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lower their costs of handling, which will reflect itself in further development of the livestock industry. This will be a considerable amount of corn that will be bought over a 3-year period of time. But they say they will not buy one ounce of it unless they can get it on the

west coast.

Now, our point is whether we can get approval to see that we are competitive, that we do get it out there, so as to compete with other sources. This means that we would have to pick up an additional cost other than ordinary, which means a little further concession.

Mr. MICHEL. Would this mean that Commodity Credit, which really has title to the corn, would have to pick up the differential involved, freight principally, I guess, to the west coast?

Mr. LEROUX. Here is exactly what it means. When we had a $5 freight differential, if we between the gulf and the west coast per year and picked up $2.50 per ton of this to make ourselves competitive, we would have then been in the same position to make ourselves competitive, we would have then been in the same position as to the net return to Uncle Sam at certain points on the west coast as the gulf. But when this $5.00 freight differential practically disappeared we were as of last week still $1.75 off of being competitive. So we would have to pick up an additional $1.75 per ton and probably a little more now to be competitive with the gulf so that they would buy, per ton. So this would run us, say, about $2 net less per ton to Uncle Sam than if it went to the gulf. But if we couldn't sell it in the gulf it would only take a few weeks to accumulate that much cost, and we would like to get the corn out of here.

Mr. IOANES. The thing we would like to show is, it is proved beyond a shadow of a doubt that the increased trade cost was more than offset by increased sales.

GRAIN SALES TO BRAZIL

Mr. MICHEL. Just one final question. What are the prospects for selling more grain to Brazil?

Mr. LEROUX. I can give you that picture, I think, rather clearly. There is a rather unique situation that is on the fire right now. Brazil came in here and made an agreement with the Great Plains wheat people in what they called a memorandum of understanding. I have it here; a book about that thick. That is the one that was used when they presented their case for a permanent sugar quota in which they agreed to buy additional commodities. At that time, and for the previous 3 years back of last year, their total use of wheat was 2,150,000 tons. Now, in this memorandum of understanding, they set up a progression where Brazil was using 31 kilos per capita consumption of wheat against 112 kilos of Argentina. They expressed the view that they wanted to increase their consumption in the direction of the Argentine so as to increase their general well-being. So they set up a table and a schedule with a graph showing a consumption comparison with all other countries, and agreed that they would move from 2,150,000 to 2,700,000 tons in 1962, then to 3,350,000 tons in 1963, and in 1964 to 3,680,000 tons.

Brazil has a unique situation in that the studies show that the flour millers there not only capitalized on U.S. wheat but capitalized on the situation that exists there, on the extreme shortage of wheat. They pay 19,000 cruzeiros per ton for wheat and at times get almost

60,000 cruzeiros per ton on flour. They operate with a high margin of profit on a small volume of business. The pasta manufacturers say that they can use a million tons or an additional 37 million bushels of wheat a year for pasta products if flour were priced fairly. As it is, they are priced out of the market, and their trade is confined to limited areas.

At the present time Argentina is out of wheat for their own consumption and yet they have a commitment with Brazil to fill. They are going to have a very difficult time furnishing their own needs without going into the market to buy wheat.

We have increased our sales considerably to Brazil, and will sell about 1,700,000 tons this year, which is about 60 million bushels of wheat. The potential is great in Brazil. They have financial problems, as you know, so it takes programs to move it. We moved a certain amount of sugar on reciprocal trade arrangements with them. But they have almost no limit as to what Brazil could use in wheat if they had the tools with which to handle it.

Mr. MICHEL. What did we sell to Brazil in the past year in dollar volume under Public Law 480? Could we get that and supply it for the record?

Mr. LEROUX. Yes. I think we probably have it right here.

Mr. MICHEL. And my next question is, if you have it or will supply it for the record, What does it look like this coming year in dollar volumes of sales to Brazil under Public Law 480?

Mr. LEROUX. We can get that.

Mr. MICHEL. And if you have got a projection for a year or two beyond that, in keeping with what you are talking about, I would be pleased to have that.

Mr. LEROUX. Yes.

(The material referred to follows:)

During calendar year 1963, Brazil will have an unshipped carryover of about 650,000 metric tons of wheat from the March 15, 1962 Public Law 480 agreement, as amended. This would amount to about $48 million. In addition, we anticipate that Brazil will import from the United States about 400,000 metric tons of wheat or about $26 million which would be financed from barter arrangements and/or earnings from Brazilian exports of sugar to the United States. It is anticipated that a new title I, Public Law 480 agreement will be entered into with Brazil during calendar year 1963. From such an agreement probably not more than 700,000 tons or about $52 million worth of wheat would be shipped during calendar year 1963.

The Government of Brazil has indicated its interest in a new multiyear Public Law 480 agreement. We anticipate we will be programing under Public Law 480 in the next 2 or 3 years about 1.2 million tons of wheat each year for approximately $88 million plus between $20 and $26 million of wheat under barter and/or earnings from Brazil's exports of sugar to the United States.

In summary, under combined programs we expect Brazil will import about $126 million worth of wheat from the United States during calendar year 1963 and about $114 million each year for the next 2 or 3 years.

Mr. MICHEL. That is all.

CANADIAN TARIFFS

Mr. HORAN. Mr. Chairman, I would like to go back to the fundamentals of this tariff business.

Isn't it true that Canada can put a tariff on almost overnight, and immediately-an immediate tariff, and that they do?

95910-63-pt. 3-65

Mr. IOANES. I am sorry, Mr. Congressman, I can't answer you exactly. The only two actions

Mr. HORAN. Maybe Secretary Renne can.

Mr. IOANES. Perhaps he can.

Mr. HORAN. I would like to understand, and the members of the subcommittee would like to understand-and Secretary Freeman was quite adamant in his statement that we were probably the lowest tariff nation in the world, we were the closest to free trade of anybody. We don't have that reputation traditionally, England does. But it is no longer true. It has always been my understanding that Canada can put on their special duty almost overnight.

Mr. IOANES. Mr. Congressman, I do know this much about it. They did recently impose surcharges almost overnight.

Mr. HORAN. That is along the line I am thinking about now.

Mr. IOANES. On a wide series of products. That was done under a balance-of-payments clause in the GATT, because, as you know, they have run their dollar reserves way down.

Mr. HORAN. It was done, though, and there was no danger of injury to some of their local industries, wasn't it?

Mr. IOANES. No.

Mr. HORAN. Why did they put on this surcharge, then, to raise revenues?

Mr. IOANES. No, to reduce imports, to reduce the outflow of gold and dollars from Canada, whose reserves had reached a dangerously low level. Now that her external position has improved, the surcharges are being decreased gradually, and are almost eliminated.

Mr. HORAN. Isn't it also true that they can put on charges when there is danger of injury to their industries?

Mr. IOANES. There is an equalization law on the books which I think you are talking about which can be put on seasonally by one of their ministers, I am not sure which, but I believe it does apply to horticultural items.

Mr. HORAN. I am sure it applies to pears, because we have sold them.

Mr. IOANES. The only one they put it on that I know about is potatoes, and we took them to GATT on the fee, and they eliminated the fee. There is a law on the books which does permit them to do exactly what you say on horticultural crops, but they haven't exercised the law except with respect to potatoes.

Mr. HORAN. They haven't used it.

Mr. IOANES. It could be that in earlier years they did.

USE OF SECTION 22 REGULATING IMPORTS

Mr. HORAN. Now, in the application of the mechanism of section 22, if the Secretary feels that there is a danger of injury to domestic industry, then he does what?

Mr. IOANES. Then he is required by law to make a recommendation to the President for remedial action. In effect he recommends that the President request the Tariff Commission to investigate the situation and to make a finding.

Mr. HORAN. And that usually takes 3 months to a half a year?

Mr. IOANES. It could take 3 to 6 months, yes, sir. It doesn't have to, but it could.

Mr. HORAN. On the face of it, this New Zealand cream businessthere is a letter already typed that I haven't got yet, and somebody saw it and said it wasn't very satisfying, I wouldn't enjoy it muchbut on the face of it, our dairy product situations, you would think that you would put on an injunction against the importation of things that add to our surpluses. The United States is where our taxpayers live.

And we had the same thing with lumber, except that we can't use section 22, because lumber isn't an agricultural product. And yet it comes from plant life. But right now we know that we are being badly hurt in the lumber industry two ways. We have over 11 billion board feet of lumber that has to be salvaged out on the Pacific Coast because of the blowdown last fall. And yet our imports from Canada on softwoods have risen 300 or 400 percent in the last 3 years. And yet we have got to legislate and, to petition the President to act. And I thought that under the new legislation he had the more immediate power in case of any danger to domestic industry. At least that was the assurance given to us on the floor by Chairman Mills of the Ways and Means Committee when we passed this Trade Expansion Act.

So actually, while we have section 22, it takes about 6 months to get action on it.

Mr. RENNE. Well, it varies with the commodity, of course, it is more complex in some cases than others. It doesn't have to take that long, as Mr. Ioanes pointed out.

Mr. HORAN. It does have to go through the Tariff Commission.

Mr. RENNE. That is right.

Mr. HORAN. And a study has to be made?

Mr. RENNE. That is right.

Mr. IOANES. May I say, I know of nobody in the Department of Agriculture that doesn't have great concern about this very import problem that we have been speaking about. The urgency of the problem that has been coming to your attention, is one where our own dairy producers are looking down the road to what may happen if the door stays open indefinitely. The volume of stuff coming in at the present time that is not controlled is not huge in relation to our own domestic production, but it is growing. The concern that you have heard and we have heard is the fact that these imports are circumventions of existing import controls, and I repeat, although not a large percentage of our production, are loophole kinds of items that ought to be closed.

Mr. HORAN. Well, I don't think the dairy industry is threatened as much as our softwood and lumber industry is threatened. But certainly if we are going to be competitive with other nations, and they have greater facilities for protection of their home industries than we do from the standpoint of tariffs, it is about time that we found a quicker way to protect domestic production, don't you think? Mr. IOANES. Well, I would say in the long run, if we are going to have liberal trade rules, everybody has got to apply it.

Mr. HORAN. Wait a minute. We have already agreed that we are more liberal in our trade rules

Mr. IOANES. I agree with you, sir.

Mr. HORAN. The Secretary is very adamant about it. And I think in light of the fact that these other countries are not so gen

erous, we should almost demand that we change some of our ground rules here, shouldn't we?

Mr. IOANES. Mr. Congressman, I am not arguing with you at all. Is Canada the country we are talking about?

Mr. HORAN. In lumber, and New Zealand in cream.

Mr. IOANES. Canada happens to be one of our real good customers for a wide sector of American agriculture. And in general Canada has a reasonably liberal import policy.

Mr. HORAN. Well, for your information, we are not asking that they be excluded from our American market. We already have an informal agreement that works with Canada on apples whereby we share our market for a third of their production. We have asked the President to impose a 6-percent restriction or quota on their lumber exports to us. And they have definite advantage laborwise and transportationwise, and on the exchange of money, of about 715 percent. We proposed a 6-percent quota based upon the last 3 years, which encompass 3 of the years that have seen this huge rise in the exporting of lumber to the United States.

AGRICULTURE TRADE POLICY

Mr. WHITTEN. In connection with this azalea business, in too many instances it looks like under this present pressure that they are asking us to lighten up existing restrictions, and in consideration they will just be half as restrictive as they threatened to be. And they threatened to be terribly restrictive, so they want us to loosen what has been in existence all along, and they in turn tightened theirs up, but only half as much as they first threatened to. And I say for the record again that there are many things about the farm price-support program which I think are essential that are dependent upon proper action under section 22. If you don't do that and leave that part out, it leaves the other part where it can't work.

Mr. RENNE. Mr. Chairman, as a newcomer I do want to say that I am impressed with the fact that the Department is not only alert, but very anxious to protect U.S. agriculture's interest in the light of our overall trade policy.

Mr. HORAN. Mr. Chairman, in the past we have put in the record some of the roadblocks to commerce, as you well know. And you in FAS prepared them. And it was quite a job. I would like to know just what you have that is available now that is up to date in that regard. Or is it possible always to put into the record some of the roadblocks, the restrictions, the price-support programs that we have in some of these well, let's be specific, about the Common Market countries, because that seems to be a magical word now, everybody is talking about it, and want someway to get into it.

Mr. IOANES. Why don't we do this for you this time-
Mr. WHITTEN. Bring it forward.

COMMON MARKET AGRICULTURAL SUPPORT AND TRADE POLICIES

Mr. IOANES. Why don't we center it this time on the Common Market countries and give you a pretty good description there of their price-support programs and their import policies and of the level of tariffs on the important items, whether they have quotas, the

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