I do not really understand this contention. The price and income protection for domestic sugar producers stems from section 201 of the act which requires the Secretary of Agriculture to make available a supply of sugar that will be consumed at prices that will not be excessive to consumers and that will protect the welfare of the sugar industry. That section provides further detailed guidance to assure the attainment of the general objective of fair and stable prices. The administration subscribes without reservation to the philosophy that American farmers should be enabled to participate with all other segments of our population in the abundance this country has to offer. The administration in drafting its recommendation provided assurance that when foreign sugar enters the flow of commerce in this country it would be priced at a level consistent with the terms of section 201 of the Sugar Act. The mechanism provided is simple and it is sure. All foreign sugar coming into this country must pass through a customs port of entry. Right now under the present Sugar Act, no quantity of sugar in excess of 100 pounds may be entered without the collector of customs having in his possession a quota clearance certificate issued by the Department of Agriculture. The administration proposes that such clearance certificates for foreign sugar other than from the Republic of the Philippines be issued only upon payment or binding agreement to pay an import levy approximately equal to the difference (after adjusting for freight and most-favored-nation tariff) between the world market price of sugar and a domestic price consistent with price objectives of section 201. The fee would be varied from time to time whenever necessary. Thus, after this sugar is cleared through customs it is priced in conformity with the price of domestic sugar similarly situated. 2. A number of persons have expressed fears that permitting all friendly countries to compete on the basis proposed would not provide the security of foreign sugar supply obtainable under a system of individual country quotas. The validity that this argument may have had disappeared when Castro took over Cuba and reoriented the entire life of that country. It is true enough that Cuba once maintained ample supplies of sugar throughout every month of the year to serve whatever surges might occur in the demand for sugar in the United States. But this is the past. No country today produces and has available supplies of sugar for export in the quantities that Cuba once had. In July 1960, when we discontinued sugar importations from Cuba, a number of our other supplying countries had recently accumulated surpluses, in some cases to embarrassing proportions. The two events happened to occur at about the same time. But in the last 2 years we have drained those surpluses away and current exportable supplies from those countries as well. For more than a year, our foreign supplies available under a strict allocation basis have been shipped hot from the mills. A natural disaster in any one of the countries, a strike or other economic emergency, or a miscalculation as to production potential interferes with the flow of sugar from that source. This can no more be corrected quickly than it can be foreseen. It disturbs the marketing of domestically produced sugar which becomes available in quantities in the closing quarters of the year. It disturbs the price stability that is so desirable under this type of legislation. Summertime foreign supplies, when demand is heavy, are distressingly meager and last quarter supplies are embarrassingly large when the mainland areas are in the midst of their heavy production. The fact is that the insecurity and instability of our foreign supplies would be corrected under the administration's recommendation and consumers would have the security of supplies that they have not known in the last 2 years. In the global quota of more than 2,585,000 tons, all of the friendly countries could compete for a share of our market, and our refiners would have all of these sources from which to obtain their suppiles as needed. If a stoppage occurs in the flow from one source, additional quantities are readily available elsewhere. The situation reverts in essence to what it was when Cuba maintained a large reserve and made it available when and as needed. 3. It is said that the economies of a number of our quota-supplying countries are geared to the premium price of the American market and will suffer in making the adjustment to the world market price level, even if that market rises somewhat following the merger of our foreign requirements into the world market. It is true that the adjustment could better have been made 2 years ago than now. On the other hand, many of these countries had burdensome supplies of sugar at that time which were beginning to create severe economic problems. As a result of the Cuban windfall, those countries supplied many times the quantities of sugar they had previously been permitted to market in the United States. Aside from the Republic of the Philippines whose premium price status is unchanged under the proposed amendment, all foreign countries other than Cuba collectively supplied less than 300,000 tons of sugar annually to the United States prior to July 1960. Under S. 3290 which embodies the administration's recommendation, they would retain quotas somewhat larger than they had 2 years ago and the premium on this sugar would be reduced gradually until eliminated at the end of 1965. It is certainly better to begin eliminating the quota premium now than at any time in the future when, if not eliminated, the sugar economies of those countries would be even more firmly geared to our premium price. If this occurs and the Communist regime in Cuba falls, either there will then be little opportunity in our market for Cuba or an even more difficult adjustment will have to be made in the sugar economies of the other countries. 4. It has been said that the determination and imposition of a variable import levy by an executive department places too much. power in that department. I am sure the members of this committee know that the Sugar Act for many years has authorized the Secretary of Agriculture to establish the total supply of sugar that can be marketed in this country. His direct actions with respect to sugar supply under this authority have had an indirect but very sure effect on prices-in fact, exactly the same effect as the determination of the amount of the variable import levy would have. S. 3290 provides adequate guidance to the Department, both as to the amount of the import fee to be established and the supply of sugar made possible by the total quotas including the so-called global quota. 5. It is said that the imposition of the variable import levy will be regarded as an unfriendly act by many of the countries that have supplied our sugar, This is inescapable but in time will be relegated to the past. On the other hand the experience of the last 2 years makes it very clear that our present sugar import policy wins us no friends. Regardless of the terminology used, such as "quota" and "nonquota" sugar, when a country receives an allocation for one period it expects one of greater or equal size in each succeeding period. Misunderstandings have arisen because of the irregular nature of the allocations. Countries that have not received allocations have felt even more strongly that they have been subjected to discrimination. Failure to receive allocations and the receipt of allocations, alike, in the past 2 years have produced misunderstandings and in some cases ill will. 6. It has been said that buying our foreign requirements at the going price is contrary to our national policy of trying to improve the market for basic commodities, particularly those produced in Latin America. It is difficult to understand how the practice of buying sugar from selected countries at very high premium prices without ability to tailor production to market needs could contribute to sound and orderly markets for basic commodities. Conversely, the opening of our market to all friendly cane sugar exporting countries would certainly improve the international marketing climate for sugar and because of the enlarged marketing opportunities support the price of sugar eligible for entry here that moves in world trade. 7. It has been said that current production costs are higher than the world price for sugar. This may be but, if so, a substantial contributing factor has been the hope of disposing of exports in the U.S. premium priced market. Furthermore, these hopes undoubtedly have given rise to production plans in high-cost producing areas. The most obvious solution for bringing prices up to a profitable level is to remove a device which can only in the long run bring about overproduction, disorderly markets, and unprofitable enterprises. With respect to the importation of direct consumption (refined) sugar, S. 3290 retains without substantial change the direct consumption limitations of the present act except that the 375,000-ton limitation within the proration for Cuba would be reduced to 250,000 tons when we are in diplomatic relations with that country and eliminated completely at other times. This change is recommended to compensate the cane sugar refining industry for its percentage loss of the total sugar market stemming from the fact that refined beet sugar marketings have been increasing at a faster rate than total market growth. S. 3290 which embodies the administration's recommendations with respect to the Sugar Act provides needed changes to bring the sugar program into conformity with the situation that now exists and to make it viable for the changes which may occur before the end of 1966. Mr. Chairman, and members of the committee, as you know, the House bill departs very substantially from the administration's recommendations with respect to imported sugar. H.R. 12154 increases the basic quota for foreign countries other than Cuba by about 1,085,000 tons, reduces the quotas reserved for Cuba when it returns to the hemispheric community of nations to 1,500,000 tons, and allocates that quota for the balance of this year and next year to 11 of the 29 countries which are granted basic quotas. The report on the bill indicates that Congress will review the temporary allocations of the Cuban quota after 1963. The House bill further provides that the quota premium will continue to be paid on all foreign sugars. There is one additional special provision of the House bill, not recommended by the administration, to which I wish to call attention. Section 18 of H.R. 12154 provides for the refund of more than $22 million collected as an entry fee on the nonquota purchase sugar which the act provided for the Dominican Republic during the last half of 1960 and the first quarter of 1961, a period within the Trujillo regime. In March of 1961, the act was amended to relieve the President of the requirement that he purchase nonquota sugar from any country with which we are not in diplomatic relations. No further nonquota purchase sugar was purchased from the Dominican Republic until this year by which time diplomatic relations had been resumed with the present Government of the Dominican Republic. No fee was collected at any time on the sugar which came into this country within the statutory quota for the Dominican Republic. Two of the companies, or their successors, who paid the entry fee on nonquota sugar in order to market it have brought actions in the Court of Claims to recover the fees that each paid. It is the opinion of the responsible legal authorities of the Government that the fees were properly and legally imposed and it is our feeling that the litigation should be permitted to proceed without legislative interposition. For the above reasons the Department of Agriculture feels strongly that the program recommended by the Secretary of Agriculture in his letter of May 14, 1962, to the Vice President and the Speaker of the House constitutes a sound and desirable basis for amending and extending the Sugar Act. We would now like to renew those recommendations and urge that this committee amend H.R. 12154 accordingly. Mr. Chairman, that concludes my prepared statement. I am accompanied here by Mr. John Bagwell, the General Counsel of the Department, who is an old hand at sugar legislation, and by Mr. Larry Myers, the Director of the Sugar Division of ASCS, who has been engaged in administering this act for many years, and between us, we will be delighted to answer questions the committee might have. The CHAIRMAN. Thank you very much, Mr. Secretary. Senator Kerr? Senator KERR. Mr. Secretary, I have a staff memorandum that is designated "Summary of quotas proposed in H.R. 12154 as passed by the House of Representatives." Have you seen that memorandum? Mr. MURPHY. No, sir; I have not Senator KERR. I wonder if somebody would hand him a copy of it. As I look it over, I see the domestic basic quota share is as follows: Beet sugar, 2,650,000 tons; cane sugar, 895,000 tons; Hawaii, 1,110,000 tons; Puerto Rico, 1,140,000 tons, and Virgin Islands, 15,000 tons. Can you tell me whether the Hawaiian quota is beet sugar or cane sugar? Mr. MURPHY. Cane sugar. Senator KERR. That is cane sugar? Mr. MURPHY. Yes, sir. Senator KERR. Can you tell me whether the Puerto Rican quota is cane sugar or beet sugar? Mr. MURPHY. Cane sugar. Mr. MURPHY. Cane sugar. Well, then, of the 5,810,000 tons, 2,650,000 tons are beet sugar, 3,160,000 are cane sugar? Mr. MURPHY. Yes, sir; I believe that is correct. Senator KERR. Now, you said something in your statement about great increases in the last year or two in the quotas for domestic production. Mr. MURPHY. There would be substantial increases, Senator, under this bill in the basic quotas over the basic quotas provided for in existing law. Senator KERR. I thought you said there had been substantial increases in the last year or two? Mr. MURPHY. There have been sizable Senator KERR. Where is that part of your statement? Mr. MURPHY. I do not remember that particular statement. There have been substantial increases in production in the last year or two, although not substantial increases in basic quotas. The increases in production have come about because there have been no controls during the last couple of years. Senator KERR. Well, where has that increase been? Mr. MURPHY. Sir? Senator KERR. Where has that increase been? Mr. MURPHY. It has been some increase in both the beet and in the cane sugar areas. sugar areas I think I now recall the part of the statement to which you refer. Senator KERR. Would you tell me where that is? Mr. MURPHY. There has been a very substantial increase in plantings in Florida, particularly this year, 1962. |