What has happened to Georgia is almost the same pattern that has happened to the other States in the Southeast, your State of South Carolina, the States of Alabama, Mississippi, Louisiana, North Carolina. Those States in particular represent the vast majority of all the land retired under this program.

The people who have gone out of business in the saw timber industry in our State have been the small sawtimber operator that produced up to 3 million board feet per year annually.

That has disturbed me, because, having a State made up of a series of a great number of timberland owners, it is these small sawmills that are your competitive market.

We reduce our wood-using industry to where only a few large mills are left based on efficiency and equipment that the small owner cannot put in. He cannot maintain a sales force. He is ill equipped to pay wages and hours, social security, and all the other things imposed upon him unless he is certainly receiving a fair return for his lumber. They are the ones that are being forced out of business.

When they are forced out of business, as they are, our land values are going to decline.

And so we are very interested in the increased amount of lumber that is coming into our State from Canada and from other areas, particularly foreign lumbers that are coming in. They are coming in replacing our own markets strictly on price basis.

From the information we have through studies we have made, they are paying, in governmental timberland where the timber is being harvested, in the Pacific Northwest, between 25 and 35 percent of the stumpage price that our people are having to pay that are having to compete with them in the lumber market.

I feel that your committee and the Congress of the United States have something more than just some lumber coming in from Canada. We have a valuation. We have an industry. We have a vast segment of our forest area. We are going to have a lot of raw materials to be placed on the market. We have to have an incentive for people to invest money.

You must recall that timber, unlike most any other crop that grows in the soil, must grow for 15 to 50 years in the South before we can harvest it for pulpwood or sawtimber. Yes, we have some areas that in 8 to 10 years we can get these thinners, but on the average it takes 15 years for pulpwood, and for a decent saw log 30 years upward.

Therefore, what the Congress does, what happens to our lumber market, what happens to our other forest industries as they are able to compete pricewise, immediately affects our land ownership pattern and our whole economy.

If competitive products continue to come in to drive the prices down to the timberland owner and force our present sawmill operators and others out of business, as has been occurring in the past 10 years, if we cannot reverse it I think the Federal Government will have to come in, and they will be owning lots of this forest land because it will not be profitable for the average individual to hold it the length of time necessary to grow a crop.

I appreciate the opportunity of making this statement, and I feel that this is a most important issue.

The capital gains tax I am not referring to by number, the various legislation pending in Congress, but I do know that the capital gains tax treatment that has been used as an incentive since 1944 has been probably the greatest thing that has occurred to help the people in this State decide to put idle land to growing trees of any one thing, and I hope and pray that the Congress might see fit to maintain this legislation, realizing all of the hazards that are built in to growing a forest crop.

I will make a written statement and deliver it to you within a few days. I have the facts from which I spoke in my hand with me today.

I thank you again for your consideration.

Senator THURMOND. Glad to have you here, Mr. Shirley, and I wish to thank you for your contribution that you made here this morning.

(The written statement supplied by Mr. Shirley follows:)

STATEMENT BY A. R. SHIRLEY, DIRECTOR AND SECRETary, Georgia FORESTRY

COMMISSION

My name is A. R. Shirley. I am director of the Georgia Forestry Commission, with offices in Macon, Ga.

Georgia is a State that has 69 percent, or 25,772,000 of its acres devoted to growing trees as a crop. Of this forest acreage, 24 million acres, or 93 percent, are owned by private individuals, companies, or corporations for growing forest products for profit. Only 7 percent is owned by Federal, State, county, and municipal governments. Of equal importance is the fact that nearly 200,000 persons own these 24 million acres of forest.

Forest products are of great economic value to Georgia's economy. In 1961, the value of forest industry ranked third in dollar value return, exceeded only first, by textile manufacturing and second, food processing.

A forest resource survey was completed in 1961, conducted by the U.S. Forest Service, the Georgia Forestry Commission, and private industry. This survey reveals that Georgia's forests are growing 15 percent more timber than is being cut. This is based on trees 5 inches in diameter, 4% feet above the ground and above. Six percent of this increased growth over drain is represented by sawtimber size trees and 9 percent is represented in trees under sawtimber size. In addition to this factor is the fact that Georgia has planted since 1956 more than 1,500,000 acres to pine trees. Of this quantity, almost 700,000 acres were planted under the soil bank program of the U.S. Department of Agriculture. Thinnings from these planted stands will be available for market within the next 3 to 5 years, and within 10 years the volume of wood from plantations will represent increased timber volume.

Georgia has 231⁄2 million acres under organized forest fire protection, and the amount of timber is steadily increasing each year as a result of natural reforestation and reduction in forest fires that now burn only one-fourth of 1 percent of the forest land in Georgia.

It is obvious, therefore, that markets for forest products must be found for this great increase in forest production that is coming into production each year. In view of this great interest in timber production, we are now finding that timberland owners are faced with an ever-increasing amount of forest products being brought into Georgia from Canada and other countries.

The amount of lumber now being brought into Georgia from Canada by rail and boat is increasing monthly. Lumber from Canada has only been coming into Georgia during the past 2 years to any appreciable extent. At present, we have only 527 sawmills operating in Georgia. There has been a 76-percent reduction in sawmills operating in Georgia during the period of 1955-62, representing a 29-percent reduction of lumber cut. During the past 18 months, lumber stumpage prices have declined $5 to $10 per thousand board feet, which is primarily due to the increased Canadian lumber imports.

Georgia timber owners have timber as a crop and hope to make a profit from growing trees. However, the State's timberland owners cannot continue to grow trees profitably unless our Government maintains quotas on lumber and forest

products coming into the United States at even reduced prices and unmarked as to origin. U.S. sawmill operators must comply with wage and hour laws, social security, workmen's compensation, higher freight rates, and buy stumpage from private land owners at market values. Whereas, other countries do not manufacture their lumber under the laws required by our Federal Government. In addition, the timber is owned by the Government in Canada and stumpage prices are set by the Government to make them competitive or below U.S. lumber values to arrive at prices geared to sell their lumber in the United States. Canadian freight rates are at a level to permit them to transport lumber all the way into Georgia and undersell southern pine in our own State.

If we are to continue to grow timber in the United States to meet future generations' needs, our own Government must take steps to encourage timberland owners to plant, protect and harvest products from the forest that will return a fair investment to the timber owner and to safeguard our home markets. Timber growing is a long-time crop, requiring from 15 to 25 years to grow pulpwood and 25 to 50 years for sawtimber in our State.

On behalf of the almost 200,000 timberland owners in Georgia we (1) urge the U.S. Congress to establish quotas on lumber coming into the United States from other countries, and (2) maintain the present capital gains tax structure which offers a slight incentive for landowners to grow trees as a crop.

Thank you for permitting me to express the concern and the plight of the timberland owners and lumber industry of Georgia resulting from imports of lumber and other forest products into the United States.

Senator THURMOND. Our next witness is Mr. Robert Rush of the Georgia Forestry Association.

STATEMENT OF ROBERT RUSH, ON BEHALF OF GEORGIA FORESTRY ASSOCIATION

Mr. RUSH. Senator Thurmond, members of the committee, I appreciate this opportunity to say just a few words in following up what Mr. Shirley of the Georgia Forestry Commission has said.

My name is Robert H. Rush. I am owner of the Rush Lumber Co. and past president of the Georgia Forestry Association.

Over a period of the last 20 years forestry in Georgia has made tremendous increases. They have gone from a depletion of timber to an increase of timber, as Mr. Shirley pointed out.

We are very much interested:

No. 1, in retaining the present capital gains tax.

Two, in getting an equalization of freight rates with our western competitors.

Three, to put a quota of 10 percent on imports of Canadian lumber and to have that lumber marked as having been made in Canada, as practically every other article which comes into this country must have.

Both Mr. Downing and Mr. Shirley I believe have presented the crux of the matter, and I merely wish to say that I'm trying to emphasize what they have said and appreciate very much this opportunity to make this statement.

Senator THURMOND. We are glad to have you with us, Mr. Rush, and thank you for your contribution.

Mr. J. C. Milliner, Jr., Southeastern Lumber Manufacturers Association, Atlanta.

You may proceed, Mr. Milliner.

STATEMENT OF JOHN C. MILLINER, JR., EXECUTIVE SECRETARY, SOUTHEASTERN LUMBER MANUFACTURERS ASSOCIATION,

ATLANTA, GA.

Mr.MILLINER. Thank you.

Mr. Chairman, my name is John C. Milliner, Jr., executive secretary of the Southeastern Lumber Manufacturers Association headquartered in Atlanta, Ga. The association appreciates this opportunity to appear before the Senate Commerce Committee to supplement our association's statement as presented by Mr. H. F. Beal, Sr., before your committee in Columbia, S.C., yesterday.

Mr. Beal's statement was very comprehensive in regard to competition from lumber manufacturers in the Western United States as well as the ever-increasing Canadian imports of construction lumber from British Columbia. To avoid repetition, we do not wish to repeat information furnished your committee yesterday by Mr. Beal; however, we will touch on several points which has been brought to our attention concerning importation of Canadian softwood lumber.

Quoting from the Business and Defense Services Administration, Department of Commerce, the forest resources of Canada differ from those of the United States principally in the smaller size of timber and the proportion of the species represented. The accessible timber in Canada is estimated at 582 billion board feet, or approximately onefourth that of the United States. Softwoods make up 531 billion feet or 91 percent of the total. Spruce, true fir hemlock and Douglas-fir account for 68 percent of the total timber stand. Canada produces about 6.5 billion board feet of softwood lumber annually with about 60 percent produced in British Columbia. U.S. imports of Canadian softwood lumber increased from 1 billion board feet in 1947 to an estimated 4 billion feet in 1961. These imports represented 4 percent of domestic softwood consumption in 1947 and 14 percent in 1961. Softwood imports are competitive with domestic softwoods, generally, and most particularly with southern yellow pine.

Most softwood lumber entering the United States from Canada is subject to a customs duty of 25 cents per thousand board feet plus an Internal Revenue tax of 75 cents per thousand feet. The foregoing duties and taxes are extremely low in relation to current prices of lumber and therefore do not inhibit the flow of lumber from Canada into the United States.

From 1959 to 1961 softwood imports from Canada increased by 250 million board feet or 7 percent. During this period U.S. softwood lumber consumption declined 17 percent and production 10 percent.

In 1952, 66.5 percent of the softwood lumber shipped to Puerto Rico was southern pine as compared to 10.2 percent from British Columbia with the remaining portion being shipped from the Pacific

coast.

In 1956, southern pine region shipped 44.5 percent as opposed to 42.2 percent from British Columbia.

During 1961, only 23.8 percent was shipped from southern pine region as compared to 76.2 percent from British Columbia.

The more important factor contributing to Canada's strong competitive position is favorable cargo rates, which in 1961 ran from $6.50 to $11.50 less than U.S. rates, and lower stumpage costs. The average stumpage price paid in British Columbia in 1960 was $5.38 per thousand board feet. The average price paid for southern pine timber approximated $25 to $30, or in a lot of instances more.

It is also reported that, wage rates and other production costs in Canada are less than in the United States. Official data on which to be measured such differences are not immediately available.

According to figures released this week by the Department of Commerce, Canadian softwood lumber imports in February jumped 67 percent over January to a total of 379,672,000 board feet. Compared to last year's level, the February shipments were up 22 percent. Of the total U.S. lumber market in February, Canadian softwoods accounted for 17.1 percent, a 7.4-percent rise over the preceding month, and a 13.6-percent rise over February 1962.

Imports of all lumber in February of this year totaled 409,548,000 board feet, 63 percent above January 1963 and 2 percent above February of last year.

Rail freight rates from British Columbia to the Atlantic coast are practically identical to the rates from the Pacific Northwest. Since 1935, a common or blanket rate has applied on lumber from the Pacific Northwest to all points in the official territory which covers the area east of the Illinois-Indiana State line, and north of the Ohio River, excepting a few points in northern Maine. Coupled with ex parte rail rate maximum increases following World War II, the west coast lumber industry, and in recent years the Canadian lumber industry, has moved in on eastern lumber markets to the extent the southern pine industry is at a distinct marketing disadvantage.

Quoting statistics of the National Lumber Manufacturers Association, in 1947, shipments of southern pine lumber totaled 9,369 million board feet.

In 1953, southern pine region shipped 7,167 million, a decrease of 23.5 percent.

In 1961, southern pine dropped to 6,522 million board feet for an additional 9-percent reduction.

In part, this can be attributed to the rail transportation advantage afforded the west coast lumber industry and which the lumber shippers in British Columbia are now using to great advantage.

Within the past year the Pacific coast lumber industry asked our Federal Government to amend the Jones Act which would grant them permission to transport lumber to the gulf and Atlantic coast ports via foreign-flag vessels, thereby reducing their transportation costs from $7 to $13 a thousand board feet in order to compete with the Canadiana. Approval of that amendment would have placed the southern pine region in a price squeeze which would have spelled ruination to the southern pine mills who are in no position to further reduce prices to meet such competition.