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with an essential agricultural problem, and in our judgment the Secretary of Agriculture and his department should have full authority to administer the program for our Government.
In order to fulfill the obligations of the United States under the agreement, it is recognized by all concerned that it is necessary for our Government to provide a subsidy on both wheat and wheat flour to compensate exporters for the difference between domestic prices of wheat and wheat flour and the lower prices stipulated in the agreement.
Senator JOHNSTON. Do you have the figures on how much flour we have sold?
Mr. FakLER. Yes, sir; I have.
Mr. Fakler. There is a statement issued by the Department of Agriculture on September 19, which shows that for the period August 1 through September 15, 1949, 718,082 hundredweight of commercial flour, which is the equivalent of 1,662,218 bushels of wheat, were exported to countries signatory to the wheat agreement; and during the same period 654,035 bushels of wheat were exported through commercial channels.
During that same period the Commodity Credit Corporation transferred wheat to the signatory countries in the maount of 4,868,264 bushels. Making a total of 7,184,517 bushels.
Senator JOHNSTON. Thank you.
Mr. FAKLER. The authority for the payment of this subsidy should be placed in one Government agency and adequate funds should be provided promptly.
It is our recommendation that this authority should be given to the Commodity Credit Corporation, and that it should be authorized and directed to pay subsidies on all shipments of wheat and wheat flour to eligible wheat-agreement countries, including shipments to countries receiving assistance through the Economic Cooperation Administration.
Up to the present time Commodity Credit Corporation in the absence of specific authority and direction has declined to pay any subsidy on the export of wheat flour to the ECA countries. As the result these countries have been prevented from acquiring the quantities of wheat flour to which they are entitled under the agreement and which they desire to procure at wheat-agreement prices.
At this point, Mr. Chairman, I would like to call attention to Mr. Trigg's statement yesterday indicating there is a statutory impediment which prevents_the Commodity Credit Corporation from transferring wheat to ECA for this purpose at anything below the market price.
However, there is no statutory impediment which I can find with respect to the payment of a subsidy on wheat flour furnished by the mills directly to countries participating in the ECA program; the Commodity Credit Corporation has declined up to now to pay that subsidy. I think they feel that they need the additional legislative authority.
I see no need for it, but, nevertheless, it is an indication that some action should be taken to clarify this situation at the earliest possible moment.
In order to expedite the payment of these subsidies promptly, it is our recommendation that Commodity Credit Corporation be author
and yet, ized to utilize its own funds for this purpose for the present, with the provision that Congress will reimburse CCC by subsequent appropriation.
Any further delay in making subsidy payments will in our judgment make it difficult or even impossible for the United States to fully meet its obligations under the agreement. Such a reduction in our export program will also contribute to the development of a serious domestic wheat-surplus problem.
We have no objection to the record-keeping and reporting requirements of section 3 (b) of S. 2383. However, we do feel that the authority proposed to be given the President to examine such books, papers, records, accounts, correspondence, contracts, documents, and memorandum as he, or the person to whom he delegates the authority, has reason to believe are relevant, is broader than is necessary and than was probably intended. In order to keep such examinations within proper bounds, we believe the authority should be specifically confined to those matters related to transactions under the international wheat agreement.
Therefore, we recommend that, following the word "relevant” in line 3 on page 4 of S. 2383, there be inserted the words "to transactions under the international wheat agreement."
We believe that section 3 (d) of S. 2383 should be eliminated from the legislation as enacted by the Congress.
It is our judgment that this section is unnecessary. The initial responsibility for determining the quantities of wheat and wheat flour permitted to be exported from the United States under the agreement rests with the International Wheat Council and the United States Administrator of the wheat-agreement regulations provided for in section 3 (c). Under regulations already in effect, and which have been in effect since August 1, each export sale of wheat and wheat flour must be approved and confirmed by the Administrator before it can can be consummated. It is his responsibility to determine before he approves a sale whether or not the quantity included in the sale can be credited to the United States wheat-agreement account. The exporter has no way whatever of determining this fact except by the approval or disapproval of the sale.
This is particularly true when a subsidy is being paid. No exporter in his right mind is going to incur the financial risk of not receiving the subsidy payment by taking a chance on an export sale without prior approval by the Administrator.
If no subsidy is being paid, it must be by reason of the fact that our domestic prices are in line with the prices set forth in the agreement, and under those conditions there would be no object in limiting the quantity exported to that set forth in the agreement. In the general interest, we should want to export all the wheat and wheat flour we can.
If by chance our domestic prices should be at or below the minimum wheat-agreement prices, the importing countries are obligated to take their quotas at the minimum prices and obviously will take no more than the obligated quantity at that price. Additional quantities will be available at prices below the wheat-agreement minimum, and again under such conditions we should want to export all the wheat and wheat flour we can.
In view of these conditions, we believe that section 3 (d) is not only unnecessary, but that the penalty provided therein is unduly harsh in view of penalties already available under existing law as well as those proposed in section 3 (c). I repeat our recommendation that section 3 (d) should be deleted.
In passing, we see no reason for including imports in any part of section 3 of the bill. Imports of wheat and wheat flour into the United States are already controlled by quotas proclaimed by the President under authority of the Agricultural Adjustment Act, as amended, and such quotas have been and are in effect.
In summary, we recommend:
2. Full and complete authority to administer all provisions of the legislation should be granted to the Secretary of Agriculture by the Congress and the President.
3. Commodity Credit Corporation should be authorized and directed to make the necessary subsidy payments out of its own funds on export shipments to all eligible wheat-agreement countries, including those countries receiving assistance from ECA.
4. Authority in section 3 (b) to examine books, papers, records, et cetera, should be specifically limited to matters relevant "to transactions under the international wheat agreement."
5. Section 3 (d) should be deleted because it is unnecessary and imposes unduly harsh penalties in addition to those already available and proposed.
6. Control over imports of wheat and wheat flour proposed in section 3 is unnecessary because of the authority already vested in the President of the United States, and all reference to imports should be deleted.
With the adoption of the foregoing recommendations, we favor prompt and affirmative action by the Congress on S. 2383.
Senator Johnston. Senator Young, do you have any questions?
Senator Young. I am not familiar with that reference that you make to import controls now. Do you refer to the 1938 act?
Mr. FAKLER. That, Senator, is under section 22 of the Agricultural Adjustment Act as amended by the Agricultural Act of 1948. That is now in effect.
Senator Young. I think grain-trade spokesmen yesterday had reference to the act of 1938.
Mr. FAKLER. That is the original act, but it was amended several times, and the latest amendment is contained in title I of the Agricultural Act of 1948. It amends section 22 of the original Agricultural Adjustment Act.
Senator Young. The House has already voted to repeal the socalled Aiken Act.
Mr. FAKLER. That is correct, but I do not believe that affects the amendment to section 22 of the Agricultural Adjustment Act.
Senator Young. We would have to reinsert that into any new legislation that might be passed.
Senator JOHNSTON. That is in the Anderson Act, is it not? That is my understanding.
Mr. FAKLER. I am not sure. I have not examined the latest copy. It just became available this morning.
Mr. KENDALL. It is permanent legislation and continues to be in effect.
Mr. FAKLER. So that authority does exist, Senator, in two respects. It not only gives authority to the President to impose quotas, but also to impose additional fees up to 50 percent of the existing tariff. For the moment the President has chosen, upon recommendation of the Tariff Commission, to impose quotas. Those quotas are very small, by the way. Would you be interested in having the figures?
Senator YOUNG. Yes; I would.
Mr. FAKLER. The total quota for a year is 800,000 bushels of wheat and 4,000,000 pounds of wheat flour.
Senator Young. Imports?
Mr. FAKLER. Imports. And those quotas for this current year have already been filled.
Senator Young. That is all right with me.
Mr. FAKLER. That has been the case for several years during which this quota provision has been in effect.
Senator Young. That answers my question.
Senator HOLLAND. I am particularly interested in what the witness said with reference to section 3, subsection D.
Senator Young. Senator, I would like to say this off the record. (Discussion off the record.)
Senator JOHNSTON. I have an amendment here which has been submitted by Senator Anderson, which I would like to have inserted in the record at this point. (The document referred to follows:)
AMENDMENT SUBMITTED BY SENATOR ANDERSON On page 3, line 7, before the period insert the following: "on and after August 1, 1949. Where prices in excess of the international wheat-agreement prices have been paid for such wheat and wheat flour financed by the Economic Cooperation Administration on or after August 1, 1949, the Secretary of Agriculture or Commodity Credit Corporation is authorized to reimburse the Economic Cooperation Administration for such excess amounts. Funds realized from such reimbursement shall revert to the respective appropriation or appropriations from which funds were expended for the procurement of such wheat and wheat flour.”
Senator JOHNSTON. Are there any further questions?
Senator HOLLAND. I just mentioned section 3 (d) on page 4 of the printed bill. I note that the witness recommends the elimination of that section; and, offhand, it seems to me it is a very harsh section. I wonder if the testimony of those who drafted the bill has been heard on that point. I do not recall that it has. That is the penalty.
Mr. FAKLER. May I say this off the record?
Senator JOHNSTON. It might be well to ask the Department for a reply on that question of the Senator's.
Senator HOLLAND. I am greatly concerned with that provision because it seems to me that it is drawn in such a sweeping way as to discourage and inhibit any effort to build up an outlet for wheat or flour, either one, outside of the provisions of the international wheat agreement.
It appears to me that under it apparently it could easily be made illegal to attempt to find by initiative other than by the international wheat agreement. I am sure that is not intended.
Senator JOHNSTON. I think you will notice ore little word there that has a great bearing on the whole thing——"willful,” and “knowingly.” When you use those words—Senator HOLLAND. It says:
Any person who knowingly exports wheat or wheat flour from the United States or who knowingly imports wheat or wheat flour into the United States for consumption therein in excess of the quantity of wheat or wheat flour permitted to be exported or imported, as the case may be, under regulations issued by the President, shall forfeit to the United States a sum equal to three times the market valueand so forth.
Apparently from that it is contemplated that regulations should be issued by the President entirely regulating and entirely controlling the movement out of and into the United States of wheat and wheat flour, irrespective of whether it is moving under the terms of the international wheat agreement.
Mr. FAKLER. I think it is susceptible of that interpretation, and that is why we think it is far too broad and in our judgment entirely unnecessary for the proper administration of the United States obligations under the international wheat agreement.
Senator HOLLAND. I feel there should be no objection from anyone to the inclusion of a section which would make the provisions of the international wheat agreement effective and shall give to the President's regulations enforceability in the field of making effective both sides, both the export and the import side of the international wheat agreement, but to have it as broad as this where it apparently shuts off any other traffic or might include any other traffic, regardless of whether it is under the terms of that agreement, might be so broad as to preclude any international traffic at all in those two commodities that would not be under the agreement, and I doubt the wisdom of such a sweeping provision and I hope the Department will deal with that in their supplemental showing.
Senator JOHNSTON. I would like to have in the record, too, when they answer this question, just why such a severe penalty as this is included. I cannot see why it is so far-reaching.
Senator HOLLAND. Do you represent the Department? Is it the contemplation of this international wheat agreement that the entire trade out of the United States in wheat and flour and into the United States in wheat and flour should be incorporated into and considered within the machinery of the international wheat agreement?
Mr. BORTON. I do not know, Senator. It may be necessary to restrict exports of wheat outside the wheat agreement in order to assure that we fulfill our guaranteed quantities. I hope that point will not be lost sight of, because it might be possible that in certain years we would have no wheat left if too much was exported outside of the agreement to fulfill our guaranteed quantities; and that is an international obligation which we assume under this treaty.
Senator JOHNSTON. When you make your report, you will touch on that, too; will you not?
Mr. BORION. Yes, sir.