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Mr. GILES. That is right; it can't. But I think the answer, sir, to our complaints from our foreign friends is that, while as between a Government aid program, a Government aid shipment and commercial, this is commercial, from the standpoint of responding to the foreign complaints our answer has been and the State Department has appropriately said—it has been published—that this is a unique shipment and transaction here on the part of our Government when we enter into this sort of transaction with the Soviets and we have not ordinarily been selling them this amount of grain. So we are justified in this case in having this sort of shipping requirement, and I think that is a sound explanation.
The CHAIRMAN. Mr. Tollefson?
Mr. Giles. Sir, may I add a couple of other points? I was indicating the reasons why this individual though that there was a reasonable question now about this 50-percent requirement.
He went ahead to point out that, in effect, our larger vessels would be able, if we didn't have the 50-percent requirement on the Soviet shipments, to continue to get their portion, you might say, on a competitive basis of the Public Law 480 shipments, and that the general shipping demand throughout the world would be increased to the point that really they would make out about as well in the long run without the 50-percent requirement, and he indicated just as a matter of an analysis that the 50-percent requirement was really helping more our least efficient ships, our smaller, less efficient ships, by giving them a first choice on Public Law 480 and that that wasn't necessarily a longrange desirable trend.
The other point he made, which I thought was appropriate, was that for the berth liners generally our 50-percent requirement is no particular help on this quantity of grain shipments. Certainly our subsidized operators and our berth liners are not going to carry a substantial amount of it, so they don't have the same interest in this program as our tramp operators do.
I am simply reporting that as a point of view where apparently there are some shipping people themselves who now, looking back on it, say that perhaps this is not a good item for our own interest overall. That doesn't mean that it isn't desirable for specific segments of the shipping industry or for specific operators, and I don't think the shipping industry generally is prepared at this point to step forward and ask the Government to change this policy.
If they are we would be happy certainly to consider it.
The CHAIRMAN. That was more or less an informal and confidential conversation.
Mr. Giles. That was a personal conversation, but I thought it was pertinent to add in connection with the sentiment as we understood it earlier in this program, that is, last fall.
The CHAIRMAN. Mr. Tollefson.
Mr. Tollefson. Thank you, Mr. Chairman. Yesterday you gave a good explanation of why you did what you did in connection with this sale of wheat to Russia, and there may have been those who got the impression that whatever you did do was in accord with the thinking of the shipping industry generally, but I can't be too sure that that is the case because of the tremendous concern on the part of operator representatives who have talked to me.
I don't mean to intimate that you sought to mislead us, but I just want the record clear on this point; namely, that not everybody is happy with what happened. Yesterday there was reference made to the President's announcement and you said that there was no percentage figure cited in the announcement.
Did I understand that you had a copy of the President's announcement?
Mr. GILES. I do have a copy here before me, sir.
Mr. TOLLEFSON. Would it be possible for you to submit a copy of it for the record ?
Mr. GILES. We will.
[From the Washington Post, Oct. 10, 1963)
TRANSCRIPT OF PRESIDENT'S NEWS CONFERENCE
(The transcript of President Kennedy's news conference yesterday :) The PRESIDENT. Good afternoon.
I have a statement to make. The Soviet Union and various Eastern European countries have expressed a willingness to buy from our private grain dealers at the regular world price several million tons of surplus American wheat or wheat flour for shipment during the next several months. They may also wish to purchase from us surplus feed grains and other agricultural commodities.
After consultation with the National Security Council, and informing the appropriate leaders of the Congress, I have concluded that such sales by private dealers for American dollars or gold, either cash on delivery or normal commercial terms, should not be prohibited by the Government. The Commodity Credit Corporation in the Department of Agriculture will sell to our private grain traders the amount necessary to replace the grain used to fulfill these requirements, and the Department of Commerce will grant export licenses for their sale with the commitments that these commodities are for delivery to and use in the Soviet Union and Eastern Europe only.
An added feature is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by ships of other countries as required. Arrangements will also be made by the Department of Commerce to prevent any single American dealer from receiving an excessive share of these sales.
No action by the Congress is required, but special report on the matter will be sent to both Houses tomorrow.
Basically, the Soviet Union will be treated like any other cash customer in the world market who is willing and able to strike a bargain with private American merchants. While this wheat, like all wheat sold abroad, will be sold at the world price, which is the only way it could be sold, there is in such transactions no subsidy to the foreign purchaser; only a savings to the American taxpayer on wheat the Government has already purchased and stored at the higher domestic price which is maintained to assist our farmers.
This transaction has obvious benefit for the United States. The sale of 4 million metric tons of wheat, for example, for an estimated $250 million, and additional sums from the use of American shipping, will benefit our balance of payments and gold reserves by that amount and substantially strengthen the eco nomic outlook for those employed in producing, transporting, handling and loading farm products.
Wheat, moreover, is our No. 1 farm surplus today, to the extent of about 1 billion unsold bushels. The sale of around 150 million bushels of wheat would be worth over $200 million to the American taxpayer in reduced budget expenditures. Our country has always responded to requests for food from governments of people who needed it, so long as we were certain that the people would actually get it and know where it came from.
The Russian people will know they are receiving American wheat. The United States has never had a policy against selling consumer goods, including agricultural commodities, to the Soviet Union and Eastern Europe. On the contrary, we have been doing exactly that for a number of years, and to the extent that their limited supplies of gold, dollars and foreign exchange must be used for food, they cannot be used to purchase military or other equipment.
Our allies have long been engaged in extensive sales of wheat and other farm products to the Communist bloc, and, in fact, it would be foolish to halt the sales of our wheat when other countries can buy wheat from us today and then sell this flour to the Communists. In recent weeks Australia and NATO allies have agreed to sell 10 to 15 million tons of wheat and wheat flour to the Communist bloc.
This transaction advertises to the world as nothing else could the success of free American agriculture. It demonstrates our willingness to relieve food shortages, to reduce tensions, and to improve relations with all countries, and it shows that peaceful agreements with the United States which serve the interests of both sides are a far more worthwhile course than a course of isolation and hostility.
For this Government to tell our grain traders that they cannot accept these offers, on the other hand, would accomplish little or nothing. The Soviets would continue to buy wheat and flour elsewhere, including wheat flour, from those nations which buy our wheat. Moreover, having for many years sold them farm products which are not in surplus, it would make no sense to refuse to sell those products on which we must otherwise pay the cost of storage. In short, this particular decision with respect to sales to the Soviet Union, which is not inconsistent with many smaller transactions over a long period of time, does not represent a new Soviet-American trade policy. That must await the settlement of many matters. But it does represent one more hopeful sign that a more peaceful world is both possible and beneficial to us all.
Mr. TOLLEFSON. I think it is generally conceded what he did say, whatever it was, gave the impression that American-flag vessels would be used to some extent or another.
Mr. GILES. That is right.
Mr. TOLLEFSON. Where "available" I think was the word used. If that was the case and there was no percentage figure why did you pick the 50 percent figure? I think your answer probably will because that sounds like our 50-50 law.
Mr. GILES. Well, I won't say that the 50–50 law didn't have a little halo effect, but that was not the only reason, sir. We looked at the total picture. We took into account the Public Law 480 anticipated shipments during the next 5 or 6 months, and, remember, we are now back in October looking ahead 5 or 6 months and we are not looking ahead all the way through June 30, 1964, but through about April of 1964.
We looked at that. We took into account and anticipated 412 million tons to be shipped to Soviet bloc countries, not all necessarily to the Soviet Union, but to Soviet bloc countries. That is what the discussion was, and it was evident to the shipping people and it was evident to the Government officials that physically we would not have the American tonnage to handle one-half of all of that. Then the discussion went to the point as to what is a reasonable top percentage that we could reasonably expect our American carriers to handle, and based on our estimate as to the physical availability we did arrive at the 50 percent on the basis of discussions with various people in the shipping industry.
I don't know how much in our collective minds the cargo preference law such as Public Law 480 and the 50-percent requirement had an influence. I will say that it was not selected purely on that basis.
Mr. TOLLEFSON. I have no quarrel with what you did in that respect. As a matter of fact, I wish there was something we could do to see to it that 50 percent of all our cargo coming and going is carried in American-flag ships.
Presently that 50–50 provision applies only to Government-sponsored cargoes, and I am glad that you were at least thinking in terms of trying to be helpful to the American merchant marine.
As a matter of fact, that is your responsibility, isn't it?
Mr. TOLLEFSON. You are the promotional branch of our maritime setup as opposed to the regulatory branch, the Maritime Commission, which, while you theoretically are promoting the American merchant marine, the Commission is putting its brakes on.
I am glad to see some thinking on your part about the welfare of the American merchant marine. I am interested in this statement of yours that this is a purely commercial transaction. I just frankly can't quite see this.
We have always talked about our 50–50 law as applying to Government-sponsored cargo, and this certainly must be some kind of a Gov. ernment-sponsored cargo.
Further than that, your actions with respect to it indicate a lot more Government interest and activity than is normally the case with purely commercial transactions. Isn't that so?
Mr. Giles. With respect to the shipping aspect that is true.
Mr. TOLLEFSON. I am going beyond that even. I am talking about the export license, and the export subsidy, and that sort of thing. I am taking the whole picture. It seems to me that the Government is more active in this transaction than in any other commercial transactions.
Mr. GILEs. It is to the extent, Mr. Tollefson, that this involves an important commercial sale to the Soviet Union and it raised questions about our basic export policy. There are other sales in the export of items, for example, to a Soviet bloc country, that individually will receive as much concentrated attention in one form or another; say, for example, a requested sale of machinery of some type.
It doesn't get the attention that this particular sort of transaction does because it is not of the same size or magnitude, and of course this did raise basic questions of policy.
The President was involved. Congress was involved.
Mr. TOLLEFSON. It involves our whole foreign policy and our foreign trade policy.
Mr. GILES. Yes, sir.
Mr. TOLLEFSON. And this transaction would not have taken place except that the President made a foreign policy or a foreign trade declaration or announcement that we would sell grain to Russia. Had it not been for that decision, this transaction wouldn't have taken place at all, would it!
Mr. GILES. That is true, and that would be true with respect to the export of any other item to the Soviet bloc countries.
Mr. TOLLEFson. There is no point in us discussing it. You say it is a commercial transaction. I say it is as much of a Governmentsponsored transaction as any that I can think of, but then that is just a matter of difference of opinion,
However, I am intrigued by some things that have happened. You have said today and yesterday that one of the reasons you fixed a guideline on cargo rates was to give Continental an opportunuity to know just where it stood so it could negotiate a contract or agreement with Russia.
Incidentally, does Continental deal directly with the Government of Russia ?
Mr. Giles. Well, with the Soviet trade representatives. They are in their purchasing agency now.
Mr. TOLLEFSON. I would assume there is not much private enterprise over there.
Mr. Giles. There is not much private enterprise, I understand, so they were government employees or officials, but they were in their international trade department.
Mr. TOLLEFSON. So here is an exporter in what you call a purely commercial transaction getting the Federal Government to assure him in advance a ceiling on his rates so he will know exactly where he stands.
Has the Government ever done that in other commercial transactions, sort of assured the commercial exporter that his ocean freight rates would not exceed a certain ceiling?
Mr. GILES. I don't recall any other commercial transaction or shipment, sir, but I don't recall any other shipment in this category where this sort of shipping requirement has been imposed.
Mr. TOLLEFSON. You mean your shipping requirement ? Mr. Giles. Yes, sir; a 50-percent shipping requirement. Mr. TOLLEFSON. Which leads me to an incidental question because of what you said.
What would have been wrong with imposing the 50–50 thing and just letting nature take its course?
Mr. GILES. Well, that is the point I was commenting on awhile ago, sir. Perhaps, and apparently, there are some people in the shipping industry now who, looking back on it, have some views along that line.
Nobody has come in, though, and put things down in black and white and said, “Well, we are willing to stand up and say that this is so and we are asking the Government on behalf of the shipping industry to remove this requirement."
Mr. TOLLEFSON. I am not advocating it. I am glad that you are seeking to see that we get 50 percent if, in fact, this proves to be what you really are trying to do.
Mr. GILES. Well, it is, and let me just add, sir, that at the time in last October when this decision was made and the President announced this, the Department officials had been consulted and everybody involved then thought it was a desirable thing; it would be to the interest of our country; it would be to the interest of our merchant marine; it would mean certainly that American ships would get more business than they could anticipate if they did not have this 50-percent requirement; it would assist our balance of payments; it would give us employment and all of that, so the policy decision which was made then was made in the light of what the President and the other officials thought would be in the total public interest and in the interest of the merchant marine.