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The United States not only took a leading part in negotiating the wheat agreement, but it also urged the United Nations Food and Agriculture Organization to use the commodity agreement approach as being the most effective method in stabilizing world trade in food. Work leading to the international wheat agreement began in 1933, with the establishment of the International Wheat Advisory Committee. From that time until the adoption of the agreement, this Government continued its efforts to work out some plan under which we could have a dependable market for our exportable wheat.
The fact that the United States exported an annual average of less than 50,000,000 bushels of wheat in the decade of the 1930's shows the need for an effective operating agreement, and the potential benefits to this country from such an agreement.
The basic objective of the international wheat agreement is to assure wheat supplies to importing countries and a wheat market to the exporting countries at equitable and stable prices. During the period covered by the agreement, the United States will export annually, under the agreement, 168,000,000 bushels of wheat at specified prices. It is hoped of course that we will also export substantial quantities outside the agreement. To date, 4 of the exporting countries and 24 of the 36 importing countries have accepted the agreement. The International Wheat Council established by the agreement fixed August 1, 1949, as the effective date of part 2 of the agreement, which relates to the rights and obligations of the parties to the agreement.
Senator HOLLAND. I have a question, Mr. Trigg. Mr. TRIGG. Yes, sir. Senator HOLLAND. Is the number, four, of the exporting countries which accepted the agreement, including the United States, sufficient to put the agreement into effect?
Mr. TRIGG. It is my understanding that it is, sir.
An indication of the need for prompt enactment of legislation to clarify questions of pricing and operations is given in the record of exports under the agreement since August 1. Sales of wheat and flour by the United States under the terms of the agreement since that date have amounted to only a little over 7,000,000 bushels. In terms of a yearly guaranteed quantity of approximately 168,000,000 bushels, it is obvious that exports must be materially increased soon if we are to export the remainder before next August. Our best opportunity to export under favorable conditions is in the next 4 or 5 months.
In view of this situation, and the fact that the wheat agreement is an integral and important part of United States foreign economic policy, the need for early legislative action is apparent.
On July 18, 1949, the Department of Agriculture submitted a draft of proposed legislation for consideration by the Congress. This draft was introduced by Senator Elmer Thomas, chairman of the Senate Committee on Agriculture and Forestry, on August 4 as S. 2383. This bill is now under consideration by this subcommittee, along with a similar bill, S. 2287. S. 2383 would authorize the President, acting through the Commodity Credit Corporation and such other department, agency, or officer of the Government as the President may designate, to take certain action necessary in the implementation of the international wheat agreement.
Section 2 of S. 2383 directs the President, acting through the Commodity Credit Corporation, to make purchases and sales of wheat and wheat flour or otherwise cause to be made available quantities of wheat and wheat flour at prices necessary to exercise the rights, obtain the benefits and fulfill the commitments of the United States under the agreement. In designating the CCC to exercise this authority we would be utilizing an agency which, because of its experience in the type of operations required, would assure an efficient and economic performance of our rights and obligations under the agreement.
As pointed out in our letter transmitting the draft of proposed legislation, the designation of the Corporation would likewise permit a better coordination of operations required by the agreement and other operations of the Corporation as authorized by law. For example, in making wheat available under the agreement the Corporation could use wheat acquired by it under its price support program, could procure the commodities upon the open market under its charter authority, or could make subsidy payments to exporters who would make sales to designated countries under the terms of the agreement. In this connection, the bill requires the Corporation to utilize the usual and customary channels of trade and commerce to the maximum extent practicable in making wheat available under the agreement.
The proposed bill, S. 2383, also includes provisions which would affect the pricing of wheat or wheat flour supplied by CCC to meet ECA needs. Under existing legislation, CCC must be fully reimbursed for commodities it procures for ECA supply. Present legislation also sets the levels of payment ECA must make to CCC when it receives wheat from stocks which the Corporation has acquired under price support operations. For such stocks, ECA must pay either the CCC cost of the commodities or the domestic market price, whichever is lower. The wheat agreement price, of course, would be lower than either of these levels under present conditions. Under S. 2383, these pricing provisions of present legislation would not apply to domestic wheat and flour supplied to agreement countries and credited to their guaranteed agreement purchases. CCC would be authorized to assume the difference between agreement prices, at which the wheat would move, and market prices or CCC costs, at which it was procured. ECA would save this amount on its operations; CCC costs would be increased proportionately.
Senator HOLLAND. One question: You say "domestic" on the sixth line from the bottom. Do you mean from the United States?
Mr. Trigg. Yes, sir.
The proposed bill contemplates that the operations which CCC would be authorized to carry out would be financed by it in the same manner as other programs conducted under its charter. Accordingly, no authorization to appropriate funds is contained in this section.
Section 3 of the bill empowers the President, or such agency as he may designate, to regulate exports and imports of wheat and wheat flour and to issue such rules and regulations as he may deem necessary to accomplish the purposes of the legislation. Available authority to regulate the movement of wheat into and out of the United States would be essential to the proper fulfillment of responsibilities under the agreement. Such regulation would be applied in large part to prevent the reentry into the United States of wheat exported with benefit of subsidy under the agreement, and to control the export of wheat only to the extent necessary to assure the movement of enough wheat to those foreign markets for which the United States can have credit applied to its guaranteed sales under the agreement.
The bill would also authorize the issuance of rules and regulations requiring persons engaged in exporting and importing wheat and wheat flour, or selling wheat or wheat flour for export, to keep records of such transactions and to permit the inspection of such records. This authority is needed to assure compliance with regulations issued under the legislation and to obtain the information necessary to compile reports to the Wheat Council which are required by the agreement.
It is urged that enactment of S. 2383 be expedited as much as possible, so that the United States will be in position to realize the maximum benefits under the International Wheat Agreement.
Senator HOLLAND. I note your prepared statement makes no reference to S. 2287.
Mr. Trigg. Senator Holland, we, as pointed out by the chairman, submitted legislation which was a draft of S. 2383, and it was introduced by the chairman of the full committee, and we later sent up an unfavorable report, as pointed out by the chairman in the beginning, on S. 2287. Anyhow, the Department's position is that we support S. 2383 as presently drawn.
Senator JOHNSTON. Senator Young.
Senator YOUNG. Your objection to S. 2287 is against the provision in that bill which requires that ECA absorb the losses only?
Mr. Trigg. As I understand it, S. 2287 does provide that ECA absorb the subsidy, whereas S. 2383 does provide that the Commodity Credit absorb the subsidy, and the President's program provides for, or is in keeping with, s. 2383, and of course that is the position that the Department takes, and we are supporting that bill.
Senator Young. In effect would you not agree that really increases ECA appropriations some 60 or 80 million dollars this year? They can export this wheat or must sell it now for $1.80 a bushel to these ECA countries, whereas they would have to pay probably $2.25 a bushel now.
The ECA countries are benefiting to that extent, are they not?
Mr. Trigg. Under S. 2383 I think, Senator Young, that that is correct. ECA's appropriation as such is benefiting by the amount that is absorbed by Commodity Credit.
Of course as far as the Government is concerned, it is a subsidy paid by the Government regardless of which agency takes care of it.
Senator Young. Since appropriations have already been made for ECA, I can see where it would be rather difficult to turn around now and charge the ECA with the loss, but I was in hopes that in future years it could be applied in ECA in place of the Commodity Credit Corporation.
Mr. Trigg. My understanding is, and probably the witnesses who will appear in connection with this agreement from the ECA would be in a better position to discuss this than I, that some discussion took place during the debate of the ECA bill, either on the floor or in committees, which dealt with the specific point on the reduction of ECA appropriations by an amount which was supposed to be estimated or approximated, the amount would be included in the subsidy for the wheat agreement, but as I say, there is probably someone here from ECA who can fill you in much better than I on that.
Senator JOHNSTON. Do you have the figures in regard to the amount of wheat bought from the United States last year by ECA?
Mr. Trigg. I can furnish those, Senator. I do not know whether we have them available. I do not have them available with me at this time, but we can furnish that, as to the amount of wheat bought by all ECA countries, broken down by countries. That is what you would want, I presume.
Senator Johnston. I think we ought to have that for the record.
Senator Johnston. I would like to know where they are buying the wheat. If they are using our money, I would like to know where they buy it.
Senator Young. $175,000,000 from Canada just recently. Senator JOHNSTON. I understood that. Senator Young. May I ask another question there, Mr. Chairman. Under this bill you seek to have complete control of exports all the time, is that correct, over all exports of wheat regardless of what the surplus is in the United States.
Mr. Trigg. My understanding of it is, Senator, that we would simply have the control so far as the wheat agreement is concerned, over 168,000,000 bushels of it.
Senator YOUNG. And over and above that amount United States exporters would enter into any kind of an agreement, business deal that they wished, to dispose of wheat, without first getting permission from the Commodity Credit Corporation?
Mr. TRIGG. Well, of course as you know now the Commodity Credit Corporation is procuring and shipping wheat for all countries at the present time except in the case of the countries in the Western Hemisphere, and in the case of flour throughout the entire world, but for all the wheat that goes now into the ECA countries, and to occupied Germany and so on, it goes through the Commodity Credit Corporation.
Senator YOUNG. Are all United States exports controlled that way? Are the millers and wheat exporters exporting wheat on their own without getting any Government license or getting permission?
Mr. Trigg. Well, the flour is being exported, yes, by the millers, and without any reference to the Commodity Credit Corporation. That is true. Wheat which is going to go to particular countries, to countries outside the Western Hemisphere, is handled by the Commodity Credit Corporation.
Senator JOHNSTON. What is the estimated surplus of wheat in the United States for the forthcoming year?
Mr. Trigg. Senator, I do not know that I can answer that directly. At the end of this year we had right at 300,000,000 bushels carry-over in this country.
If it is assumed that that is the surplus, we might say that the carryover next year will be probably in the same neighborhood, maybe more or less. I think it depends upon what is determined by all the people concerned, what is an adequate carry-over, and maybe that or a portion of that might be said to be surplus.
I do not know that that specifically answers your question, but as of this time I do not know that we can give you an accurate estimate as to what the surplus will be so far as that is concerned. Insofar as the determining of acreage allotments and marketing quotas of wheat is concerned, it is set down by formula of course within the law.
Senator HOLLAND. Mr. Trigg, what did you say was the amount, or did you say what the amount of wheat to be purchased from the United States by ECA would be, or for ECA use?
Mr. Trigg. I do not have that with me at the present time, but probably someone from ECA could give a better example of what their program will include, and be all inclusive. Under the wheat agreement there are 168,000,000 bushels to go to all agreement countries. There will be much more than that shipped out of course under the entire export program for this next year.
Senator HOLLAND. It seems to me that it would make a very material difference whether a subsidy were paid by the ECA or were paid by the Commodity Credit Corporation, because if it were paid by ECA, it would use of course that amount that was required to pay the subsidy out of the ECA appropriation, whereas if it were paid out of the Commodity Credit Corporation, it would not only mark the expenditure of that much money, the same amount out of one Government pocket, but would leave the equivalent amount in ECA to be spent elsewhere, and unless the ECA budget was based upon the acquisition of wheat at the price provided for export under the international wheat agreement, it seems to me that the Congress should insist that the subsidy be paid by ECA.
Senator JOHNSTON. There is a question that I would like to ask. Would the Commodity Credit Corporation charge subsidy as a public debt transaction or would it come to Congress for an appropriation?
Mr. Trigg. It, Senator, would be charged against our borrowing authority, and of course we have to get our borrowing authority restored each year by appearing before committees of Congress and asking for authority, so it would come back to Congress.
Senator Johnston. In effect you would have to come back to Congress to replace your funds, so to speak as you use it up.
Mr. TRIGG. That is correct. As you know, Commodity Credit has the borrowing authority of $4,750,000,000 in the form of a revolving fund. It is restored after such time as the authority is permitted by Congress.
Senator Young. In answer to your question a moment ago, Senator Holland, ECA did in their testimony before the Appropriations Committee indicate that they had cut their budget by some 60 or 80 million dollars, taking into account that the Commodity Credit Corporation would pay this difference between the international wheat price and the price that they would have to pay to acquire that wheat here through the Commodity Credit Corporation, which is about a 45-cent spread in there.
Mr. TRIGG. About 45 to 50, yes, sir.
Senator HOLLAND. That would mean of course that that pretended reduction in the ECA budget was not a reduction at all, that much of it.
Senator Young. Well, it is not a very good deal for the Commodity Credit Corporation or the American wheat farmer either, and this