As a member of the Interstate and Foreign Commerce Committee of the House of Representatives, I am already in the process of analyzing and studying serveral proposals by which this situation might be remedied. I shall look forward to examining the findings of your committee in this regard, so that, in the final analysis, I am able to promote the best possible legislative solution to the problem to join in what your committee is doing.

There has also been serious concern expressed to me by my people in many instances in relation to the President's recent tax message, in which he suggests the elimination of capital gains treatment of timber sales. The high degree of opposition within the industry to this change in its tax structure suggests that one of the most useful aspects of your hearings might be an extensive inquiry into this matter.

I feel certain that this Shreveport hearing will provide a great deal v insight into the problems of this major Louisiana industry. Its products, which are valued at almost $600 million annually, constitute a vital segment of our economy.

I feel confident that the committee will listen with utmost attentiveness to the testimony of the people of Louisiana. I shall look forward to the conclusion of this most worthwhile hearing, when we shall all know more about the existing problems and the best means of providing solutions for them.

Also I add, Mr. Chairman, that I offer my services. As I say, this matter is of utmost importance to not only the entire State of Louisiana, but particularly my congressional district. I offer my assistance in any way that I can be of assistance to you. I appreciate the opportunity to make this short statement, and if it is permissible, I would like to sit in with the rest of the hearing.

Senator THURMOND. We are glad to have you with us, Congressman; and we wish to thank you for your fine contribution.

Congressman LONG. Thank you.

Senator THURMOND. Our next witness is W. E. Harmon, of W. T. Carter & Bros. Mr. Harmon, have a seat.

STATEMENT OF WILLIAM E. HARMON

Mr. HARMON. Thank you, sir. I'm another unhappy Texan. Senator THURMOND. We are glad to have you. What place in Texas are you from?

Mr. HARMON. From Houston. Our plant is in Camden, Tex. I have a prepared statement, Senator.

Senator THURMOND. All right, sir. Do you wish to follow that this morning?

Mr. HARMON. Yes, sir.

Senator THURMOND. Just have a seat.

Mr. HARMON. My name is William E. Harmon, of Houston, Tex. I am the sales manager of the firm of W. T. Carter & Bros., with mills at Camden, Tex., a lumber manufacturer and producer of allied forest products since 1883. I speak for the principals of my company and for all of its employees when I say that I appreciate this opportunity to appear before the Senate Interstate and Foreign Commerce Committee with the distinguished Senator Strom Thurmond presiding. Most of us in this area feel that but for the Senator's courage and skill

in the U.S. Senate our national problems might be much worse than they are even today.

I would like to make a brief statement concerning the lumber manufacturing business, particularly its problems in our market area and the problems of my company. We produce annually better than 36 million feet of lumber, and in addition piling, pulpwood, and chips, which are sold to the paper industry. Competition within our industry has reached an acute stage for the business now available to those of us who have survived the past 10 years of growing competition. For example, Texas produced 769 million board feet of lumber in 1951, 549 million feet in 1958, 483 million feet in 1961, a reduction of 37.2 percent. In the year 1958 there were 436 operating mills in our State of Texas, and as of this date 189 have gone out of business for one reason or another, leaving only 247. In our own case, we have modernized our plant, we have exercised every management tool at our disposal, but we still find the return on the investment in plant equipment and resources unattractive to our principals. Without the current capital gains feature pertaining to timber or stumpage in our present tax laws, there would be little incentive left to continue operations.

We are particularly concerned at this time with the growing and unrestricted importation of Canadian lumber. It is well known that, historically, Canada had supplied certain areas of our lumber market, averaging about 6 percent of the total consumption in the United States, up to the year 1956. We understand that they are now supplying 18 percent of our U.S. market, or approximately, 4,600 million feet, which amount is approximately 82 percent of the quantity supplied by our Southern States, with a production of 5,609 million feet.

Certainly we consider Canada one of our most valued friends and allies; we do not feel that we can afford to lose many more allies, but we believe that a solution of Canada's problem might be found elsewhere, particularly since the problem apparently was created in the first place by an increased production in Canadian lumber, supported and encouraged by the Canadian Government, the owner of 95 percent of Canadian timber. We earnestly recommend that some protection be given our lumber manufacturing industry within the United States, which of course includes our own southern pine industry, and we believe that of the several bills now pending, the one designated Senate Joint Resolution 50 would greatly alleviate our problems. At this point we would like also to express our opposition to the proposed repeal of the Jones Act. Such action would create additional problems and another casualty list of southern pine lumber producers.

We earnestly believe that our recommendations would save the jobs of many people and would save an industry that is vital to the economy of this Nation.

Thank

you, sir.

Senator THURMOND. Thank you very much. We appreciate your contribution.

Mr. STILWELL. Mr. Harmon, may I ask you one question. Did your company ship lumber into Puerto Rico?

Mr. HARMON. Yes, they did.

Mr. STILWELL. Did you feel the same effect when the amendment was applied?

Mr. HARMON. Yes, we did. We haven't had an order since.
Mr. STILWELL. Haven't had an order since that amendment went

through?

Mr. HARMON. No, we have not had one order since.

Mr. STILWELL. I was just wondering. I am sorry to hear that. Mr. HARMON. Thank you, sir.

Senator THURMOND. Mr. J. N. Brown of the Texas Forestry Association. Come around, Mr. Brown.

STATEMENT OF J. N. BROWN

Senator THURMOND. Where are you from, Mr. Brown?
Mr. BROWN. I am from Corrigan, Tex., Senator.

Senator THURMOND. Corrigan?

Mr. BROWN. Yes, sir. And I would like to say to you, Senator, that although I am in the position of being here to read this prepared statement for the president of the Texas Forestry Association, I also present it with the same sincerity of being a lumber manufacturer.

Senator THURMOND. All right, sir. Have a seat.

Mr. BROWN. My name is J. N. Brown. I am a member of the board of directors of the Texas Forestry Association. I am presenting this statement for the president of the Texas Forestry Association, Steve C. Kardell of San Augustine, a Texas tree farmer. Since Mr. Kardell was unable to attend this hearing, he requested that I present this statement for him.

Organized in 1914, the Texas Forestry Association is a statewide organization promoting the wise use of the 112 million acres of commercial forests containing some of the best managed and finest timberland of the South. A stubstantial number of our members are sawmill operators, logging contractors, and tree farmers. We are speaking in the interest of approximately 120,000 woodland owners and the thousands of employees who earn their livelihood from employment in the sawmills and in the woods.

Many east Texas cities came to life around a sawmill and are still dependent upon this industry. Timber resources and industries are the basis for the economic stability of many east Texas counties. In fact, Texas has been among the leading States in lumber production for the past 75 years, but its production in recent years has declined. In 1907, Texas was the third lumber producing State in the Nation with 2,229,590,000 board-feed which declined to only 703 million in 1961, according to the Texas forest service.

Small ownerships prevail in the forest land ownership pattern in east Texas. Nearly two-thirds of the privately owned commercial forests are in holdings under 500 acres each. Public ownership in Texas accounts for less than 7 percent of the commercial forest lands of Texas. This is in sharp contrast to Canada where, I am told, 95 percent of the timber is cut from public lands.

Tree farms supply the raw material for Texas sawmills and other wood-using industries. Operating a tree farm, even a small tree farm, is an expensive and hazardous undertaking. Timber growing at best is a long-range investment. Actually the practice of forestry by a private landowner requires more long-range confidence in Government

cooperation and the economic future than almost any other form of private enterprise.

We feel this background is necessary to help demonstrate the great importance of the forest industry in Texas.

The Texas Forestry Association, other associations, forest industry, and many Federal and State agencies have jointly spent millions of dollars in the past 25 years to encourage woodland owners to practice wise forest management and to produce continuous crops of timber to meet the needs of our expanding population.

The enactment of long-term capital gains treatment by Congress in 1944 breathing new life into the forests of the South has been the chief single factor responsible for the great improvement in the productivity of east Texas forests.

If enacted, the proposal by Secretary Dillon on February 6, 1963, to substantially eliminate the capital gains treatment of timber would force liquidation of many forest properties which, in turn, would cause costly erosion, widespread unemployment and economic chaos in the thousands of forest-dependent communities of Texas and the Nation.

It is estimated that Canada is now supplying 22 percent of the softwood lumber consumed in this country today. We see no reason to handicap the Nation's fourth largest industry in terms of manufacturing employment with these large foreign imports.

According to the National Lumber Manufacturers Association, Texas has received far more than its fair share of lumber imported from Canada. These imports almost doubled from 1953 to 1961. In 1953. Texas received 2,400 carloads and in 1961, 4,600 carloads. These figures cover rail shipments only and do not reflect water shipments. The Texas carload receipts of Canadian lumber in 1961 was double the shipments received by Florida, the second highest Southern State, and at least four times as large as the shipments received by any other Southern State.

If there was a timber famine in Texas or in the Nation, it would be easy to justify the increased imports of Canadian lumber; however, such is not the case. There is no shortage of softwood timber in Texas. Nor is there a shortage of production facilities. Since timber is a renewable resource, there is no justification to import foreign lumber to save our own supply as is advocated for other resources. Actually, there is a great need to increase the cut from both privately and publicly owned Texas forests to maintain these forests in a healthy condition.

Several reasons contribute to the decrease in lumber production all of which are directly connected with loss of domestic markets.

A major reason Texas lumber markets suffer great agony from Canadian imports is that our markets are already flooded with local lumber forced onto the market by the wholesale clearing of forest lands withdrawn from timber production. This reason is often overlooked and not fully appreciated. When these lands are withdrawn from timber production, the lands are usually cleared and the timber dumped upon local markets. Wide rights-of-way for pipelines, powerlines, highways, et cetera, and the large areas covered by reservoirs require the clearing of tremendous acreage. Here is east Texas much

acreage is already flooded and logging on some 129,000 acres is being expedited in preparation for the flooding of the McGee Bend Reservoir. When that much timber is dumped on the local market in a relatively short period, it is bound to flood the market. There are many other reservoirs completed, under construction and contemplated, but the granddaddy of them all in this area, the recently approved Toledo Bend Reservoir on the Sabine River, will flood 182,000 acres in Texas and Louisiana. It is a physical impossibility for the sawmills in the area of the Toledo Bend Reservoir to cut this volume of timber by August 1966, the current target date for flooding the reservoir. No relief from this chaotic condition is foreseen.

Still another factor depressing local lumber markets is the southern pine bark beetle epidemic. This tiny insect caused almost threefourths of a million dollars loss in southeast Texas in 1961. The 1962 infestation, continuing to spread in spite of costly control efforts, covered in excess of 4 million acres and killed timber valued at $234 million. It is too early to make predictions for 1963; however, every effort is being made to salvage the beetle-killed timber.

The condition of the Texas lumber market resulting from the above conditions is further aggravated by the receipt of such a large volume of Canadian lumber and accompanied by a corresponding loss in employment.

National economists estimate that 100 new workers will make the following changes in a community: 296 other jobs are indirectly created; 112 more houseowners; $590,000 more personal income per year; $270,000 more bank deposits; 107 more passenger cars purchased; 4 more retail establishments; and $360,000 more retail sales per year. If this is true, then the loss of each 100 employees as sawmill after sawmill in east Texas blows its last whistle might conceivably adversely affect our economy to the same extent. This illustration merely serves to emphasize why Texans are so concerned about increasing Canadian imports of softwood lumber which are absorbing Texas markets at an alarming rate.

In article I, section 8, of the Constitution of the United States of America, listing the specific powers of Congress, power is granted, "To regulate commerce with Foreign Nations ***" While much of this congressional power has seriously eroded in recent years, we urge that this power be retained and exercised by Congress. When local lumber markets are already saturated with a high-quality, homegrown, lumber product, there is little reason for penalizing Texans and other Americans with such large imports of Canadian softwoods. We respectfully recommend that the Jones Act remain as is without change, permitting the Neuberger amendment to expire this fall without extension. Subsidizing one section of this country at the expense of another section ignores the real problem and is no solution to the tragic condition precipitated by these unreasonably large lumber imports from Canada.

Speaking for the Texas Forestry Association, we strongly urge the approval of Senate Joint Resolution 50 by Senator Warren Magnuson, limiting the annual import of Canadian softwood lumber to 6 percent emergency quota of the Nation's average consumption for the previous 3 years. Establishing such a curb on these imports is our only salvation.