which this willingness on their part developed or whether the indication of their willingness developed.

Mr. DREWRY. What I am trying to get at or trying to learn is—you say to help the American merchant marine whether this was just a general thing that it would help the American merchant marine if American-flag ships were used. Or was there any particular planning in mind, including a study of the availability of the American ships at that time.

It seems to be a very firm decision and one in which as you mentioned a little while ago was not even negotiable. I wondered just whether it was to help the American merchant marine, to help the balance of payments or to help something else.

Mr. JOHNSON. I think all of those factors were considered. I don't believe there was any effort at that point to determine with any precision the extent to which American ships were available, but it was felt that there would be substantial numbers available and if they were available they should be used.

This was about the sum and substance of it.

Mr. DREWRY. When the first discussions at your level were had, before it got to the commercial aspects of it, was there any discussion of terms at all? Did the Russians say, "We want this on a delivered basis, on cost-and-freight terms"?

Mr. JOHNSON. There was a discussion of the basis, the terms, at one time with the Soviet representatives, the purpose of which was from our standpoint to ascertain whether they were prepared to accept various kinds of terms; in other words, whether they were prepared to accept free on board American ports, free alongside ship Soviet ports, and we found out that they were prepared to accept either type of terms.

Mr. DREWRY. Was it a matter of insistence on their part that the wheat be sold at the world price?

Mr. JOHNSON. They made it quite clear that they were not prepared to pay in excess of the world price.

However, of course, the decision was in terms of the world price of wheat. We didn't get into a discussion of the shipping prices.

Mr. DREWRY. Of course the Russians knew as well as we did that our freight costs are higher than foreign-flag costs, and if they were willing to take it on a cost-and-freight basis wasn't there any discussion of how to put the freight on a world basis too?

Mr. JOHNSON. No, sir. We assumed, of course, that they did know, as I say, the fact that American ship costs were generally at that time higher, and are now, but we did not discuss the question with the Russians of how this particular problem could be handled. This was, as I say, not a negotiable requirement.

We felt that this was a matter, and we so told them, that would have to be dealt with in the contractual negotiations between the private American traders and themselves.

Mr. DREWRY. At least as far as the Department of State was concerned this was the case?

Mr. JOHNSON. Yes; that is correct.

Mr. DREWRY. You mentioned that the Russians themselves balked on the idea of the transaction being handled on a government-to-government basis under cargo preference.

Mr. JOHNSON. Yes. I think they would have had no objection to a government-to-government deal, but they would not have been prepared to have made a deal on a cargo-preference basis.

Mr. DREWRY. What was their specific objection to that?

Mr. JOHNSON. They felt that this would be discriminatory, that the United States is engaged in selling large quantities of wheat on commercial terms to other countries and they saw no reason why they should be discriminated against. They desired to buy the wheat on the same terms that other commercial purchasers were getting.

Mr. DREWRY. That would be really just a matter of form rather than price, wouldn't it?

Mr. JOHNSON. Both I think would be involved. As a matter of form I think they would insist on the absence of any discriminatory elements in the arrangements, but I assume that there was also a matter of price.

Mr. DREWRY. Do you know whether the Canadian deal was a straight commercial transaction, or whether that was government to government with the grain traders being in the position of agents?

Mr. JOHNSON. The Canadian deal was worked out again in general, as I understand it, between the Canadian Wheat Board and the Soviet purchasing group, but the actual contracts were handled by private grain trading groups.

I am sure there are others that can testify as to the details of these arrangements, but in that sense the Canadian deal was not too unlike

our own.

Mr. DREWRY. That is all, Mr. Chairman. Thank you, Mr. Johnson. Mr. DOWNING. Thank you very much.

Mr. JOHNSON. Mr. Chairman, there was one point that came up in the hearing yesterday and the day before which I meant to refer to in my opening remarks and which I would like to clear up, if I may, and that is this question of the wharfage cost, the port cost, in the Soviet ports.

Mr. DOWNING. I wish you would. It was alleged that they were about three times what the normal wharfage cost would be.

Mr. JOHNSON. Yes. As you doubtless know, there is the general practice in this area of charging nondiscriminatory port charges in those cases where treaties of friendship, commerce, and navigation exist, and we follow this practice and so do other countries.

There is no such treaty between the United States and Russia, and when this matter of possible port charges was called to our attention, I believe toward the end of last week, we investigated the situation with our Moscow Embassy and found that in fact American ships calling at Russian ports might be subjected to port charges which would be I think about three times as high as the port charges paid by Russian ships or other ships with whom the Russians had commercial treaties. In investigating our own situation here we found, however, that Soviet ships calling at our ports would be given national treatment. In other words, they would be charged only the rates which American ships would pay. They would be charged the same rates as ships of countries with whom we have FCN treaties.

This stemmed from a Presidential proclamation in January 1934 which followed on the original recognition of the Soviet Union and was based on a law which permitted the President to waive the higher

charges in the case of those countries who reciprocate, and at that time the Soviet Union presented evidence that it was reciprocating and that it was charging American ships the lower cost.

We have instructed our Embassy to bring this matter to the attention of the Soviet Government and we anticipate that, when the treatment that we would give Russian ships in this country is brought to their attention and the arrangements that were put into effect at that time are called to their attention, they will grant national treatment to American ships in those ports.

We would certainly expect them to do so.

Mr. HAGEN. May I ask a question?

Mr. DOWNING. Mr. Hagen.

Mr. HAGEN. Prior to this wheat deal of course there had been buying and selling between U.S. sellers and the Russians of other items. Has there ever been any difficulty in getting U.S. ships admitted to Russian ports?

Mr. JOHNSON. Of course this is one of the reasons why I suppose this difficulty appears now, that there have been practically no American ships that have gone to Soviet ports. I believe there were one or two Moore-McCormack liners that went there several years ago, but there has been no occasion for us to take this matter up with the Soviet Government.

Mr. HAGEN. Did those Moore-McCormack ships have any problems in getting access to the port?

Mr. JOHNSON. That I don't know, sir.

Mr. HAGEN. I am just wondering why you would even consider that question. It should be an undebatable question and the basis of your policy really would have been more directed at guaranteeing a percentage of this wheat going in U.S. vessels rather than a mere matter of

access.

Mr. JOHNSON. I am sorry, I don't quite get your point.

Mr. HAGEN. You indicated that the only real consideration in this policy reference to American vessels was getting them access to the Russian ports, that that was almost the sole criterion, whereas I think it might be more reasonably concluded that the purpose of the policy was to guarantee that at least a certain percentage of this cargo would go in U.S. vessels.

Mr. JOHNSON. I think that was the purpose of the policy and we just took for granted the fact of access of American vessels to the Soviet ports. The question of the wharfage rates didn't come up because nobody really realized it existed, and I just wanted to indicate that we do anticipate and we expect to get confirmation of reciprocal treatment in this regard.

Mr. HAGEN. Was there any discussion of this matter of the blacklist, because, the situation being what it is, if that applied the Russians would look bad with their Cuban ally if the blacklist applied to ships that engaged in trade with Cuba.

Mr. Johnson. No, sir. The only discussion that I recall with respect to Cuba with the Soviet Union was a specific understanding that none of this wheat would be delivered to Cuba.

Mr. HAGEN. Did they make any assurances that they wouldn't deliver any other wheat to Cuba?

Mr. JOHNSON. No.

Mr. HAGEN. They could substitute it.

Mr. JOHNSON. Yes, sir.

Mr. DOWNING. Mr. Secretary, you will find out what the wharfage fees are over there so that that can be a stable factor.

Mr. JOHNSON. Yes, sir.

(The following data was supplied in response to the above request :)

PRESS STATEMENT BY THE U.S. EMBASSY, MOSCOW, FEBRUARY 6, 1964 "Soviet authorities informed the Embassy on February 6 that U.S. ships calling at Soviet ports will be given preferential treatment in the payment of tonnage dues and expressed the hope that steps will be taken by U.S. authorities to remove any discrimination against Soviet ships entering U.S. ports."

Mr. DOWNING. Under the Continental charter they allowed $2,500 demurrage per day and the shipowners don't know whether that is exactly equitable or not.

Mr. JOHNSON. This won't, I don't think, relate to the demurrage. Mr. DOWNING. Wharfage we are talking about.

Mr. JOHNSON. Yes.

Mr. DOWNING. Would the Russians be adverse to letting us know how deep these Russian ports are?

Mr. JOHNSON. No. I think that the difficulty is, as I understand it, that there is a variation in the depth of the ports, depending on the season and the weather, and it is unfortunate that the particular ports involved, particularly those on the Black Sea, happen to be at this breaking point of 31, 32, 33 feet. It may very well be that a 31-foot depth is the only one that they can guarantee at all times. They have indicated that there is some variation, depending on weather and

season.

Mr. DOWNING. Do they use the figure 31 feet?

Mr. JOHNSON. They have used the figure 31 feet, yes, sir, not in our talks here, but when the matter was explored in Moscow.

Mr. DOWNING. Mr. Tollefson?

Mr. TOLLEFSON. Just one question. I may have asked it, but I don't recall.

I think I asked you whether or not you had anything to do with the setting of the guidelines. Would that have been discussed with you?

Mr. JOHNSON. That was discussed in the sense that we had a strong interest in facilitating the arrangements for making American ships available. The validity of the guidelines or the technical aspects of the guidelines obviously are not matters we are competent to deal with. Mr. TOLLEFSON. That is all.

Mr. DOWNING. Thank you, Mr. Secretary, for coming down. You have been very helpful.

Mr. JOHNSON. Thank you.

Mr. DOWNING. Now we will hear from Mr. Clarence R. Eskildsen, the Acting Administrator of the Foreign Agricultural Service of the Department of Agriculture.

STATEMENT OF CLARENCE R. ESKILDSEN, ACTING ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE; ACCOMPANIED BY ROBERT G. LEWIS, DEPUTY ADMINISTRATOR, COMMODITY OPERATIONS, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE; EDWARD M. SHULMAN, DEPUTY GENERAL COUNSEL; JOSEPH A. RYAN, JR., CHIEF, OCEAN TRANSPORTATION BRANCH, PROGRAM OPERATIONS DIVISION, FOREIGN AGRICULTURAL SERVICE, DEPARTMENT OF AGRICULTURE

Mr. ESKILDSEN. Mr. Chairman, I have with me this morning Mr. Robert G. Lewis, on my right, who is the Deputy Administrator for Commodity Operations of the Agricultural Stabilization and Conservation Service under which most of our wheat sales work is done, Mr. Edward M. Shulman, Deputy General Counsel, and Mr. Joseph A. Ryan, Jr., who is Chief of our Ocean Transportation Branch in the Foreign Agricultural Service.

With your permission, Mr. Chairman, I have a prepared statement. If you would like I could read it for the record.

Mr. DOWNING. Yes, sir. Suppose you go ahead with your state

ment.

Mr. ESKILDSEN. Mr. Chairman and members of the committee, we may export a billion bushels of wheat this marketing year-which would far exceed any year in the past. Add to this the fact that almost two-thirds of those exports will be commercial sales for dollars and 1963-64 becomes quite a high point in the history of the Nation's trade in wheat. The United States is traditionally a great wheat exporting nation, with wheat ranking as an important contributor to farm income and an essential earner of foreign exchange.

With these things in mind, it might be easy to overlook the fact that we are in an era of growing competition for the world's wheat markets. Exporting countries are increasingly ready to cut prices and to bargain with every tool available—including credit, special transportation arrangements, and state trading. The European Economic Community has included wheat in its system of variable import levies which favor producers within the Common Market, even though their grain be more costly to produce.

The current export situation, glowing as it is, should not cause us to forget that during the 1950's the U.S. share of the commercial world wheat market declined-from 30 percent in 1951-53 to 17 percent in 1960-62. U.S. dollar exports of wheat remained fairly constant during the 1950's at about 140 to 150 million bushels a year. But the world market expanded substantially, and U.S. wheat growers failed to share in that increase.

If the United States is to hold its position in the world wheat trade and improve its standing as I think it should-then this is a critical time. We must either be prepared to really compete for world wheat markets, or to take a back seat. The latter would be a poor alternative indeed for a great trading nation and a great wheat producing nation.

We are, therefore, taking action on several fronts to gear our export trade to the more highly competitive world market of the present and future. For one thing, we are active in market development work,