Mr. JOHNSON. Our work is primarily in Washington. But with reign travel of our personnel and with research contracts under Public Law 480, and with the contacts that we have developed over e years, and are trying to develop more effectively with economists other countries. This is a third flow of information, which does me directly to us, because we are acquainted with the economists these other countries.

DATA FOR NEGOTIATIONS ON COMMON MARKET

Mr. WHITTEN. Mr. Koffsky, Secretary Freeman, as a spokesman for Department of Agriculture, has attended some of these interational meetings. What did you arm him with prior to his parcipation in negotiations on the Common Market? Knowing there is asually somewhat of a competitive situation among the Secretaries of Commerce, Agriculture, and State, each of which has a prime responshality in a certain area, what did you arm him with prior to discussions within our own country with these people? In connection with Leetings on this Common Market what did you furnish him to help him insist that agricultural commodities be treated fairly, from our viewpoint at least, in any determinations by the Common Market for the future?

Mr. KOFFSKY. We worked with the Foreign Agricultural Service in providing the potential requirements and potential production, in each of the Common Market countries for the farm products that we were exporting. And this indicated, then, to the Secretary, how much of a stake we had in the Common Market with respect to agricultural products, and what different kinds of pricing, different kinds of restrictions that might be imposed, would do to our market. In other words, we took a look ahead, going some 10 years ahead, in terms of what might be the potential markets for the major commodities we were exporting.

Mr. WHITTEN. In connection with that, did you use the data available, including the amount of cultivatable land, and other things, within the countries that are presently in the Common Market and the others that might be under consideration? Did you look to see what their production potential was, if fully utilized?

Mr. KOFFSKY. That is right.

Mr. WHITTEN. And from that you looked at the deficit that still exists and matched that against what our present export needs are? Mr. KOFFSKY. Precisely.

SUPPLY OF INFORMATION

Mr. WHITTEN. Were there any other areas in which you were asked to supply information? Were there any other analyses that had to be made prior to these meetings?

Mr. JOHNSON. Consumption information, over the years, country by country.

Mr. KOFFSKY. This was all part of the analysis; yes, sir.

Mr. WHITTEN. We have the Foreign Agricultural Service. Sc years ago, as chairman of this committee, I tried to get our Gove ment to change its policy in regard to offering our billions of doll worth of agricultural commodities in world trade for dollars. embarrassed the Foreign Agricultural Service. I asked a group agricultural attachés at a meeting in Paris if anyone there knew we could sell for dollars. Not a man there could raise his har They talked of barter and various other things.

Since that time there has been a great improvement, and I thi: this committee can claim some credit in that. Now, explain for with that big service, with quite a number of people who receive th data from the representatives abroad, why is it that FAS can't c the whole job? Why do they have to have you to do that job?

Mr. KOFFSKY. Well, I think that originally the Economic Researc Service was set up so we would bring the economic work together an provide for better coordination. Now, many of the things that we d on the domestic side have applications on the foreign side. Fo example, we have got some work starting now in Puerto Rico on lan‹ tenure problems. This is well adaptable to land tenure problems in South America.

Now, when we are involved in our own domestic agricultural outlook work, one of the important factors in this is the potential abroad. This is one of our great markets. And so the work that is done on the foreign economic side has a great deal of bearing on the domestic agricultural economic side.

I think one of the great virtues of the Economic Research Service is that we can bring to bear these talents, from both sides, into a coordinated, integrated whole. This does not mean, Mr. Chairman, that we do not work very, very closely with the Foreign Agricultural Service. We do. And I think it has been quite beneficial on both sides.

EFFECTS OF FOREIGN TRADE ON STANDARD OF LIVING

Mr. WHITTEN. Mr. Koffsky, earlier in these hearings it was testified that our standard of living was some 50 percent higher than in Western Europe.

The President has recommended to Congress a new reciprocal trade act which will enable us to get on a common level in trade with the Common Market countries. As a layman and with only a smattering of knowledge in this field of economics and trade, maybe bolstered a little bit by sitting on this committee for many years, it strikes me that if they have a standard of living at one level and we have ours at a higher level, if we open up free trade between the Common Market. and our country, a tendency would be to strike a mean level about midway between their standard of living and what we have. In other words, they would come up about halfway and our standard would go down about halfway. Now, that is oversimplified, but you get the point.

Now, it is hard for me, having been to Germany, to conceive of anything in the way of machinery and equipment and things of that

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where we could compete with German production in these counthat are right around them. I know of the fine Italian gloves ties and of the fine French gloves and various other things, and ave seen nothing over here that would indicate that we could comwith those countries in that area.

Now, I could go on and take it up country by country. Where they alize and where they open up the trade between themselves, withany tariffs, where we no longer can compete in Germany for the de of gloves, or in France for the sale of machinery, because they will a free market, what is it that you believe that we could produce for a. better than one country or the other already within the Common Market! I will be glad to have you list them.

Mr. KOFFSKY. Let me start with this, that even within the Common Lirket countries you have a considerable range of standards of living Ľiproductivity.

Mr. WHITTEN. Yes; but the general belief is, if I understand it orrectly, that because they break down the trade barriers, that these arious countries will somewhat reach a common standard of living these distinctions and differences will no longer exist. If that be re within the Common Market, why is it not also true, if we join with the Common Market, ours and theirs will reach a mean level— somewhat lower, theirs somewhat higher?

Mr. KOFFSKY. I doubt very much whether ours would result in lower levels. I think it is a question partly of the rates of growth. And the European Common Market countries are expanding faster ten our domestic market.

Mr. WHITTEN. You mean internally, or do you mean in rate of port from foreign nations?

Mr. KOFFSKY. I mean the rates of internal growth.

Mr. WHITTEN. Is that because they have begun to export more and import less? What are their trade figures during this period of growth?

Mr. KOFFSKY. I do not have the figures at hand.

Mr. WHITTEN. We can get the figures from the Foreign Agricultural Service. They are the gatherers. But you are the analysts. I am trying to get the report of the analysts now.

Mr. JOHNSON. They have increased their trade, Mr Chairman. They have increased their exports and increased their imports. And they have especially increased their imports of agricultural products from the United States.

Mr. WHITTEN. For dollars?

Mr. JOHNSON. For dollars.

Mr. WHITTEN. What is their situation with regard to other countries? I am not prejudging this thing. I am afraid of it, to be perfectly candid. But I am trying to get all of the facts I can, wherever they may hit.

EFFECT OF COMMON MARKET ON U.S. AGRICULTURE

Mr. KOFFSKY. Well, I am not sure we can answer all of your questions because the Common Market is relatively new and of course its potential impact on agriculture here is unknown in a sense.

Mr. WHITTEN. I have traveled through the Common Market countries. I have spoken to groups of agricultural attachés on at least two or three occasions. And coming from an agricultural area and being on this committee, quite naturally I am interested in the welfare of agriculture and am interested in the Secretary of Agriculture insisting that American agriculture receive fair treatment not only there, but at the Cabinet or White House level in our country.

I can see, having been through those areas, that perhaps for agricultural products the potential in those countries is such that it might not be as much of a problem for us in an agricultural way as in other

areas.

For instance, I don't recall any place in the whole area where they can produce hard wheat. The soft wheats they produce require hard wheats to have the type of bread they are accustomed to.

I don't think there is any place in any of these countries where they can produce cotton. Now many of them have had other areas they controlled in Africa and elsewhere, where they could import it. If we do maintain our share of agricultural markets, what is it that we are going to buy from them, so they can pay for it?

This is a balance of payments problem. Where does that come in? Mr. JOHNSON. Well, of course we are buying a good many things. from them now, Mr. Chairman. Nonagricultural products. Actually, of course we are selling a great deal of agricultural products a year, and we are only importing

Mr. KOFFSKY. We sold about $1.1 billion dollars worth to the European Common Market in 1960 and imported about $220 million worth.

Mr. JOHNSON. That is right.

Mr. WHITTEN. Now that is a comparison, agriculture against agriculture. Now when you get an across-the-board comparison, it is different. I think it would be well, so far as they are available, to put total trade figures in, so we can see how this trade is now. Show what the trade between those countries and this country is, agricultural and nonagricultural.

(The information requested follows:)

U.S. TRADE WITH COMMON MARKET COUNTRIES

Total U.S. exports of farm products averaged $4.2 billion during the 3 calendar years 1958-60, of which nearly $1 billion went to the Common Market (table 1). Most of the Common Market exports were commercial transactions. They equalled about one-third of our total dollar sales, over half the dollar sales of feed grains and vegetable oils, 45 percent of cotton, around 40 percent for soybeans, poultry, and shell eggs, 28 percent for tobacco, 26 percent for wheat and flour, and 28 percent for lard and tallow.

Nonagricultural trade between the United States and the Common Market was nearly balanced over the 3-year period 1958-60, with U.S. exports exceeding imports by a mere $120 million annually. However, if the United Kingdom had been included in the Common Market, the United States would have had a nonagricultural trade deficit of $173 million for the period 1958–60.

Although nonagricultural exports from Common Market countries to the United States increased over the past 5 years, they still were 13 percent less than U.S. nonagricultural imports by these countries in 1960 and 1961 (table 2).

Major categories showing an export surplus from the Common Market to the United States in 1960 and 1961 were automobiles and metals and metal manufactures. Net U.S. nonagricultural export balances to the Common Market in 1961 were recorded for machinery, chemicals, and related products, wood and paper, petroleum, and coal. Of basic importance from the standpoint of expanding commercial agricultural exports to Common Market countries, including the United Kingdom, is the capacity of the United States to absorb greater nonagricultural imports.

The long-run impact of the Common Market on U.S. farm exports will depend in part on (1) its implementation with respect to the common price level and the type and level of controls to be levied on imports from nonmembers, and (2) on the countries whose output is likely to have a preferential position, either through membership or special arrangements including purchase agree ments.

TABLE 1.-U.S. agricultural exports, total and dollar sales, and exports to the Common Market and the United Kingdom, with comparisons

1 France, Italy, Western Germany, Belgium, Luxembourg, and the Netherlands. Excludes exports for relief and charity which are included under "All other.” Excludes allowance for barter transactions.

Source: Bureau of the Census, U.S. Department of Commerce; and Economic Research Service, U.8. Department of Agriculture.

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