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rye here.

Of course, it is really a tempest in a teapot in a way, except to the individual farmer who happens to grow rye. Senator YOUNG. Well, that is enough, is it not?

Mr. SANFORD. Well, he switches. He already has switched. You have not got any rye problem for next year because they are not raising anything to amount to anything.

Senator YOUNG. Well, the farmers are required to reduce their wheat acreage. The support price of flax has gone down to 60 percent, and you cannot afford to raise it at that price. Farmers must reduce corn acreage. They could well shift to rye if purchases were made and the price would be reasonable.

Mr. SANFORD. Maybe we had better switch this hearing to the price-support program.

Senator YOUNG. It all came about because of the export market business.

Mr. SANFORD. Section 3 (b): As this section now stands it would grant unlimited investigatory authority to the executive branch which authority might be exercised either with or without reference to transactions under the international wheat agreement.

Again it is difficult to see why "importers" should be subject to this authority.

In the past, when wheat or wheat flour exports have moved under Government subsidy, exporters have agreed that if subsidies were paid, the Secretary of Agriculture would have access, during the usual hours of business, to books and records for the purpose of verifying reports and documents submitted to the Government in connection with such subsidized transactions.

As an alternative to providing this authority by regulation, we have no objection to the present language if amended in line 3, page 4, to insert after the words "are relevant" the words "to transactions eligible for recording under the International Wheat Agreement."

I might read that sentence:

For the purposes of ascertaining the correctness of any report made or record kept or of obtaining information required to be furnished in any report, but not so furnished, the President is hereby authorized to examine such books, papers, records, accounts, correspondence, contracts, documents and memorandum as he has reason to believe are relevant

and to that I wanted to add—

are relevant to transactions eligible for recording under the International Wheat Agreement

and it continues

and are within the control of any such person.

Section 3 (c) would make it a misdemeanor, punishable by a $1,000 fine, if reports were not made or records not kept. The inclusion in

S. 2383 of this provision does not appear unwarranted.

Section 3 (d), however, contains a forfeiture provision equal to three times the value of wheat or wheat flour "knowingly" exported in excess of the quantity permitted to be exported under Presidential regulation. In our opinion this provision is too harsh and probably is more severe than intended.

A cargo of wheat is worth about $700,000. We admit that our international obligations under the wheat agreement should be met. We doubt, however, if to meet them it is necessary to have available a

sanction that may mean a penalty of over $2,000,000 if a single violation of a regulation is found. Grain exporting is not big business. Few exporters have that much liquid capital. The presence of such a sanction would, we believe, discourage the private exporting of American wheat. It seems that the reporting requirements and necessity to get approval of transactions in order to qualify for subsidy payments provide all the protection and penalties that are needed.

This conclusion is strengthened by the language of section 3 (e) where it is provided that

the remedies, fines, and forfeitures provided in this Act shall be in addition to, and not exclusive of, any remedies, fines, and forfeitures under existing law. Under that language, violations of the law would be punishable as a crime against the Government and subject to whatever penalties those crimes warranted. General criminal statutes would be available to punish irregular, illegal, or improper activity.

We respectfully urge, therefore, that section 3(d) be stricken.

III. PROMOTION OF EXPORT SALES

In the report of the hearings before the subcommittee of the Senate Committee on Foreign Relations last May, there is a discussion on pages 40, 41, and 42 between the chairman, Senator Elbert D. Thomas of Utah, and Secretary of Agriculture Brannan, as to whether or not this treaty "puts the United States in a position as a governmenttrading country."

Secretary Brannan assured the committee that it did not, saying at one point that if wheat

can move through private channels and through the private trade groups, then every encouragement is given by our Government to see that it is moved in that fashion.

This is qualified later by his explanation:

I do want to make this point, that because of the volumes of wheat which it has been necessary to move in world trade, the Government of the United States has been taking a major role in moving the wheat out of the country and getting it to the importing countries.

On the strength of Mr. Brannan's testimony, the following appears in the report of Senator Thomas to the Senate, Executive Report No. 7, Eighty-first Congress, first session:

17. OPPORTUNITY FOR PRIVATE TRADE

Although the parties to the agreement are governments, article III provides that the guaranteed quantities may be supplied through private trade channels. This provision is new and is interpreted by the interested departments as an encouragement to private enterprise. The committee was told by Government witnesses at its hearings that the agreement will be administered in the United States in such a way that it will not result in competition between the private trade and the Government.

As stated in Secretary Brannan's testimony, the Government, through the Commodity Credit Corporation, has been taking the major role in exporting wheat. Private exports of wheat, as grain, are permitted only to the Western Hemisphere, and they amount to less than 5 percent of the total.

Due to problems of transportation, storage, and handling of such a large volume, private exporting of grain was ordered discontinued last November, before it had really begun. While we did not agree

then with the imperative need for Government handling, we do not deny that there were and will be difficulties whenever the movement is so great.

Meeting these difficulties is our business, and has been our commonplace exercise as a routine matter. When done inefficiently, we have paid for our mistakes. If they were too frequent, we did not last long as exporters. Nevertheless, even after the First World War, when the grain-export movement was larger than now and handling facilities were less, the job got itself done without commotion or public expense. It was accomplished by the traditional American mechanism of each firm managing its own business as skillfully as possible.

Although unconvinced, therefore, of the need for government handling as ordered last November, we did not protest it. We have cooperated as capably as possible in executing the huge shipping program. We promise to continue doing so in the future, in the belief that when a procedure is adopted we have an obligation to help make it work.

Secretary Brannan has been consistent with his testimony before the Thomas subcommittee in drafting the following portion of S. 2383, section 2, page 2, line 18:

Nothing contained herein shall limit the duty of the Commodity Credit Corporation to the maximum extent consistent with the fulfillment of the Corporation's purposes and the effective and efficient conduct of its business to utilize the usual and customary channels, facilities, and arrangements of trade and commerce in making available or causing to be made available wheat and wheat flour hereunder.

This contains the usual language "to the maximum extent, and so forth," permitting administrative discretion in applying this clause. In this respect it follows the pattern of similar clauses in the export control law, the Economic Cooperation Administration Act, and in the Commodity Credit Corporation Charter itself.

While we feel that such latitude weakens the provisions so that frequently it is meaningless, we do not deny the need for authority to cope with emergencies. A recent example is ECA Administrator Hoffman's decision to finance part of the Canadian wheat, contracted with Britain.

Secretary Brannan has given further evidence of the sincerity of his testimony, in directing the return of coarse-grain exporting to private firms when sales of corn, oats, barley, and grain sorghums began to lag during recent spring months.

As to wheat exports, there is evidence that the time is at hand, or is approaching, when the present policy of Government selling for export should be reviewed. The problem is translating itself from one of handling the volume, into one of getting a volume to handle. This is illustrated by the following figures:

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The difference is more striking if exports to the occupied zones are eliminated, as these do not involve selling and are more nearly

constant:

Wheat exports, other than to bizone, French zone, and Japan

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As stated in the beginning, delay in settling the subsidy question is partially responsible for this decrease. At the same time we have lost, and are losing regularly, other selling opportunities because there are no offers of United States wheat to foreign buyers on a competitive market price basis. Commercial firms in Europe handle the internal distribution of most grain, even in countries where purchases are by governments. In many countries these firms receive daily offers of Canadian, Argentine, Russian, Polish, and other wheats, but none from the United States.

Similarly, exporting concerns can make firm offers of Canadian and other wheats to their selling agents abroad, but they are not permitted to offer United States wheat.

In times of scarcity, when exporting wheat is a mere matter of accepting orders and making shipments, the present method may work well enough. It appears that it is not working well now, except to the occupied areas and to countries wholly dependent on ECA financing. As with radios, washing machines, and even automobiles, the days of order taking are over. We need salesmen abroad; but salesmen cannot operate if they cannot quote prices, or promise delivery of the qualities wanted at the time they are needed.

We believe, too, that commercial exporting firms and their foreign branches can help inject life into the much-discussed plan for bartering farm products against strategic and other materials.

Authority for such bartering was granted in the Commodity Credit Corporation charter about 6 months ago, but little progress has been made until now. In the meantime, our European and other foreign branches have been exceedingly busy with such trades. This is an old story abroad, and has become routine since the middle 1930's: 10% tons of north African barley for 5 tons of Dutch sugar; Danish malt for Brazilian coffee; Cuban sugar for Norwegian freights; and so on for a whole list of transactions.

It should be pointed out, too, that hardly any of these trades are bilateral; nearly all involve three or more countries. Very often there remains one loose leg which cannot be firmed up immediately. The private trader has to take a chance and be long in that commodity, speculating that he can sell later at a profit, and such profits are never available in dollars.

All of these intricacies lead to doubt about the ability of a Government agency to compete with these barterwise foreign traders. Assistant to the Secretary of Agriculture E. D. White, who is in charge of the Cotton and Fiber Branch of ECA, has recognized this and has

invited the cooperation of cotton exporters in the project. We are attempting to formulate a group of proposals, and hope we may be able to contribute something to assist in the program.

CONCLUSION

We should dislike to leave the committee with the impression that this legislation to give effect to the international wheat agreement concerns only wheat and wheat-flour people. It is of general interest, because hope has been expressed that the wheat agreement will lead to many others agreements for cotton, coarse grains, possibly tobacco and other farm products. If so, this implementing legislation will be a pattern; therefore, nearly every Member of Congress is directly concerned in behalf of his constituents.

For these reasons, we respectfully ask the committee to give careful thought to the method of providing subsidies; to the prohibitions and restrictions upon exporting; to the penalties and extremely harsh forfeitures; and, above all, to the effect upon free trading between citizens of free nations.

I should like to close by repeating the last few paragraphs of our statement of May 24, 1949, filed with the Senate Committee on Foreign Relations. Those paragraphs expressed our feelings at that time, and they are equally true of our sincere sentiments now:

During the difficult world supply position following cessation of hostilities, importing nations were grateful for the method of procurement instituted at that time by Commodity Credit Corporation. It was generally recognized that this system was inevitable in the interests of movement maximization and distribution equity. Since, however, the supply position is moving toward surplus, would-be buyers feel the continuance of this method to be irksome. In the interests of United States agriculture, freer access to wheat on a daily market basis would attract buyers who now come to the United States only as a last resort, when they find they cannot buy elsewhere, or when they must have ECA financing. This has been particularly evident in the case of corn lately. Already we are beginning to lose some of the good will that is so valuable. Private importers often have no alternative than to work on grains from sources other than American.

We believe all of us recognize the importance of reversing this position. We need foreign distributors pushing our farm products enthusiastically. Private exporters and government must team up in a job of real salesmanship.

The wheat agreement obligations assumed by importing nations can be helpful. But our prices must not be frozen in a rigid subsidy formula. We must have subsidy arrangements operating through private exporters in a flexible and competitive manner. The results will far outweigh the technical obstacles discussed earlier.

It is our intention to join forces with farm groups and the Government to work out an effective procedure.

In this way it is hoped that we may maximize exports, take forward steps in freeing world trade, and so help to promote harmony among nations.

Senator JOHNSTON. Any questions? Is there anything you wish to add?

Mr. SANFORD. No, I have said enough, Senator.

Senator JOHNSON. We will adjourn at this time until 10 o'clock tomorrow morning.

(Whereupon, at 4:35 p. m., the hearing was adjourned to reconvene on Thursday, September 22, 1949, at 10 a. m.)

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