Mr. SHANLEY. The boom has nothing to do with it. All of this abnormal shipments of commodities create booms, just as the shipment of planes to France creates a boom in the manufacture of planes and a demand for more of them.

Mr. CRAWFORD. I would say large sales and increased production tends to reduce the unit cost-not only the cost but the unit selling price of airplanes. Here is the situation, where governments are Seeking material that can be converted into, manufactured into, war material. It directly increases the price of the raw material which is involved and pulls up the price of all finished steel products into which that raw material might enter to 130,000,000 people in the United States.

Mr. SHANLEY. I agree with you there. The contribution is illuminating.

Mr. CRAWFORD. I think we certainly should protect our interests. Mr. VORYS. Mr. Chaiman.

Mr. BLOOM. Mr. Vorys.

Mr. VORYS. What would you think of a simple statutory embargo against the shipment of scrap iron to Japan and to Congress passing that? At present, as you know, the President has not invoked the embargo provision in the undeclared war in the Orient, and it is quite possible that the embargo provisions of the law may lapse or may not re beenacted. So your definition of scrap iron under that may become academic or is academic at present. We have a present situation where there are hostilities going on in China and where there is an enormous amount of scrap iron going to Japan. What would you think of just a plain statute which would put an embargo on the shipment of scrap iron to Japan?

Mr. CRAWFORD. I think a direct embargo against Japan now would be a very unwise policy to follow for this reason: Suppose you embargo the export of scrap iron to Japan and continue to ship other things to Japan as we are now shipping them, and at the same time continue to make loans, as we are now making loans to China; it just does not hold water. It is an unbalanced program and will not work out satisfactorily.

Mr. VORYS. What would be your objection to it?

Mr. CRAWFORD. Because it is so inconsistent it has no sense to it. Suppose I say to my friend here, "I am going to fix it so you cannot get any food in the open markets of the world, and literally starve you and your family to death"; and then I say to my wife, "You slip around to the back door and take them a lot of nice things to eat, and I try to follow both policies at the same time.

Mr. VORYS. But, is not this your situation: Here is a raw material that ought to be conserved. It is somewhat embarrassing to try to attempt to create a world-wide embargo.

Mr. CRAWFORD. May I understand the gentleman now. I would be in favor at this particular time of an embargo on the exportation of scrap iron and scrap steel and tin scrap and junk to all the countries of the world, and holding it for our own people. That would be a simple step to take.

Mr. VORYS. Now, suppose that embargo were impracticable, what would be your objection to picking out one nation, where a tremendous amount of scrap iron is going, where we know it is being

used in violation of treaties to which we are signatory, and just simply stopping that delivery of scrap iron, even though we do nothing else?

Mr. CRAWFORD. As effective as it might be in a way, and as punitive as it might be to Japan for having violated something that we feel they should have lined up to and taken their medicine, I think after all it would be a bad and ineffectual policy to attempt to do it that way. I would not advocate such a step.

Mr. RICHARDS. Mr. Chairman.

Mr. BLOOM. Mr. Richards.

Mr. RICHARDS. Suppose conditions were such now that one of the totalitarian states, say Japan, needed cotton more than anything else, and the purchase of cotton by Japan for this purpose would tend to give Japan a great advantage over China, for instance, a weaker nation, and at the same time it would create a boom in the market here in America and help, say, the cotton farmer, would you be in favor of an embargo on that?

Mr. CRAWFORD. That is, on cotton?

Mr. RICHARDS. Yes. It is a raw material which may be used in

war.

Mr. CRAWFORD. No; I would not under present conditions as they now exist. Only yesterday morning I received this letter from Osaka, Japan. It comes from one of the large cotton buyers and operators in that country. It is just a few lines, and I would like to read it to • you, because it ties into this question. It is dated March 17, 1939, and states:

Please note that the amount of Brazilian cotton imported into Japan is now an average of 300,000 bales per season, and, should the present price difference between American cotton and Brazilian cotton be maintained, it is very likely that the amount will be increased to 600,000 bales per season.

At present, only our leading mills are using Brazilian cotton, but there is a tendency that our smaller mills will begin to use this growth in a near future.

I have simply made these two copies of that letter to hand them to some of my cotton friends on the floor of the House today. This is why they were in my pocket.

Mr. RICHARDS. Let us go to the proposition of disposing of the 14,000,000 bales mentioned yesterday, and let us ask the further question: It is a fact, is it not, they are buying cotton from Brazil, and they are buying scrap iron from Brazil too, are they not?

Mr. CRAWFORD. Yes, certainly; but we cannot raise scrap iron by planting it in the ground. There could easily become a scaricity of scrap iron in our building program. We can produce cotton. We are still at peace with the world, and I am in favor of bartering cotton for tin and rubber. I believe in trading, and I am in favor of sitting down around the table and working out ways and means whereby prices can be met and trades made. I am in favor of trading our cotton to Japan and other countries for goods that we need and can consume, until we say we do not trade with you any more, or we fight you from here on, but at no time do I believe in trying to push out of this country an essential war and raw material which we need, and which we could not produce as in this case of scrap iron. As we approach closer to war we might prefer cotton to tin and rubber, but I think we are long on cotton and short on tin and rubber, so I would trade.

Mr. RICHARDS. As a matter of fact, outside of scrap iron we have. a great natural store of minerals that you mentioned in this country. Mr. CRAWFORD. We could dig iron ore out of the ground, but you cannot reproduce it every year as you can cotton. And, too, we need scrap for enlarged operations.

Mr. BLOOM. Are there any other questions?

Mr. IzAC. Yes. Mr. Crawford, what effect would it have on the Japanese war, let us call it, if we kept all scrap iron from them? Would she have enough iron ore available to produce the 5,000,000 tons you say she is producing now?

Mr. CRAWFORD. Here is what I really think would happen. I think if we discontinued shipping scrap to Japan she would pick up such scrap from other parts of the world as she could and fill in the balance from the Philippine Islands with raw iron ore, where she is getting a large amount now, and from under our flag.

Mr. Izac. Is it not true that every one of these nations that you have mentioned, with the possible exception of Italy, would be able to get iron ore instead of scrap if we shut off all exports of scrap? Mr. CRAWFORD. I think they would, probably.

Mr. IzAC. Germany would, would she not?

Mr. CRAWFORD. Yes; but I am not think so much of what would happen to them as what would happen to us if we should go into war activities with our supply of scrap depleted.

Mr. Izac. Let us look at it this way: Suppose we had to have tin from the Dutch East Indies; we must have it to conduct a successful war?

Mr. CRAWFORD. That is right.

Mr. Izac. And Japan must have iron to conduct a successful war? Mr. CRAWFORD. Yes; that is right.

Mr. IzAC. Would it not be likely that she would retaliate to the extent that, if she were shut off from any further iron scrap, that she would say, "Well, we cannot let you approach the Dutch East Indies."

Mr. CRAWFORD. Under present conditions?

Mr. Izac. Yes; under present conditions.

Mr. CRAWFORD. That is one of the reasons I stated to Mr. Vorys that I would not be in favor of an embargo at this moment, and I again say I would trade cotton for tin and rubber.

Mr. BLOOM. Do we get our tin from the Dutch East Indies?

Mr. CRAWFORD. Yes; some of it, I think.

Mr. BLOOM. Very little?

Mr. CRAWFORD. Most of it.

Mr. IzAC. Yes; most of it.

Mr. BLOOM. Most of it comes from England.

Mr. Izac. But it goes from the Dutch East Indies to England. Mr. BLOOM. Could we not trade direct and get our tin from the Dutch East Indies?

Mr. Izac. There are only a few smelters in the Dutch East Indies. Mr. BLOOM. Are not all of the smelters in England?

Mr. Izac. Most of them are in England; yes; but they get their supply not only for the Cornwall mines, but also from the Dutch East Indies, and Malaysia. When any nation has its back up against the wall and has to have these things in order to conduct a war, you know they are going to get them. You can shut off all the

markets you want to, and they are going to get their metal some place. Mr. CRAWFORD. I think so.

Mr. Izac. If you think that we need that ore as one of our basic raw materials, then I think we better pass an embargo on those things we have to have in case of war.

Mr. CRAWFORD. My whole approach is to the effect that we need this material here and we should not be pushing it out of this country or permitting it to go out of this country when it is such an essential war material and war is so close to us.

Mr. KEE. Referring to the question asked a moment ago by Mr. Vorys, do you not think that if we passed an act embargoing the shipment of scrap iron to Japan alone, leaving it open for us to ship to all of the other countries, that that would be definitely an unfriendly act toward a nation, and equivalent almost to a declaration of war on Japan?

Mr. CRAWFORD. I think under present conditions it would be. Suppose, for instance, that I am selling goods and here is a group of customers sitting around this table who I have heretofore done business with, and I wake up in the morning, and for some reason I make up my mind I do not like Bill here. You have a good balance sheet, you pay your bills promptly and discount your obligations, and then I call you up and say, "Listen, Bill, I am not going to sell you any more goods." Naturally, Bill will turn against me, and he will influence this fellow and that fellow to turn against me and my program, and he is bound to do it. We have got to treat friendly countries, in my opinion, similar to the way we treat friendly individuals if we are to have peace with them and desire to trade.

Mr. KEE. In other words, treat them alike in the application of our legislation.

Mr. CRAWFORD. I think so, until you designate your enemies.
Mr. BLOOM. Mr. Schiffler, did you have a question?

Mr. SCHIFFLER. I think Mr. Crawford has answered what I intended to ask him.

Mr. CORBETT. Mr. Chairman.

Mr. BLOOM. Mr. Corbett.

Mr. CORBETT I think it would be valuable to us if Mr Crawford would elaborate on and emphasize his thought on the stabilization agreements, how they are tied up to our neutrality policy.

Mr. CRAWFORD. I will make that very brief. For months our Treasury Department was attempting to arrest in one manner or another the flow of gold from France. Back in 1936, in the latter days of August 1936 and up until September 25th following, I am informed by the Federal Reserve Board that $320,000,000 in gold was taken out of the Bank of France by England and in movements to the United States. That followed a very serious situation that had developed and grown worse from month to month for many months prior to that date. After negotiations were carried on there was a simultaneous announcement, as I said a while ago, by France, Britain, and our Treasury Department to the effect that the three of them operating together would stabilize the pound sterling, the French franc, and the dollar. September 25, 1936, Belgium followed with

an announcement.

Well, when you get into the western European situation we find countries that are very unfriendly to France and England; others.

that are friendly. We find what is known as the gold-bloc countries. We moved into the picture by placing some $2,000,000,000 of gold on the barrel head through what we term our stabilization fund (exchange) and which now stands at about $1,800,000,000. Our announcement made September 25, 1936, was of far-reaching importance. Similar statements simultaneously made by our "exchange. allies" completed what might be termed an agreement. To do what? To foster those conditions which safeguard peace and will best contribution to the restoration of order in international economic relations. Furthermore, to pursue a policy which will tend to promote prosperity in the world and to improve the standard of living of peoples; to maintain the greatest possible equilibrium in the system of international exchange, and to avoid to the utmost extent the creation of any disturbance of that system by American monetary action. Did we include all countries with their exchange problem? We did not. Have we used our purchase and sale of international exchange operations to protect, promote, and expand the exchange of Germany, Italy, Japan, and Russia? I would not so contend. Our agreement of working arrangement was with England, France, and their allies-in exchange operations. In that manner, we have used our gold and other resources, intelligence, and constant application to protect dollar, pound sterling, and franc exchange so that economic conditions, trade, industry, and agriculture will flow as freely as possible in the United States, the British Empire, Belgium, and France. We are their gold allies. The other countries of the world were invited to "go along with our crowd." They did not come along. They went their way and their exchanges are subject to the operations and manipulations of the central banking systems and governments of the United States, Great Britain, France, and their friends. Using our gold and our financial strength in favor of these few countries, parties to our arrangements, certainly does not place us in a neutral position with countries operating in oppo sition to our exchange allies. Now, protection of the exchange of a country is equivalent to protecting that country's trade, internally and externally; its standard of living-its very existence. Our President and Secretary of the Treasury hold vast powers of a monetary nature. Does anyone doubt this Congress will, at an early date, refuse to renew and extend those powers? Do any of you doubt the desire of the President to move in a direction which would add strength to the democratic countries of England, France, and Belgium? If all this be true, on what grounds can we impose a neutrality act and make it work in a manner that will avoid or prevent as much trouble as we would lead ourselves into? I sincerely trust the committee will give full cognizance to this important matter before neutrality legislation is recommended.

Mr. CORBETT. One of the first things we did in the World War I was to supply our allies with money in order that they might back up the france and the pound.

Mr. CRAWFORD. Yes.

Mr. BLOOM. Mrs. Rogers.

Mrs. ROGERS. What would you do in regard to the present Neutrality Act? Would you keep it as it is, and would you reenact the cash-and-carry provision which expires the 1st of May?