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(There was discussion off the record.)
Senator Young. On the record again, Dr. FitzGerald, could you answer that? There was this exchange of letters between Mr. Hoffman and Secretary Brannan. Do you recall whether Secretary Brannan had agreed to absorb the losses?
Senator HOLLAND. My point is this. The Appropriations Committee, as I understood it, and I was conferring with them from time to time while they had the ECA appropriation before it, was to make a very real effort to cut the amount of the ECA budget and the ECA appropriations.
Unless they meant it so, I think they would feel that they had not created any very real cut as to this $60,000,000 if they simply reduced the amount of the ECA appropriation bill by that amount, but had passed on to another Government corporation the obligation of meeting that same amount of the expense of acquisition of wheat for ECA countries.
Senator Young. That is correct, Dr. FitzGerald, that Secretary Brannan did agree to absorb it?
Dr. FITZGERALD. Yes.
Senator HOLLAND. You see, I think we must have a clear showing in the record, if there is about $60,000,000 involved here, whether or not it has actually been a saving in the ECA budget or whether or not it has just been passed on to another Government department where it would not appear in the appropriations.
Senator YOUNG. According to the testimony of Mr. Hoffman before the Appropriations Committee, they did reduce their budget by either 60 or 80 million dollars. Am I correct in that, Dr. FitzGerald?
Dr. FITZGERALD. Yes, sir; you are, Senator.
In that connection, Senator Holland, Senator Thomas of Utah, in discussing the international wheat agreement itself before the Senate, said:
As you know, the maximum in the agreement is 180 on the basis of that figure, and wheat prices as of March 1, 1949, are now estimated at the cost for subsidy purposes, will be about $64,000,000 for the 1949 market year. If we recall that the wheat trade operates under price-support program, the subsidy here in question becomes relatively small. As a matter of fact, it is expected that a large part of the subsidy will be returned to the United States Treasury due to savings by ECA in its purchases of wheat. ECA estimates that if it could buy wheat at $1.80 a bushel under the agreement, it could save $60,000,000 of its estimated cost for the coming year and its appropriation for the coming year has been cut to that extent.
Senator HOLLAND. Was its appropriation cut?
Dr. FITZGERALD. Yes, sir; it was. It was cut more than that, as a matter of fact, Senator.
Senator HOLLAND. I mean as to this particular item. Was that cut off?
Dr. FITZGERALD. Yes, it was cut off in this way. It was reduced specifically by the House Appropriations Subcommittee. Then the House full committee and the House made it a fat 10-percent cut in the ECA appropriation.
When we came before the Senate Appropriations Committee, Mr. Hoffman placed before the Senator a request for $4,015,000,000, which represented a reduction from the request he had made to the House. That reduction included the three items that I mentioned
earlier in my testimony, one of the three being the $60,000,000 expense saving on wheat.
(The information filed by Dr. FitzGerald is as follows:)
LEGISLATIVE HISTORY OF ECA APPROPRIATION FOR THE FISCAL YEAR 1950
DEMONSTRATING REDUCTION OF $60,000,000 to REFLECT SAVINGS PossiBLE UNDER INTERNATIONAL WHEAT AGREEMENT
1. The legislative history of the foreign-aid appropriation bill, 1950 (H. R. 4830), demonstrates that the ECA appropriation for the fiscal year 1950 was specifically cut by $60,000,000 to reflect savings in connection with financing of wheat purchases by ERP countries which would be possible under the international wheat agreement. The $60,000,000 cut, which was initially recommended by the Subcommittee on Foreign Aid of the House Committee on Appropriations at the outset of congressional consideration of the ECA appropriation, was intended to reflect the saving ECA would obtain by being able to acquire wheat at the agreement price of $1.80 per bushel. It was estimated that the international wheat agreement would require the payment of a subsidy of $84,000,000, of which $60,000,000 would represent the payment in connection with ECA-financed shipments of wheat. In return for the cut of $60,000,000 in the ECA appropriation for fiscal 1950, it was clearly understood that the $60,000,000 subsidy on ECAfinanced wheat would be borne by an agency other than ECA, namely, the Department of Agriculture.
2. The initial report on the foreign aid appropriation bill, 1950, made by the House Appropriation Committee subcommittee, which was later recalled by the full committee because of the committee's decision to make additional cuts in the ECA appropriation, should be referred to in order to fully understand the history of the $60,000,000 cut relating to the international wheat agreement. The House committee report flatly stated that in suggesting a reduction of the ECA appropriation to $4,015,000,000, it made, among other reductions, a reduction in an amount "of $60,000,000 based on the expected ratification of the international wheat agreement now being considered by the Senate.” The committee also pointed out that "in the event that prices do not decline to the extent suggested, and the international wheat agreement is not ratified as anticipated, and compensating savings cannot be found by the Administrator, the ECA is expected to reappear before the committee for such funds as may be needed to carry out the program presently contemplated.” The public nature of the recalled report is emphasized by the fact that it was extensively quoted in the newspapers in reporting the actions of the House Subcommittee on Foreign_Assistance of the House Committee on Appropriations. See the dispatch by Felix Belair in the New York Times for Wednesday, May 25, 1949.
The pertinent portions of the recalled House subcommittee report are incorporated by reference at two places in the hearings before the Senate Appropriations Committee on the ECA appropriation. At page 653 in a letter to the chairman of the Senate Appropriations Committee, Representative John Taber, a member of the Subcommittee on Foreign Assistance of the House Appropriations Committee refers to the recalled report when he states,
These savings on wheat were only in part considered by the House committee but illustrated how one single item can affect this bill
Mr. Hoffman's letter to the chairman of the Senate Appropriations Committee, commenting on Representative Taber's letter, refers to the House subcommittee's report when he states, “The following table, prepared in the same form, reflects the actual cuts which can be made from the original ECA and GARIOA appropriation requests by virtue of the signing of the international wheat agreement. As you know, the House Appropriations Subcommittee allowed for this savings in its recommendation and it is, therefore, reflected in the appropriation for fiscal year 1949–50 of $4,015,000,000 approved by this subcommittee” (p. 881 of Senate Appropriation Committee hearings on foreign aid appropriation bill, 1950).
3. There is equally clear evidence in the hearings before the Senate Appropriations Committee that the figures submitted by ECA to the Senate committee, which were based on a spending rate of $4,015,000,000 for 12 months (the same rate adopted by the House subcommittee), already encompassed the cut of $60,000,000 reflecting anticipated savings under the international wheat agreement. Thus, in his opening statement before the Senate Appropriations Committee, Mr. Hoffman stated,
In addition the House Appropriations Subcommittee, viewing favorably the prospects of Senate ratification of the inter
national wheat agreement in the near future, decided to allow for the lower export prices of wheat provided for in that agreement, which we calculated would make possible a further reduction of $60,000,000 in the ECA appropriation (p. 6 of Senate Appropriations Committee hearings on foreign-aid appropriation bill, 1950). Again, at page 681 of the Senate hearings, in response to a question posed by Senator Young, Mr. Hoffman stated: “* * Actually, today, as you know, Senator, the wheat that we are selling in our program is being paid for at the rate of around $2.50. After August 1 the European nations will get much of it for about $1.80. The Department of Agriculture is supplying about $60,000,000 to cover the difference between the support price of wheat we have to buy and the guaranteed price under the wheat agreement.'
4. In the Senate debates of June 13, 1949, on the ratification of the international wheat agreement, Senator Thomas of Utah, the Administration's proponent of the agreement, stated that ECA had received a cut of $60,000,000 in its appropriation for fiscal 1950 because it was to obtain wheat at the agreement price of $1.80 per bushel. In the portion of the debate quoted .below it was clearly indicated that there would be a subsidy of $84,000,000 in connection with the wheat price of $1.80 per bushel, which subsidy would be borne by an agency other than ECA. “Mr. THOMAS of Utah.
As Senators know, the maximum in the agreement is $1.80, and on the basis of that figure and wheat prices as of March 1, 1949, it is now estimated that the cost for subsidy purposes will be about $84, 000,000 for the 1949-50 market year.
If we recall that the wheat trade operates under a price-support program, the subsidy here in question becomes relatively small. As a matter of fact, it is expected that a large part of that subsidy will be returned to the United States Treasury due to savings by ECA in its purchases of wheat. ECA estimates that if it can buy wheat at $1.80 a bushel under the agreement, it can save $60,000,000 of its estimated cost for the coming year, and its appropriations for the current year have been cut to that extent. Thus, it would appear that the subsidy figures will be offset by savings of a substantial character *
“Mr. HYE. Did I understand Senator correctly to say that th ECA requirements would be taken out of the 168,000,000 bushels provided for in the treaty?
“Mr. Thomas of Utah. They will make their savings because, so far as the ECA wheat goes to the countries which are parties to the agreement, buyers of our export wheat in accordance with the agreement, the ECA has promised to give them so much wheat, which we ourselves pay for, and they are able to buy it at the Government figure, $1.80, instead of at the market price of wheat as it is today, $2.25.” (Congressional Record, June 13, 1949, p. 7729.)
Mr. PAREL. That concludes my testimony, Senator.
(The document above referred to follows:) STATEMENT FILED BY DON PAREL, ASSOCIATE DIRECTOR, WASHINGTON OFFICE,
AMERICAN FARM BUREAU FEDERATION The American Farm Bureau Federation supported ratification of the international wheat agreement. We believe that the agreement provides a firm foundation for a continuing world trade in wheat, and that it provides the United States with a stabilized market for a large quantity of wheat that otherwise might become surplus. Consequently, we favor the enactment of legislation to make it possible for the United States to carry out its commitments under the agreement.
The two bills ($. 2287 by Senators Young and Russell, and S. 2383 by Senator Thomas) which have been introduced to implement the wheat agreement differ in one important respect on which we would like to make a recommendation. This difference has to do with the question of how losses, in the event they should occur, are to be accounted for, particularly during the period of ECA's operaton.
Section 2 of S. 2287 provides that transfers of wheat and wheat flour from the Commodity Credit Corporation to the Economic Cooperation Administration shall be made “at prices applicable by law to other transfers of wheat and wheat flour between such agencies” where the commodities transferred are to be granted
by ECA to countries that are participating in the wheat agreement and credited against their guaranteed import quantities. The applicable provisions of law are:
(1) That part of section 112 (e) of the ECA Act which reads as follows: "The sales price paid as reimbursement to Commodity Credit Corporation for any such agricultural commodity shall be in such amount as Commodity Credit Corporation determines will fully reimburse it for the cost to it of such surplus agricultural commodity at the time and place such surplus agricultural commodity is delivered by it, but in no event shall the sales price be higher than the domestic market price at such time and place of delivery as determined by the Secretary of Agriculture, and the Secretary of Agriculture may pay not to exceed 50 per centum of such sales price as authorized by subsection (f) of this section."; and
(2) Section 4 of the act of July 16, 1943, which provides that “full reimbursement shall be made to the Commodity Credit Corporation for services performed, losses sustained, operating costs incurred, or commodities purchased or delivered to or on behalf of
any other Government agency, from the appropriate funds of these agencies.”
We are of the opinion that S. 2287 contemplates a bookkeeping operation which will prevent the CCC from showing a loss on wheat and flour that move under both the wheat agreement and the ECA program. At the same time, S. 2287 provides that section 32 funds are to be available for operations under the wheat agreement. Only 25 percent of section 32 funds may be spent on a single commodity, and it is conceivable that there will be years in which losses on wheat moved under the agreement but outside of the ECA program will be greater than the amount of money available for wheat from section 32. This presumably would mean that part of the cost of the agreement would be absorbed by the CCC.
S. 2383 provides that “the pricing provisions of section 112 (e) of the Economic Cooperation Act of 1948 and section 4 of the act of July 16, 1943 (57 Stat. 586), shall not be applicable to domestic wheat and wheat flour supplied to countries which are parties to the international wheat agreement and credited to their guaranteed purchases thereunder.” This language apparently contemplates that wheat and flour transferred from the CCC to ECA will be transferred at the agreement price, with the CCC absorbing any loss resulting from such an arrangement. S. 2383 also provides that section 32 funds are to be available for operations under the wheat agreement.
At a recent meeting, the board of directors of the American Farm Bureau Federation agreed to recommend that the cost of the wheat agreement be financed by a separate appropriation for that purpose. We do not believe that any good purpose will be served by an arrangement which charges part or all of the cost of operating the wheat agreement to other programs. Since we are obligated to supply a guaranteed quantity of wheat to agreement countries at a price within the range set forth in the agreement, it would hardly be fair to charge ECA more than the agreement price. Losses should not, however, be charged against the Commodity Credit Corporation, because the main function of that agency is to support prices, while the wheat agreement requires that wheat be sold at prices within a specified range, regardless of the domestic price. We should also like to avoid charging any part of the cost of the agreement to section 32 funds. These funds are very limited, and many claims are made on them. Furthermore, S. 2522, which was recently reported by the Senate Committee on Agriculture, provides that these funds shall be used principally for perishable nonbasic commodities other than those for which mandatory price-support operations are provided.
In our judgment, the best method of handling the losses which may occur under the wheat agreement would be through a separate appropriation labeled for what it is: "Operation of International Wheat Agreement." This approach would not make the cost any greater to the Government in the event of loss. It merely would avoid the confusion that is certain to result from any other method of accounting for losses occurring under the agreement. In the event the committee feels that it would be impracticable for Congress to make an appropriation in advance of the time losses are incurred, we would suggest that the CCC be authorized to carry out the United States responsibilities under the agreement, with a definite provision that the CCC is to be reimbursed for its losses under this program by a separate appropriation.
Senator JohnSTON. We will hear next from Mr. Sanford. Mr. Sanford is chairman of the National Grain Trade Council, I believe, and he is accompanied by Mr. William F. Brooks, executive secretary.
STATEMENT OF H. E. SANFORD, CHAIRMAN, NATIONAL GRAIN
TRADE COUNCIL, PORTLAND, OREG.; ACCOMPANIED BY WILLIAM F. BROOKS, EXECUTIVE SECRETARY
Mr. SANFORD. I did not expect to testify, but I did bring a few copies of my statement. Mr. Chairman, my name is H. E. Sanford. I am appearing as chairman of the National Grain Trade Council. I am in the grain business on the Pacific coast, and Pacific coast manager of the Continental Grain Co.
The National Grain Trade Council appreciates this opportunity to testify on S. 2383, a bill to give effect to the international wheat agreement.
We believe your committee is aware of the unfortunate effect of the delay in implementing this treaty. ECA countries have had to postpone buying United States wheat and flour under the agreement except when they could pay for it with their own dollars. Belgium, Ireland, and Portugal have bought on these terms from Commodity Credit Corporation, expecting ECA reimbursement later if this legislation permits. Austria and Greece have made purchases at the full market price, their total requirements being greater than their international wheat-agreement quotas. The Netherlands has been forced to buy without benefit of the wheat agreement. Most of the other countries are waiting settlement of the United States subsidy question.
The United States inability to carry out its wheat-agreement obligations to ECA countries stems from two facts: (a) that the Commodity Credit Corporation handles all such wheat exports, and (6) that the Corporation is required by law to be fully reimbursed for its costs or, if lower, for the domestic market price when its wheat is transferred to another Government agency, such as ECA.
Meantime, the volume of United States wheat exports has declined seriously from last year. Undoubtedly, the United States has missed a good deal of business at a time we have needed to maximize exports to help solve the storage problem. We urge prompt action, therefore, on this legislation by your committees and by the Congress.
We should like to discuss the proposed bill under three general headings: "I. Payment of Subsidies”; “II. Controls and Penalties”; and "III. Promotion of Export Sales.”
I. PAYMENT OF SUBSIDIES
S. 2383 permits the Commodity Credit Corporation to meet the subsidy requirements of the international wheat agreement. The earlier bill (S. 2287) would put the subsidy burden on ECA.
The National Grain Trade Council favors adoption of S. 2383 in this respect. It opposes the method provided in S. 2287, for two reasons:
(1) The estimated saving to ECA countries under the international wheat agreement already has been deducted from the proposed ECA appropriation. S. 2287 would have the effect of deducting it twice.
(2) If S. 2287 is adopted, the international wheat agreement may not survive. It means that the full market cost of wheat and wheatflour shipments will have to be paid out of ECA dollars that were intended for division of aid between the countries. We are already informed that this will not be considered compliance with the wheat