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by ECA to countries that are participating in the wheat agreement and credited against their guaranteed import quantities. The applicable provisions of law are: (1) That part of section 112 (e) of the ECA Act which reads as follows: “The sales price paid as reimbursement to Commodity Credit Corporation for any such agricultural commodity shall be in such amount as Commodity Credit Corporation determines will fully reimburse it for the cost to it of such surplus agricultural commodity at the time and place such surplus agricultural commodity is delivered by it, but in no event shall the sales price be higher than the domestic market price at such time and place of delivery as determined by the Secretary of Agriculture, and the Secretary of Agriculture may pay not to exceed 50 per centum of such sales price as authorized by subsection (f) of this section.”; and (2) Section 4 of the act of July 16, 1943, which provides that “full reimbursement shall be made to the Commodity Credit Corporation for services performed, losses sustained, operating costs incurred, or commodities purchased or delivered to or on behalf of *, *, * any other Government agency, from the appropriate funds of these agencies.” We are of the opinion that S. 2287 contemplates a bookkeeping operation which will prevent the CCC from showing a loss on wheat and flour that move under both the wheat agreement and the ECA program. At the same time, S. 2287 provides that section 32 funds are to be available for operations under the wheat agreement. Only 25 percent of section 32 funds may be spent on a single commodity, and it is conceivable that there will be years in which losses on wheat moved under the agreement but outside of the ECA program will be greater than the amount of money available for wheat from section 32. This presumably would mean that part of the cost of the agreement would be absorbed by the CCC. S. 2383 provides that “the pricing provisions of section 112 (e) of the Economic Cooperation Act of 1948 and section 4 of the act of July 16, 1943 (57 Stat. 586), shall not be applicable to domestic wheat and wheat flour supplied to countries which are parties to the international wheat agreement and credited to their guaranteed purchases thereunder.” This language apparently contemplates that wheat and flour transferred from the CCC to ECA will be transferred at the agreement price, with the CCC absorbing any loss resulting from such an arrangement. S. 2383 also provides that section 32 funds are to be available for operations under the wheat agreement. At a recent meeting, the board of directors of the American Farm Bureau Federation agreed to recommend that the cost of the wheat agreement be financed by a separate appropriation for that purpose. We do not believe that any good purpose will be served by an arrangement which charges part or all of the cost of operating the wheat agreement to other programs. Since we are obligated to supply a guaranteed quantity of wheat to agreement countries at a price within the range set forth in the agreement, it would hardly be fair to charge ECA more than the agreement price. Losses should not, however, be charged against the Commodity Credit Corporation, because the main function of that agency is to support prices, while the wheat agreement requires that wheat be sold at prices within a specified range, regardless of the domestic price. We should also like to avoid charging any part of the cost of the agreement to section 32 funds. These funds are very limited, and many claims are made on them. Furthermore, S. 2522, which was recently reported by the Senate Committee on Agriculture, provides that these funds shall be used principally for perishable nonbasic commodities other than those for which mandatory price-support operations are provided. In our judgment, the best method of handling the losses which may occur under the wheat agreement would be through a separate appropriation labeled for what it is: “Operation of International Wheat Agreement.” This approach would not make the cost any greater to the Government in the event of loss. It merely would avoid the confusion that is certain to result from any other method of accounting for losses occurring under the agreement. In the event the committee feels that it would be impracticable for Congress to make an appropriation in advance of the time losses are incurred, we would suggest that the CCC be authorized to carry out the United States responsibilities under the agreement, with a definite provision that the CCC is to be reimbursed for its losses under this program by a separate appropriation.
Senator Johnston. We will hear next from Mr. Sanford. Mr.
Sanford is chairman of the National Grain Trade Council, I believe, and he is accompanied by Mr. William F. Brooks, executive secretary. Mr. SANFoRD. I did not expect to testify, but I did bring a few copies of my statement. Mr. Chairman, my name is H. E. Sanford. I am appearing as chairman of the National Grain Trade Council. I am in the grain business on the Pacific coast, and Pacific coast manager of the Continental Grain Co. The National Grain Trade Council appreciates this opportunity to testify on S. 2383, a bill to give effect to the international wheat agreement. We believe your committee is aware of the unfortunate effect of the delay in implementing this treaty. ECA countries have had to postpone buying United States wheat and flour under the agreement except when they could pay for it with their own dollars. Belgium, Ireland, and Portugal have bought on these terms from Commodity Credit Corporation, expecting ECA reimbursement later if this legislation permits. Austria and Greece have made purchases at the ; market price, their total requirements being greater than their international wheat-agreement quotas. The Netherlands has been forced to buy without benefit of the wheat agreement. Most of the other countries are waiting settlement of the United States subsidy question. The United States inability to carry out its wheat-agreement obligations to ECA countries stems from two facts: (a) that the Commodity Credit Corporation handles all such wheat exports, and (b) that the Corporation is required by law to be fully reimbursed for its costs or, if lower, for the domestic market price when its wheat is transferred to another Government agency, such as ECA. Meantime, the volume of United States wheat exports has declined seriously from last year. Undoubtedly, the United States has missed a good deal of business at a time we have needed to maximize exports to help solve the storage problem. We urge prompt action, therefore, on this legislation by your committees and by the Congress. We should like to discuss the proposed bill under three general headings: “I. Payment of Subsidies”; “II. Controls and Penalties”; and “III. Promotion of Export Sales.”
I. PAYMENT OF SUBSIDIES
S. 2383 permits the Commodity Credit Corporation to meet the subsidy requirements of the international wheat agreement. The earlier bill (S. 2287) would put the subsidy burden on ECA. The National Grain Trade Council favors adoption of S. 2383 in this respect. It opposes the method provided in S. 2287, for two reasons: (1) The estimated saving to ECA countries under the international wheat agreement already has been deducted from the proposed ECA appropriation. S. 2287 would have the effect of deducting it twice. (2) If S. 2287 is adopted, the international wheat agreement may not survive. It means that the full market cost of wheat and wheatflour shipments will have to be paid out of ECA dollars that were intended for division of aid between the countries. We are already informed that this will not be considered compliance with the wheat agreement on the part of the United States. The doubt that has been raised over this question, plus the delay in implementing the wheat agreement, is causing the United States to lose business in wheat and wheat flour every day. It is building up ill will against United States Foloral commodities, thus harming the interests of United States armerS.
We endorse the proposal of the farm groups that an independent fund be provided for subsidy payments. If adopted, we think it important (a) that Commodity Credit Corporation be designated as the administering agency, and (b) that, when and to the extent this fund is not available or sufficient to carry out our obligations under the wheat agreement, the Corporation be authorized to use section-32 and other funds available to it; and that such other funds later shall be restored by appropriations from the Congress. In this suggestion we have in mind the initial delay in providing such a special fund, as well as the subsequent impossibility of predicting the exact amount needed for subsidy payments.
We further recommend that, in view of the permissive rather than mandatory language of section 2 of S. 2383, the report of this committee set forth clearly the intent of the Congress in respect to payment of subsidy requirements by CCC.
Lastly, we recommend that the legislation be made effective August 1, 1949, in order that the United States may honor conditional purchases already made by several nations against their international wheat-agreement quotas.
II. CONTROLS AND PENALTIES
Section 3 of S. 2383 contains a broad grant of authority to the President to issue regulations; to impose controls and to require reports and the keeping of records. The section further establishes penalties for violations, and would permit almost unlimited examination by the Government into the affairs of any person who exported or imported wheat or wheat flour, whether or not in relation to the international wheat agreement. Such a broad grant of unlimited authority appears unnecessary and undesirable. It far exceeds what Secretary Brannan envisioned in testifying before the subcommittee of the Senate Committee onforeign Relations that considered the wheat agreement last May. Mr. Brannan, in speaking of legislation to implement the wheat agreement, referred to “limited export controls.” He stated that implementing “legislation will also need to include a licensing procedure to control the destination of our wheat exports and a requirement for reporting quantities, prices, and related information in order that the Government can meet its obligation to report such information to the council. These regulations need not be difficult, however, and will only be imposed to the extent necessary to carry out our obligations under the agreement.” We think that the draftsman delegated the task of spelling out these limited controls simply short cut his job by writing a blanket
provision. We do not think the Congress should be casual about accepting whatever is written. The committee should examine carefully the —o
controls actually needed to implement the international wheat agree
ment. These should be provided. Unnecessary blanket grants of authority should be denied. To this end, we should like to discuss the provisions in detail, as follows: Section 3 (a) reads: The President is hereby further authorized to take such other action, including prohibiting or restricting the importation or exportation of wheat or wheat flour and to issue such rules or regulations which shall have the force and effect of law, as may be necessary in his judgment in the implementation of the international wheat agreement. It appears that this subsection can be interpreted to mean, by omitting the central clause between commas: The President is hereby further authorized to take such other action as may be necessary in his judgment in the implementation of the international wheat agreement. Such a provision certainly simplifies draftsmanship. It saves the trouble of thinking through the type of controls actually needed to implement the agreement. Does the central clause, “including prohibiting or restricting the importation or exportation of wheat or wheat flour, etc.” mean “including, but not limited to”? Or does it limit the “such other action” to prohibiting and restricting imports and exports? | If not so limited, then why confuse the meaning by naming only two or three of the unlimited actions therein authorized? We believe, however, that this is completely contrary to the report of the Committee on Foreign Relations to the Senate. There is even a possible doubt that the treaty would have been ratified if the Senate had expected blanket powers of a permanent nature to be requested. If the language of section 3 (a) is interpreted to limit controls to those mentioned in the central clause, then the vague and general authority “to take such other action” should be deleted. Would this phrase permit the promulgation of “set-aside orders”? Would it enable the Government to require, by way of condemnation or otherwise, producers, handlers, or processors of wheat or wheat flour to deliver those commodities to the Government? If this phrase would permit such action we believe it should be stricken from any legislation enacted to implement the wheat agreement. We should examine also, in an agreement in which the United States is an exporting Nation, why authority is needed to prohibit or restrict imports. We should examine carefully under what circumstances authority is needed to prohibit or restrict exports. We should narrow down the authority to these precise points, rather than use the wheat agreement as a vehicle to convey permanent extensions of wartime control powers. We are reminded of the facetious, but unfortunately sometimes too nearly true, remark current around Washington, that “The Government needs controls to keep business from falling into private hands.” I am sure that this is not the intention of the Congress. We should like to discuss, therefore, the specific needs for controlling imports and exports of wheat. At no time during hearings on the agreement in either 1948 or 1949 was there a suggestion made by Government witnesses that the United States would be required to impose import controls to carry out our obligations under the wheat agreement. It is difficult to foresee a situation where it would be necessary to exercise import
controls. In the absence of a clear showing that imports into the United States of wheat or wheat flour need be controlled beyond the extent now permitted by law—that amounts to 800,000,000 bushels of wheat per year for human use, and I believe it is 400,000 pounds of flour—we trust that this grant of additional authority will not be recommended by this committee. The need of exporters to qualify for subsidy payments provides automatic control of exports at all normal times. The only time exports of wheat or wheat flour need be prohibited or restricted by specific authority will be when supplies are scarce, and world prices exceed the domestic support level or the maximum price set in the wheat agreement, whichever is higher. At such a time export sales can be made easily without subsidy payments outside the wheat agreement. Then and only then will it be necessary, through a strict licensing procedure, to channel United States wheat exports to make sure we can fulfill our quota obligations under the wheat agreement. I am thinking, gentlemen, about a time like during 1947 and 1948 when supplies were very scarce all over the world, and sales could be made for export at any price anyone cared to ask. You will recall that our prices went up to as high as three and a quarter a bushel; Argentina at the same time was getting over $5, and so on. Well, at that time we would certainly need the export controls to protect the supplies in this country. Senator YouNg. What is the real objection to import controls? Mr. SANFoRD. What is the purpose of import controls? Why write in a provision unless some showing has been made on the need for import controls that we know nothing about. Senator YouNG. It may not be appropriate in this bill, but if you have a price support program Mr. SANFORD. You have that under the AAA Act of 1948. Senator Holland. Can it be possible what they have in mind is the reimportation of exported wheat under the international wheat agreement? Mr. SANFord. Well, it would still have to come under the quota, I think, of the AAA Act of 1938 which permits 800,000 bushels a year. Senator Holland. We do not want any of it to come back, do we, after we have paid a subsidy and shipped it out. Mr. SANFORD. Well, the plain fact is that wheat shipped to Europe and sold is not going to be shipped back again. If wheat comes in, it will be from Canada which is right next door. You are not going to pay freight across the ocean and freight back. I cannot see any connection between this agreement and the necessity to control imports. Possibly there is. Whoever put that in the legislation may have had a very logical reason for it. I have tried to figure out what it could be, and have been unable to. Senator YoUNG. Well, I believe I could see a reason. Supposing the cash price of wheat was down to $1.50, as it well may be in another year. We subsidized, say, 70,000,000 bushels of exports under the international wheat agreement, and at the same time the Argentine, which may not be cooperating in the program, could be dumping their wheat here. Mr. SANFORD. Well, how can they dump their wheat here, Senator? Senator YouNG. Well, if the tariff is low and the world price is down to $1 a bushel, of course then you would not be subsidizing exports, I can see that.