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INTERNATIONAL WHEAT AGREEMENT FUNDS

THURSDAY, SEPTEMBER 22, 1949

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE
ON AGRICULTURE AND FORESTRY,

Washington, D. C. The subcommittee met, pursuant to adjournment, at 10 a. m., in the committee room, United States Capitol, Senator Olin D. Johnston, presiding

Present: Senators Johnston, Holland, and Young.

Also present: A. J. Borton, Office of Manager, Commodity Credit Corporation.

Senator JOHNSTON. We will begin the hearing.

Mr. Smith, you are first on our list this morning. Give the reporter your name and representation.

you have?

STATEMENT OF RUSSELL SMITH, LEGISLATIVE SECRETARY,

NATIONAL FARMERS UNION, WASHINGTON, D. C. Mr. Smith. My name is Russell Smith, and I am legislative secretary of the National Farmers Union, located here in Washington.

Senator JOHNSTON. How many members do
Mr. Smith. Approximately 460,000.
Senator JOHNSTON. Proceed.

Mr. SMITH. While there are subsidiary questions involved in the legislation before the committee, it seems to us in the National Farmers Union that the principal question is one of speed in giving effect to the international wheat agreement already ratified overwhelmingly by the Senate.

We should like, therefore, first to urge the committee to act as speedily as possible on this legislation and to express the hope that the House quickly will follow suit.

The wheat agreement is of critical importance, not alone because of the promise it offers in helping to solve the difficult situation of that commodity, but also because it is in a sense a test case of an international commodity agreement. Moreover, failure of the Eightieth Congress to act on the agreement already has meant a year's delay and renegotiation of the instrument.

Successful operation of the agreement is, of course, the earnest desire of every friend of American agriculture, and we earnestly hope that the attainment of that end will not be handicapped by any delay in the commencement of operation under it.

Secondarily, the National Farmers Union endorses S. 2383 which we understand to be the measure also having the approval of the

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Department of Agriculture. Its only difference from S. 2287 is in the provision of the latter for the Economic Cooperation Administration to pay the difference between prices at which wheat is sold under the agreement and prices at which wheat is transferred by ECA from this country to European countries participating in the European recovery program. We have consistently opposed restrictions upon the freedom of action of ECA. A recent example was our opposition to the McClellan amendment to the ECA appropriation bill, which would have required European countries to accept specified amounts of agricultural commodities. In taking this position, we joined with all of the other American farm organizations.

In any event, such losses as may be sustained in the operation of the wheat agreement and the operation of a domestic price-support program ultimately will be sustained by the Treasury of the United States, and we can see no valid reason for relating the operation of the European recovery program to the mechanics of the international wheat agreement.

Similarly, we do not regard it as of great consequence whether, if losses are sustained, they are made up by direct appropriation by Congress or whether they come from Commodity Credit Corporation funds. Such losses can be well regarded as part of the price for maintaining domestic support levels, since whatever wheat is exported under the wheat agreement will be taken out of surpluses and to that extent will lose its price depressant effect.

Further, the regular accounting process of Commodity Credit Corporation would appear to be adequate to keep Congress and the public informed as to the funds expended in the operation of the wheat agreement.

Senator JOHNSTON. What do you think about setting up a separate fund so it will show what ECA is spending and what it is costing, and put it up in a separate fund instead of charging it in general against the CCC or against ECA funds?

Mr. Smith. You mean for this specific purpose?

Senator JOHNSTON. Yes. Let the ECA-let the world know they are spending this much more. That is what they are doing.

Mr. Smith. We would rather not do it that way, Senator. There are a number of things involved other than the one I have mentioned here. For one thing, the European recovery program is going to end, I think, in 1952.

Senator JOHNSTON. I hope so.

Mr. Smith. We all hope so. We hope it will be possible to end it then.

Senator JOHNSTON. I hope we can terminate it sooner than that, myself.

Mr. Smith. But the wheat agreement runs beyond that date, and we hope will be extended beyond the expiration date provided in the instrument now.

Senator JOHNSTON. The reason I make that statement, rather than to make special legislation and putting it on some other agency to pay for subsidies to ECA countries, I though it might be allowed to terminate with ECA.

Mr. Smith. We do not regard this as being in any sense an emergency machinery of the kind that ECA is. We regard it as essentially

Thank you.

a part of a long-time surplus-disposal program for the United States in the world community. We are inclined to think it would not be wise to commingle the two kinds of things.

Of course, this money has some relationship to both kinds of money, but we think it has more relationship to the domestic-support program actually than it has to ECA.

Senator JOHNSTON. And that is your reason?
Mr. SMITH. Yes, sir.
Senator JOHNSTON. There is some logic to that.
Mr. Smith. That is the primary reason.
Senator JOHNSTON. Do you have anything else?
Mr. Smith. No, sir, that is all.
Senator JOHNSTON. We thank you for coming.
Mr. Smith. Thank you, Senator.

Senator JOHNSTON. We will have next the vice president of the Millers' National Federation, Mr. Herman Fakler.

STATEMENT OF HERMAN FAKLER, VICE PRESIDENT, MILLERS'

NATIONAL FEDERATION, WASHINGTON, D. C.

Mr. FAKLER. Mr. Chairman, my name is Herman Fakler. I am vice president of the Millers' National Federation, which is the national association of the wheat flour milling industry of the United States. My address is National Press Building, Washington, D. C.

I appear before you this morning in behalf of the Committee on Agriculture of our association, and by direction of the executive committee of the board of directors of the association, to express the views of our industry with respect to S. 2383, introduced by the chairman of your committee, Senator Thomas, entitled “A bill to give effect to the international wheat agreement.

As you are aware, the Government of the United States, together with the governments of 40 other nations, has negotiated and signed the international wheat agreement of 1949. The Senate of the United States has ratified the agreement, and it has also been ratified by a sufficient number of other nations so that by its own terms it became fully effective on August 1, 1949.

However, as has been pointed out by witnesses who have preceded me, it is necessary for the Congress to enact legislation to give effect to the agreement so far as the United States is concerned, and to enable our Government to completely carry out the obligations it has undertaken.

Although the agreement has been in effect since August 1, the United States has been able to export only very limited quantities of wheat and wheat flour to the countries which have ratified the agreement because of the absence of necessary legislative authority.

In order to correct this situation and to enable us to export the quantities of wheat and wheat flour provided for in the agreement, it is our recommendation that the Congress enact the necessary legislation promptly.

It is also our recommendation to the Congress and to the President that the United States Department of Agriculture be given full and complete authority to administer the several provisions of the proposed legislation. The Secretary of Agriculture has provided the leadership necessary to bring the agreement into being. The agreement deals

with an essential agricultural problem, and in our judgment the Secretary of Agriculture and his department should have full authority to administer the program for our Government.

In order to fulfill the obligations of the United States under the agreement, it is recognized by all concerned that it is necessary for our Government to provide a subsidy on both wheat and wheat flour to compensate exporters for the difference between domestic prices of wheat and wheat flour and the lower prices stipulated in the agreement.

Senator JOHNSTON. Do you have the figures on how much flour we have sold?

Mr. FAKLER. Yes, sir; I have.
Senator JOHNSTON. I would like that for the record.

Mr. FAKLFR. There is a statement issued by the Department of Agriculture on September 19, which shows that for the period August 1 through September 15, 1949, 718,082 hundredweight of commercial flour, which is the equivalent of 1,662,218 bushels of wheat, were exported to countries signatory to the wheat agreement; and during the same period 654,035 bushels of wheat were exported through commercial channels.

During that same period the Commodity Credit Corporation transferred wheat to the signatory countries in the maount of 4,868,264 bushels. Making a total of 7,184,517 bushels.

Senator JOHNSTON. Thank you.

Mr. FAKLER. The authority for the payment of this subsidy should be placed in one Government agency and adequate funds should be provided promptly.

It is our recommendation that this authority should be given to the Commodity Credit Corporation, and that it should be authorized and directed to pay subsidies on all shipments of wheat and wheat flour to eligible wheat-agreement countries, including shipments to countries receiving assistance through the Economic Cooperation Administration.

Up to the present time Commodity Credit Corporation in the absence of specific authority and direction has declined to pay any subsidy on the export of wheat flour to the ECA countries. As the result these countries have been prevented from acquiring the quantities of wheat flour to which they are entitled under the agreement and which they desire to procure at wheat-agreement prices.

At this point, Mr. Chairman, I would like to call attention to Mr. Trigg's statement yesterday indicating there is a statutory impediment which prevents the Commodity Credit Corporation from transferring wheat to ECA for this purpose at anything below the market price.

However, there is no statutory impediment which I can find with respect to the payment of a subsidy on wheat flour furnished by the mills directly to countries participating in the ECA program; and yet, the Commodity Credit Corporation has declined up to now to pay that subsidy. I think they feel that they need the additional legislative authority.

I see no need for it, but, nevertheless, it is an indication that some action should be taken to clarify this situation at the earliest possible moment.

In order to expedite the payment of these subsidies promptly, it is our recommendation that Commodity Credit Corporation be author

ized to utilize its own funds for this purpose for the present, with the provision that Congress will reimburse CCC by subsequent appropriation.

Any further delay in making subsidy payments will in our judgment make it difficult or even impossible for the United States to fully meet its obligations under the agreement. Such a reduction in our export program will also contribute to the development of a serious domestic wheat-surplus problem.

We have no objection to the record-keeping and reporting requirements of section 3 (b) of S. 2383. However, we do feel that the authority proposed to be given the President to examine such books, papers, records, accounts, correspondence, contracts, documents, and memorandum as he, or the person to whom he delegates the authority, has reason to believe are relevant, is broader than is necessary and than was probably intended. In order to keep such examinations within proper bounds, we believe the authority should be specifically confined to those matters related to transactions under the international wheat agreement.

Therefore, we recommend that, following the word "relevant” in line 3 on page 4 of S. 2383, there be inserted the words "to transactions under the international wheat agreement."

We believe that section 3 (d) of S. 2383 should be eliminated from the legislation as enacted by the Congress.

It is our judgment that this section is unnecessary. The initial responsibility for determining the quantities of wheat and wheat flour permitted to be exported from the United States under the agreement rests with the International Wheat Council and the United States Administrator of the wheat-agreement regulations provided for in section 3 (c). Under regulations already in effect, and which have been in effect since August 1, each export sale of wheat and wheat flour must be approved and confirmed by the Administrator before it can can be consummated. It is his responsibility to determine before he approves a sale whether or not the quantity included in the sale can be credited to the United States wheat-agreement account. The exporter has no way whatever of determining this fact except by the approval or disapproval of the sale.

This is particularly true when a subsidy is being paid. No exporter in his right mind is going to incur the financial risk of not receiving the subsidy payment by taking a chance on an export sale without prior approval by the Administrator.

If no subsidy is being paid, it must be by reason of the fact that our domestic prices are in line with the prices set forth in the agreement, and under those conditions there would be no object in limiting the quantity exported to that set forth in the agreement. In the general interest, we should want to export all the wheat and wheat flour we

If by chance our domestic prices should be at or below the minimum wheat-agreement prices, the importing countries are obligated to take their quotas at the minimum prices and obviously will take no more than the obligated quantity at that price. Additional quantities will be available at prices below the wheat-agreement minimum, and again under such conditions we should want to export all the wheat and wheat flour we can.

can.

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