Mr. TYDINGS, from the Committee on Territories and Insular Affairs, submitted the following

REPORT

[To accompany S. 2530]

The Committee on Territories and Insular Affairs, to whom was referred the bill (S. 2530) to protect American and Philippine labor and to preserve an essential industry, and for other purposes, having considered the same, report it to the Senate with the following amendment, and with the recommendation that the bill, as so amended, do pass:

On page 2 in line 5 insert a period after the word "thereof" and strike out the remainder of line 5 and all of line 6 down to and including the word "year".

In submitting this report, the committee desires to emphasize three important points:

1. That the measure represents an agreement between the representatives of the Philippine people and the manufacturers of cordage (rope and twine) in the United States, the two interests directly affected by the bill;

2. That thus the measure is in complete harmony and consonance with the philosophy of the act passed by Congress granting independence to the Philippine Islands under certain conditions and known as the "Tydings-McDuffy Act"; and

3. That this legislation is a necessary act on the part of Congress to the end that the agreement on this important subject may be effectuated, a necessary and respected American industry protected, and the interests of the Philippine Islands safeguarded.

The committee emphasizes the fact that agreement to the bill represents considerate compromises on the part of both the domestic manufacturers of ropes and twines, and the representatives of the Philippine people.

Under the terms of the Philippine Independence Act, 3,000,000 pounds of cordage (ropes and twines), as described in the act, may be

imported from the islands into the United States free of duty in any calendar year after the establishment of the Philippine Commonwealth.

But over and above the 3,000,000 pounds any number of pounds of Philippine ropes and twines could be imported into the United States from the islands upon payment of the duty established under the Tariff Act.

Subsequent to the passage of the Independence Act, the domestic cordage and twine industry, already severely affected prior to 1933 by increased importations of Philippine cordage, began to suffer additional competitive hardships through abnormal increase of Philippine cordage imports.

But the situation for United States manufacturers, with a capital investment of $55,000,000 and plants and factories located in 13 States, and with 27,000 branches and distributors located in each of the 48 States and the District of Columbia, was materially aggravated as a result of increased production costs in the United States through the operation of the industry under the National Industrial Recovery Act.

Production costs in the United States increased between 35 and 40 percent when the cordage industry was the third industry voluntarily to assume the wage and hour limitations of a code of fair competition (in July 1933).

The Attorney General of the United States has held that the National Industrial Recovery Act does not apply to manufacture in the Philippine Islands and thus an additional 40 percent differential became a new burden upon the United States industry in the face of uncontrolled Philippine rope and twine competition.

In the 19 months subsequent to the passage of the National Industrial Recovery Act, importations of Philippine cordage to the United States increased 100 percent over importations from the islands during the 19 months prior to the passage of the National Industrial Recovery Act. Importations of cordage from the islands were 1,157,000 pounds in 1921, 5,354,000 in 1931, and 4,944,398 pounds in 1932. But in 1934 approximately 10,000,000 pounds of Philippine cordage came into the United States from the Philippine Islands free of duty and in January and February of the current year (1935) importations have been at the rate of 15,000,000 pounds annually.

This abnormal increase in importations of Philippine cordage obviously had a serious effect upon the necessary, Nation-old cordage industry. Philippine cordage, not only depressed the industry through the increasing volume of imports, but the sale prices of Philippine cordage in the United States ranged from 2 to 6 cents per pound below production costs of the same products in the United States.

Obviously, here was a condition which enlisted wide interest in Congress.

The committee has before it as evidence of the impossible situation created, a report of the Governor General of the Philippine Islands, dated October 18, 1934, showing wage rates in the Philippines at from 71⁄2 to 15 cents per hour, with hours of operation running from 8 to 24 hours of three shifts each.

These figures are contrasted with a wage rate in the United States cordage industry averaging 45.7 cents per hour, with employees limited to 40 hours per work week and machinery to two shifts of 40 hours each per week.

Nothing more need be said to indicate the necessity for relief to the American industry.

The domestic industry properly asserts that its only relief can come from Congress, in view of the traditional policies with respect to the Philippine Islands.

Bills were hurriedly drawn (S. 2209 and H. R. 6653) and introduced respectively by the Chairmen of the Senate and House Insular Affairs Committees. Representatives of the Philippine people and American manufacturers were heard. The committee was confronted with an unusual situation. On the one hand, the United States industry had to be protected and, on the other, the philosophy of the Philippine Independence Act had to be sustained.

It was, therefore, suggested to the representatives of the Philippine people, Messrs. Quezon, Roxas, and others, and to the representatives of the United States cordage manufacturers that they attempt to reach an agreement and report back to the committee.

Long conferences between the two interested parties were held, and the bill reported to you today, and recommended for passage, represents a complete meeting of the minds of these interested parties.

Under the bill as recommended for passage, the duty-free importations of Philippine-made cordage during each successive 12 months' period subsequent to May 1, 1935, is fixed at 6,000,000 pounds. This is an increase to the Philippine Islands of 3,000,000 pounds of dutyfree cordage over the provisions of the Independence Act.

On the other hand, the bill here reported limits the importations of cordage from the Philippines to 6,000,000 pounds, and no additional cordage above that amount will be permitted entry.

The bill is effective for a period of 3 years, but may be extended, for an additional 3 or more years, by the President of the United States, with the approval of the Pres dent of the Philippine Commonwealth. The bill may not be extended beyond the period of sovereignty of the United States over the islands. Upon the expiration of the operation of this act, the provisions of the Independence Act will govern.

There are but three mills in the Philippine Islands whose cordage exportations have entered the United States. The first is of Spanish origin; the second, of Philippine-American origin; the third, of American origin. By far the largest exporter to the United States of Philippine cordage at the present time is the Spanish originated mill. The investment in the islands is $2,200,000 and there are approximately 850 Filipinos engaged in the cordage manufacturing business in the islands.

In the United States, 4,354 were directly engaged in manufacture in December 1934, and thousands additionally were engaged directly in the distribution of the product. The normal direct employment in the United States industry was about 12,000 a few years ago.

The amendment reported by the committee is of no vital concern in the United States. Under the bill, as drafted, the 6,000,000 pounds permitted entry into the United States was to be allotted among the manufacturers in the Philippine Islands, on the basis of exports during the preceding calendar year. The amendment removes the basis and leaves the allocation to the Governor General, prior to the Commonwealth, and, thereafter, to the President of the Commonwealth or the Philippine Legislature. The Philippine representatives and all others interested agreed to the change and, fundamentally, the

provision is not one which should enlist the interest of Congress as the allocation problem is one for the Philippines to determine upon. It should be noted in connection with the bill that manila hemp (abaca) is the raw material out of which manila rope is made. There are some 2,500,000 Philippine people engaged in the raising and processing of this raw material, and the United States manufacturers, in order to make manila cordage in the United States, purchase 94 percent of the raw material from the Philippine Islands, only 6 percent being purchased from Sumatra. In other words, the Philippine Islands have a virtual monopoly on the sale of manila hemp to the United States manufacturers of manila cordage. The committee emphasizes the fact that 2,500,000 are employed in the islands in raising and processing this raw material as compared with 850 persons employed in the islands in the manufacture of rope. In arriving at a compromise and agreement, Philippine representatives took into consideration the depression of the agricultural product known as "manila hemp" (abaca) which would naturally follow the continued depression of rope manufactured in the United States.

In conclusion, the committee hopes for favorable action on this measure as tending to remove from Philippine-American considerations the troublous question arising through the importation of Philippine cordage products.

[S. 2530, 74th Cong., 1st sess.]

[A BILL To protect American and Philippine labor and to preserve an essential industry, and for othe purposes]

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That, effective May 1, 1935, and for three years thereafter, the total amount of all yarns, twines, cords, cordage, rope, and cable, tarred or untarred, wholly or in chief value of Manila (abaca) or other hard fiber, produced or manufactured in the Philippine Islands, coming into the United States from the Philippine Islands, shall not exceed six million pounds during each successive twelve months' period, which six million pounds shall enter the United States duty free.

The amount or quantity of such articles which may be so exported to the United States shall be allocated, under export permits issued by the Government of the Philippine Islands, to the producers or manufacturers thereof. This allocation shall be made by the Governor General of the Philippine Islands prior to the inauguration of the Commonwealth of the Philippines, and thereafter by the President of said Commonwealth, unless otherwise provided by the Legislature of the Commonwealth.

SEC. 2. Pending the final and complete withdrawal of American sovereignty over the Philippine Islands, the President of the United States may, by proclamation, at least ninety days prior to the expiration of the three-year period provided in section 1 hereof, extend the operation of this Act for an additional period of three years or more, provided such extension is accepted by the President of the Commonwealth of the Philippines.

SEC. 3. On and after the expiration of the operation of this Act the articles described in section 1 coming into the United States from the Philippines shall be subject to the provisions of section 6 of the Act of Congress approved March 24, 934, entitled "An Act to provide for the complete independence of the Philippine Islands, to provide for the adoption of a constitution and a form of government for the Philippine Islands, and for other purposes."

SEC. 4. Except as provided herein, nothing in this Act shall be construed to modify or repeal the provisions of any existing law.

SEC. 5. The Secretary of the Treasury shall promulgate such rules and regulations as may be necessary to enforce the provisions hereof; and this Act shall be enforced as part of the customs law.

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