thin margin, but if the rate is right in that category where American operators are toying with the possibility of making a little profit, it must mean, because the foreign rates are so much lower, the foreign operators who are going to carry this wheat are going to make a real good profit. That is just a preliminary, Mr. Eskildsen. I had suggested the thought that in handling the balance of the wheat the export subsidy be fixed at one figure for that portion which will be carried on foreign-flag and at another figure for that portion that would be carried in U.S.-flag, and I suggested, just picking figures out of the hat, 70 cents export subsidy for that 50 percent of the wheat going in foreign-flag ships and 74 cents or 75 cents export subsidy for that 50 percent going in American-flag ships, and the net cost then to the Department would be exactly the same, would it not?

Mr. ESKILDSEN. I can see, Mr. Tollefson, if the only considerations here were these problems, that it would be possible to work out subsidy rates on commodities to be carried in ships in such a way that you could equate this with a given volume of American shipping with the additional cost. However, I think that this would be an operation that wouldn't really be possible. I am not even sure it would be legal in the first place, but, in any event, we do have responsibilities in terms of trade policy, international trade commitments, that would keep us, in areas where you are doing damage particularly to world market prices, in free areas, from approaching it this way. I really doubt, without having thought about it too much, that this would be a feasible approach to this problem. I think this would be my feeling.

Mr. TOLLEFSON. I wish you would give it some thought. As I say, maybe the idea is not a sound one, but it sounds good to me chiefly because it means American-flag vessels would carry 50 percent of it. I do not see how it would affect the price to the purchaser, the single purchaser in this case.

Under Public Law 480 you pay the American carrier more than you do the foreign carrier, do you not?

Mr. ESKILDSEN. We pay the American carrier more than we do the foreign carrier, that is right.

Mr. TOLLEFSON. Could you not do it in this case by using this device, having a different export subsidy for the wheat carried in American bottoms from the export subsidy on wheat carried in foreign-flag bottoms? I do not expect you to give a final answer on that now, but I would like you to think about it.

Mr. ESKILDSEN. We would be glad to do that, sir. As I have told you, I think my first reaction to that is it would give us a good bit of trouble in terms of other considerations.

Mr. TOLLEFSON. We have had a lot of complaints about our 50-50 program ever since its inception and we get complaints every year, but we have lived with it and the foreigners have lived with it, too.

Mr. ESKILDSEN. Of course in the case of Public Law 480 we are following a specific law, the Cargo Preference Act. We are making a calculation which is in accordance with that act. It is a specific amount that we pay, depending on the relative prices of foreign-flag shipping and U.S.-flag shipping. It doesn't involve itself in international trade problems to any great extent. Once having satisfied the competitive maritime nations that we are living in a reasonable way with them, then I think it becomes a problem that is pretty much cir

cumscribed by those factors. If you get into this kind of question, I think, on commercial deals around the world you face a whole new set of factors, which are the ones that I think would give us a great deal of trouble.

Mr. TOLLEFSON. Of course you start from the premise that this is a commercial transaction and therefore different from the Public Law 480 transaction.

Mr. ESKILDSEN. I do, sir.

Mr. TOLLEFSON. But if the Government had said this is not a commercial transaction, that this is a Government-sponsored transaction, not coming under Public Law 480, but coming within the terms of the Cargo Preference Act, you would have had probably a complaint, more than one complaint, from the foreign maritime nations, but it would not be any different from the complaints we got from them with respect to the Cargo Preference Act originally and since. As I see it, you made the mistake of saying it was a commercial transaction and therefore you could not apply the terms of the Cargo Preference Act. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Drewry.

Mr. DREWRY. Mr. Eskildsen, along that same line, where do you determine the world price? Is that here, or is that the delivery price? Mr. ESKILDSEN. World prices, sir, are prices paid by buyers. That is our normal conception of what a world price is.

Mr. DREWRY. So if a buyer bought on a c.i.f. price, the price would be the delivered price?

Mr. ESKILDSEN. That is right; yes, sir. The concept of world market price of course, I suppose, has its variations, but normally we think of world market prices as being the prices paid by buyers and if it is in the export trade then it is buyers on the other side of the water. These can be translated obviously into f.o.b. prices, too, and in various other ways, but this would be, I think, the normal conception of the world price of wheat.

Mr. DREWRY. I think you are helping to clear me up on something I have been confused about and that is on the Hard Red Winter and the Western Soft White you could figure subsidy on the basis of bids there just as well as in the case of Durum.

Mr. ESKILDSEN. Yes, sir; we could have. It happens, and this is something that is not related to this transaction, that our normal system of announcing subsidies on other than Durum wheat has been continued, whereas in the case of Durum last July, which was well before this transaction came up, and for other reasons, that existed at that time, we decided as a matter of policy to establish the bid system on Durum, and in my statement 1 indicated what those reasons were. They are basically related to the fact that Durum is a rather strange kind of wheat to trade in world markets. It comes up in sporadic transactions. It isn't traded day in and day out at a fairly high level around the world like other kinds of wheat are, and for that reason some of our competitors, we felt, were much more flexible and in an advantageous position with respect to selling Durum.

In view of these circumstances we established the polley which we now have of accepting bids to determine subsidy on Durum, whereas in the case of all other kinds of wheat we have announced subsidy, which is based also on the concept of what w ssing for around the world.

Mr. DREWRY. So far it has not been very much of the total four and a half million estimated program contracted for?

Mr. ESKILDSEN. No, sir. I would be glad to give you some figures here on the amounts of agricultural commodities that have been sold since October 9, 1963, to the 23d of January of this year if it would be of interest to you.

Mr. DREWRY. It might be interesting for the record. I do not need to take the time now.

Mr. ESKILDSEN. You are quite right in your observation. There has been a little bit more than a million tons sold of the 4 million. Mr. HAGEN. Will the gentleman yield?

Mr. DREWRY. Certainly.

Mr. HAGEN. It seems to me I read a story the other day that rice has been sold to the Soviet Union.

Mr. ESKILDSEN. That is right; I believe 50,000 tons of rice.

Mr. HAGEN. Is the same policy laid down of certain shipments in U.S. vessels being applied to that rice transaction?

Mr. ESKILDSEN. I believe in the case of rice, the cargo preference arrangement, or the requirement of U.S. shipping, do not apply. Mr. HAGEN. Why not?

Mr. ESKILDSEN. I believe rice is open for general license for these destinations.

Mr. HAGEN. He does not have to get an export license for rice. Mr. ESKILDSEN. Practically I believe this is right. I think there may be some legal reason why I would have to say that technically he has to get an export license even in that case, but they are freely granted, as I understand it, in any event, so that for all practical purposes he has no problem in getting an export license for his rice.

Mr. HAGEN. It seems pretty difficult to distinguish between rice and wheat. They are both foods and I assume of equal value. I would think the policy with respect to wheat should be identical with the policy with respect to rice insofar as movement in American ships is

concerned.

Mr. ESKILDSEN. I couldn't really explain why it was that this arrangement was made with respect to wheat and wheat flour and not with respect to other commodities. The only speculation I would have is that at the time this decision was reached wheat and wheat flour of course were the main points at issue.

Mr. HAGEN, This rice transaction arose after all this furor about the wheat?

Mr. ESKILDSEN. That is right, sir. In fact, this was done, I think, within the last couple of weeks or 3 weeks.

Mr. HAGEN. It certainly has not received the publicity the wheat thing did.

Mr. ESKILDSEN. No, sir.

Mr. DREWRY. Mr. Secretary, what is the time limit, if there is one, on the 412 million?

Mr. ESKILDSEN. To my knowledge, there is no specific time limit on that. Maybe some of these gentlemen know, but I believe not.

Mr. DREWRY. What I am thinking is all of the testimony has indicated that the use of American-flag ships, when available, is a firm policy. As was discussed here this morning, the higher subsidy on the Durum, undoubtedly, or at least the freight rate problem, was very much in the minds of Continental when they made their bid, and

there may or may not be any way of tracing that directly, as to the offset on the shipping cost, but, in any event, there may well have been

too.

Now, in future cases from what I hear about Durum the likelihood is there will not be so much Durum sold in future cases. Would not there have to be a bidding there, or will you immediately start asking for waivers with no possibility of shipping in American ships?

Mr. ESKILDSEN. I think anything I said in this respect would be pure conjecture, except I think it is a logical deduction to say what you have said with respect to the possibilities of selling additional large quantities of Durum to Russia because of the fact that obviously is not the kind of commodity that they would like to have in very much larger quantities. Beyond that the question of how this would work out in additional sales I think probably revolves around, to a very considerable extent, the actual availability at given times of U.S. shipping. Of course the other question, which I think I earlier described as the $64 question, is how badly the customer needs the product and how much he is willing to pay for it.

Mr. DREWRY. It is still the fact, and is going to continue, that the American shipping is going to be more costly. There is no reference in President Kennedy's statement as to what "when available" means. I do not believe that is stated in terms of a reasonable price; I mean availability being determined on that. Of course it is a factor to be taken into account. The one guideline there is in terms of the Cargo Preference Act itself. I am wondering how it will be handled in future cases for the equalizing of the difference between the foreignflag shipping and American-flag shipping, if it is not done on a bid

basis.

Mr. ESKILDSEN. I really couldn't tell you, Mr. Drewry. I really don't know. These negotiations between the private exporters in the United States and buyers, I suppose, may develop enough genius to come up with a transaction that would cause wheat to move, but at the moment I wouldn't know just how. This is one that I am afraid I don't have the competence to answer. Certainly with respect to the guideline rates, it is an area that is really not within our competence. Insofar as that would affect it I think the Maritime Administration would be much more useful to you in answering that question.

Mr. DREWRY. Would not you have to have some knowledge about the rate picture in order to determine whether a bid was a reasonable bid or not?

Mr. ESKILDSEN. Now, coming back to that, the only connection in which this would be a matter for us, as I see it, would be in case there were additional amounts of Durum sold because, as we pointed out before, the subsidy rates on other kinds of wheat are established on an announced basis, so it is only with respect to Durum that this bid subsidy problem comes up.

As I said, I suppose it is a fair conjecture that additional quantities of Durum of this magnitude probably would be difficult to sell in Russia. I wouldn't say that as a matter of certainty because I don't know what their flexibility is on the use of Durum, and if they were willing to buy more of it, then, of course it could come up again.

Mr. DREWRY. But you can peg a subsidy on other types of wheat on the same basis if the situation warmte it V-- Robert G. Lewis, Deputy

Mr. ESKILDSEN. Theoreticah,

Administrator], I guess I wo;

that you could. There

are a number of other factors involved in other cases of wheat that are not in the case of Durum, particularly Durum to a destination which is not normally being sold to by free world traders. You might want to comment further on this, Bob.

Mr. LEWIS. We would have authority, yes, to establish a bid subsidy technique for sales of other wheat-for determining the subsidy-but this would be a substantially different kind of problem than it is with Durum wheat. The one major reason is that Durum wheat is exempted from the pricing provisions of the International Wheat Agreement, but with all other types of wheat we are obligated by our participation in that agreement to sell not below the minimum price nor in excess of the maximum price, and the bid subsidy technique would give up less adequate control over the prices at which our wheat might be sold. This would be a particularly difficult technical problem to overcome in using a bid subsidy device for other wheat. There are some others.

Mr. DREWRY. I was trying to think of an example. You said there are other areas of the world that are active in the production of wheat and the export of it. Suppose many of the foreign-flag ships were busily engaged in transporting Australian or African, or some other kind of wheat and we wanted to get rid of ours and the foreign-flag ships just weren't available. How would you meet the problem here? Mr. LEWIS. What would happen in that situation, I would expect, is that our exporters would bid up the price they are willing to offer foreign flag to the point where they would take the shipping away from other exporters, unless the world shipping rate became uniform, that is, the foreign-flag rate got up to the U.S. rate. I can't conceive of a circumstance in which a commercial exporter would use U.S. shipping if he could use foreign ships at a lower cost.

Mr. DREWRY. Of course that brings us back again to the question of how much it is commercial if there is a specific requirement with regard to the use of American-flag ships.

The CHAIRMAN. I have not been here and did not hear your full statement, but notwithstanding the President's statement that a portion of this export of wheat would go in American-flag ships, you are no going to pay any attention to that? You are just going to ship it if they can sell it in any available bottoms?

I do not want to go over anything that has been gone over because I am going to read this, but I want to ascertain from you whether or not you are going to pay any attention to the President's statement that this wheat would go in American-flag ships. Is this rate business going to nullify that?

Mr. ESKILDSEN. Mr. Chairman, I did go over this partly, but I would be very happy to go over it briefly again.

The CHAIRMAN. I just want a yes or no.

Mr. ESKILDSEN. Yes, sir; we are paying attention to that.

The CHAIRMAN. And you are going to see that at least a portion, 50 percent we might say, goes in American bottoms?

Mr. ESKILDSEN. We are going to do the best we can to maximize the use of American ships.

The CHAIRMAN. You know it cannot be sold without your approval. You have the wheat. You are going to sell it. It can be easily answered.