. 3. Increased exports of nonagricultural commodities strengthened the home market for agricultural products by increasing employment and domestic purchasing power. The importance of this aspect of world trade should be more easily understood by agriculture after the present demonstration of the part played by war production in moving from surpluses to scarcities. 4. The farmers gained with all consumers where lower tariffs reduced the prices of imported goods, encouraged competition, and led to greater efficiency of production and exchange. 5. The reciprocal trade agreements halted, and to some extent reversed, the trend of growing economic isolationism within the British Commonwealth, France, and other nations. 6. The use of Executive proclamations not requiring Senate ratification has eliminated the old log-rolling procedure when the requirement of a two-thirds Senate majority made a reasonable downward revision of tariffs impossible. The use of the most-favored-nation clause has the beneficial effect of expanding trade and breaking down international discrimination; the selection of commodities on the basis of the principal exporting country has enabled us to obtain reciprocal reductions in tariffs so that the use of the most-favored-nation policy has not taken away our bargaining power. This report treated the trade agreements with Cuba, Haiti, Honduras, Nicaragua, Guatemala, Costa Rica, El Salvador, Ecuador, Belgium, Brazil, Sweden, Canada, Great Britain. Our_agreements with the Netherlands, France, Colombia, Finland, Switzerland, and Turkey were not treated. Since the above report was issued, a later study of the effects of the trade agreements upon agriculture was published in February 1941; this includes all the above agreements except the one with Turkey which did not go into effect until May 5, 1939, and hence was not operative during the period (January 1, 1936, to January 1, 1939) covered by the study. In this study the percentage increase or decrease in exports of particular agricultural commodities to tradeagreement countries was calculated when the postagreement period (1936-38) was compared with the preagreement period (1934-35). The percentage change in the same goods exported to all other countries was also calculated and the difference between these two proportions was attributed to the trade agreements. Thus, if exports of a commodity to trade-agreement countries increased 30 percent in the post agreement period, and increased 20 percent to other countries in the same period, then 10 percent of the increase to the agreement countries was attributed to the reductions in tariffs obtained under the act. In regard to imports this method could not be followed because the reductions in tariffs were generalized under the most-favored-nation treatment; all increases in imports, therefore, were credited to our tariff reductions. The results of this study are summarized as follows: 1. Exports of farm products (excluding reexports) to countries granting us concessions increased from an average of $37,400,000 a year in the preagreement period to an average of $64,200,000 a year in the postagreement period. This is an increase of 72 percent. Exports of the same commodities to countries not granting us concessions rose by only 12 percent during the same periods. This wide difference indicates that the agreements have been effective in expanding farm exports. 2. By making comparisons by countries and commodities through the method outlined above (with special period adjustments made for Cuba and Finland where the treaties went into force much earlier), the total increase in farm exports. attributable to trade-agreement concessions was $90,100,000 for the 3 years 1936-38. Distributed by countries and commodities the increases appear as follows: 3. Data for 1939 showed that this increase in exports attributable to the concessions obtained will be $100,000,000 for the 4-year period 1936 to 1939, inclusive. "Agricultural exports other than cotton to countries with which agreements were in effect during the greater part of the 4-year period rose in value from the 1935 level by $250,000,000, or by 70 percent. Of this increase, at least $100,000,000, or 40 percent, may be traced to the measurable direct effects of trade-agreement. concessions obtained by the United States." 4. Noncompetitive farm imports (mostly tropical products) on which duties were reduced in the agreements, averaged $4,111,000 per year during the 3-year postagreement period. This is an increase of $1,837,000 per year, or 81 percent above the 2-year preagreement period. Because these products are consumption items, reduced tariffs made them available at lower prices and the farmers benefited from this as did all other groups. The value of our sugar imports from Cuba. declined because of a fall in price but our domestic producers were protected by quota restrictions and a domestic susbidy policy. 5. Increases in the average annual imports of supplementary (more or less competitive) farm imports in the 3-year postagreement period compared with the 2-year preagreement period are as follows: Food specialties (endive, pickled onions, canned peas and mushrooms, candied nuts, fruits, and maraschino cherries) _ _ Wrapper tobacco.. Pineapples, brazil nuts, and castor beans_ Broken rice, maple sugar, cheddar cheese, gelatin, tulip bulbs, blueberries, poppy seeds, turnips-- Minor items (20).... Total increase... 99616-47-pt. 2-26 $3, 900, 000 400, 000 2, 400, 000 600, 000 200, 000 1, 100, 000 1, 100, 000 200, 000 200, 000 3, 000, 000 3, 400, 000 400, 000 16, 900, 000 1 Much of the increase in cattle imports was a result of the severe 1936 drought and cattle shortages in this country. The trade agreement limited imports at the reduced rate to a quota of 155,799 head per year. Imports exceeded the quota and came in at the old rate. Increased imports of many other agricultural products was due to increased purchasing power in this country and was associated with increased domestic prices. Actually the value of competitive agricultural imports and gross farm income tend to rise and fall together. With good prices on the domestic market farm income is high and the value of imports is also high. Similarly, there is a close relationship between the value of our agricultural exports and the value of our imports of competitive farm products. 6. If we compare the total increase in imports of competitive farm products of about $17,000,000 a year, with the total increased exports of farm products of about $27,000,000 a year, the favorable position of agriculture is made clear. Obviously, if we are to continue to export large quantities of farm products we must be prepared to accept more imports of non-competing foods and raw materials, or manufactured products, or competing agricultural products. As Mr. Goodwin expresses it, "The agreements have expanded United States agricultural exports much more than imports, and the moderate expansion of agricultural imports has been of such a nature as not to injure American farmers. In fact, a major weakness of the program has been that imports, particularly of industrial products, have not shown a greater increase." Source: Extension of Reciprocal Trade Agreements Act, Hearings, 1943, House Joint Resolution 111, pages 745-747. 1921-25 Trend of United States foreign trade, 1929–46—Total trade Average-annual 1926-30 1931-35 1936-40. Years 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940. 1941 1942. 1943 1944 1945 1 1946 1 1 Preliminary. Source: Publications of the U. S. Department of Commerce. |