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Mr. BORTON. Yes, sir. Senator JOHNSTON. We have been notified that the National Grange wishes to submit a statement. That will be filed at this point.
(The statement of the National Grange is as follows:)
STATEMENT FILED BY J. T. SANDERS, LEGISLATIVE COUNSEL, THE NATIONAL
GRANGE The National Grange is a farm organization of over 800,000 members, including a high proportion who produce wheat. We are, therefore, directly and vitally concerned with the problems of international trade in wheat. We have consistently supported the use of international commodity agreements aimed at the improvement of our wheat markets and international trade relations. Specifically, we gave unqualified support to the international wheat agreement which went into effect on July 1 of this year. We believe that its effective operation should not be impeded by inaction or delay on the part of the United States in implementing our commitments under that agreement.
To this end, the Grange favors the adoption of S. 2383, which is now before your committee for consideration. We are in general agreement with the detailed provisions of that bill, We also favor its adoption for the following reasons:
1. It authorizes the Commodity Credit Corporation to make wheat available at the same price terms to all importing countries which have formally ratified and accepted the international wheat agreement.
2. It places the responsibility for administering, pricing, and other operations under the agreement in the Department of Agriculture, the hands of the agency best qualified to do the job. Aside from its experience in the type of operations required, the CCC is of a more permanent nature than ECA, whose program, for example, is now scheduled to expire during the life of the wheat agreement.
3. Under present world conditions we are convinced that world peace and welfare will be greatly facilitated if a number of other commodity agreements similar in general to the wheat agreement can be worked out. This being true, we do not believe a temporary or partial provision should be worked out for implementation of the wheat agreement—the first agreement we have ratified and the first that has been successfully launched among the several peace-loving nations that are signatories.
4. Its provisions, we believe, are more equitable to importing countries than those of other proposed legislation (S. 2287) which has been introduced. We believe that the wheat agreement should stand along and that ECA countries in the agreement should not be denied its benefits by reason of their participation in the European recovery program. It is assumed, furthermore, that ECA appropriations for the current year have already been reduced to take account of savings made possible by the maximum price provisions of the wheat agreement.
We also favor the adoption of an amendment to S. 2383 making its provisions retroactive to August 1, 1949, the date the wheat agreement became effective. This would extend for the entire first year of the wheat agreement the benefits of policy determined by the Congress at this time, and would add to its effective operation.
Every means should be taken to expedite action that will assure carrying out our wheat-export program for the 1949–50 year to the fullest possible extent. Already we have lost valuable ground because of the inability to maximize our exports during some of the most favorable months of the wheat-marketing year. Failure to take advantage of this opportunity to export wheat would be difficult to justify, especially in view of the recently announced reduction in our wheatacreage allotments.
The United States played a leading role in the negotiation of an international wheat agreement. It would indeed be unfortunate, therefore, to incur the ill will of the importing countries in this agreement through failure to establish the policy of Congress regarding United States participation. We urge, therefore, the prompt enactment of S. 2383 in order that the United States may realize maximum benefits under the agreement and that importing countries may be assured of supplies from this source at prices consistent with the terms of the agreement.
Although we will not undertake to analyze the bill in detail as to any unnecessary provisions it may contain limiting private handling of grain going to export and in fulfillment of our obligation under the agreement, we are in full sympathy with a minimum necessary restriction to private trade under the agreement. We trust that before reporting the bill the committee will scrutinize with great care the details of regulation provided in the bill and will limit such detail regulation to the minimum necessary for reasonable assurance of fair and efficient compliance on our country's part with the provisions of the agreement.
Senator JOHNSTON. That concludes the hearing, and I thank you all for coming
(Whereupon, at 10:50 a. m., the subcommittee adjourned.)
(Supplementary statements filed by the Department of Agriculture and the National Grain Trade Council are as follows:)
DEPARTMENT OF AGRICULTURE,
Washington, D. C., September 26, 1949.
United States Senate. DEAR MR. JOHNSTON: This responds to your oral request for the views of this Department on the statements relating to S. 2287 and S. 2383, made to the subcommittee of the Senate Committee on Agriculture and Forestry on September 21, 1949, by Mr. H. E. Sanford, on behalf of the National Grain Trade Council, and Mr. Don Parel on behalf of the American Farm Bureau Federation.
Both S. 2383 and S. 2287 contemplate that the operations to be conducted by the Commodity Credit Corporation under the bills would be financed by it in the same manner as other operations conducted under its charter. Mr. Parel recommended that the Commodity Credit Corporation not be required to bear the losses which will be incurred in conducting operations to implement the international wheat agreement, and that Congress appropriate funds for the purpose of defraying the costs of these operations. Mr. Sanford endorsed this recommendation. This Department has no objection to this proposal, and if the committee adopts the proposal we suggest that it be accomplished by amending S. 2383 in the manner set forth in enclosed draft.
Mr. Sanford objects to the controls and penalties authorized by section 3. It is Mr. Sanford's contention that these provisions constitute a broad grant of unlimited powers which go far beyond those necessary to the accomplishment of the purposes of the bill.
We hasten to assure your committee that it is not our desire to obtain any more authority than that needed to fulfill our obligations and obtain the benefits under the wheat agreement. It is our view that S. 2383 grants only such limited authority. The authority to impose import and export controls and to take other action authorized in section 3 (a) is, by the terms of such section, limited to such action as is necessary in the implementation of the international wheat agreement. Such authority cannot be likened to or exercised as an extension of wartime control powers.
The need for import and export controls has questioned by Mr. Sanford. As has been pointed out, only such controls would be imposed as would be necessary to the proper fulfillment of our responsibilities under the wheat agreement. It is contemplated that import controls would be imposed when needed to prevent the reentry into the United States of wheat exported with benefit of subsidy under the agreement. Without such controls, the United States might lose the full benefits accruing to it under the agreement. An importer in a participating country can purchase wheat under the agreement at the maximum price of $1.80. When the domestic price of wheat is above the wheat agreement price, an export payment or subsidy to the domestic exporter will be required. Unless authority is available to exclude the reentry of such wheat into the United States, the wheat which was exported under subsidy could be reshipped back to the United States and sold on the domestic market at the greater domestic price and in competition with other domestic wheat. Thus, what was intended as a disposal of domestic wheat in a foreign country under the wheat agreement becomes in effect a payment of subsidy for wheat which is not removed from the domestic market.
It has been stated before your subcommittee that, even though a proper case could be made for the need for import controls, existing legislation is sufficient to provide these controls. Reference is had, no doubt, to existing import controls on wheat under authority of section 22 of the Agricultural Adjustment Act, as amended. As you know, import controls are imposed thereunder only after public hearing and investigation by the Tariff Commission, and quotas imposed thereunder may not reduce the total quantity which may be entered below_50 percent of that quantity which was entered during a representative period. For the reasons stated above, there will be need to prohibit entirely the entry of wheat into the United States which had previously been shipped from the United States with benefit of subsidy. It is doubtful that such a prohibition is authorized under section 22. Moreover, action to control imports in order to implement the wheat agreement should not be subject to the time-consuming procedure involved in invoking section 22.
Mr. Sanford also questioned the need for the export-control authority contained in section 3. He contends that the need of exporters to qualify for subsidy payments would provide control of exports at all times except “when supplies are scarce and world prices exceed the domestic-support level or the maximum price set in the wheat agreement, whichever is higher.” We agree with Mr. Sanford that export controls are necessary in such circumstances. We do not agree that these are the only circumstances which would require imposition of export controls. Mr. Sanford appears to be of the erroneous opinion that all commercial sales for which the United States will be credited under the wheat agreement will require a subsidy or export payment and that in the making of such payment the Government can control the destination of the wheat with respect to which the payment is made. It is our hope that all sales under the wheat agreement will not require a Government subsidy. It is possible that domestic and world prices will at levels which would not require the Government to subsidize wheat to fulfill its obligations under the wheat agreement, and in such a situation it may be necessary for this Government in order to fulfill its obligations under the wheat agreement to channel wheat to importing countries which have unfilled guaranteed purchases.
Mr. Sanford also testified that the reporting requirements and investigatory powers authorized by section 3 (b) are unlimited and unwarranted, particularly with reference to importers. If it is recognized, as we think it should be, that import controls are necessary to implement the wheat agreement, then, of course, it follows that importers should be subject to the reporting requirements and investigatory authority. We object, therefore, to the proposal made by Mr. Sanford that there be inserted after the words "are relevant” in line 3, page 4, the words “to transactions eligible for recording under the international wheat agreement,” since importations of wheat could not be considered “transactions eligible for recording,” for we are an exporting nation under the wheat agreement. Furthermore, by reason of article VIII of the wheat agreement, the United States is under obligation to report to the council such information as the council may request in connection with the administration of the wheat agreement. Conceivably, such information may not be confined to transactions eligible for recording under the wheat agreement but may relate to transactions which, although outside the wheat agreement, have an important bearing on the administration of the wheat agreement.
Mr. Sanford recommends the deletion of section 3 (d), contending that it is too harsh and is unnecessary. Section 3 (d) imposes upon an importer or exporter of wheat or wheat flour who knowingly imports or exports wheat in excess of the amount authorized under regulations issued by the President, a forfeiture of three times the market value of the quantity of wheat or wheat flour by which such importation or exportation exceeds the authorized amount. This provision is patterned after other regulatory statutes, such as the Sugar Act of 1948, which imposes a like penalty for the sale overquota sugar. The regulations governing the import and export of wheat and wheat flour will be directed toward the fulfillment of our obligations under a treaty.
Effective sanctions for the violation of these regulations are deemed necessary to the fulfillment of our international obligations. While section 3 (c) provides for a penalty of up to $1,000 for the violation of any export or import regulation issued under the bill, it is not felt that such a penalty constitutes an adequate deterrent to a person contemplating the exportation of wheat in violation of regulations. On the other hand, as has been indicated by our experience in the Sugar Act, the forfeiture imposed by section 3 (d) will be an effective deterrent.
There was some indication in the testimony before your subcommittee that as a result of devaluation Australian and Canadian prices would not be changed in relation to pound sterling. Insofar as prices under the wheat agreement are concerned, the United States maximum and minimum prices remain the same in United States currency, and the Canadian and Australian prices are increased by the amount of the devaluation of their currencies. This is so because of the wording of article VI, paragraph 1, of the wheat agreement itself.
The committee asked that a report of the amount of wheat bought from the United States last year (1948–49 marketing year) by ECA be furnished. The requested information is set out in the enclosed table.
In accordance with your request, the following table is furnished showing the amount of wheat purchased by ECA countries from the United States since the wheat agreement went into operation which was purchased at wheat agreement prices and the estimated cost (difference between the actual market price and the maximum price under the wheat agreement).
In order to furnish you with the requested information as soon as possible, this letter has not been cleared with the Bureau of the Budget. Sincerely yours,
RALPH S. TRIGG,
Procurement authorizations issued by ECA for purchase of United States wheat and wheat flour during period July 1, 1948, through June 30, 1949
[Metric tons flour in wheat
546, 404 Belgium and Belgian Congo..
483, 704 France..
239, 267 French North Africa Other French colonies.
87, 724 Germany (bizone) -
64, 009 Germany (French zone)
353, 121 Greece
525, 785 Ireland Iceland
5, 327 Italy
1, 733, 344 Netherlands.
579, 040 Indonesia
48, 094 Norway
213, 806 Trieste.
54, 173 United Kingdom.
382, 389 Total.
5, 459, 798 China
118, 695 Korea.
55, 878 Grand total..
5, 634, 371 Grand total (in bushels).
207, 027, 638
DRAFT OF AMENDMENT TO S. 2383 TO PROVIDE APPROPRIATIONS TO COVER
COMMODITY CREDIT CORPORATION Cost IN CARRYING OUT WHEAT AGREE
At the end of section 2 add the following: “There are hereby authorized to be appropriated such sums as may be necessary to make payments to the Commodity Credit Corporation of its estimated or actual net costs of carrying out its functions hereunder. The Commodity Credit Corporation is hereby authorized in carrying out its functions hereunder to utilize, in advance of such appropriations or payments, any assets available to it."
EXPLANATION OF PROVISION
This provision would authorize either advance or subsequent appropriations for the purpose of making payments to Commodity Credit Corporation to cover its estimated or actual net costs in carrying out its functions under section 2. The provision contemplates that until such payments are received by Commodity Credit Corporation, the net cost of the Corporation in implementing the wheat agreement would be reflected on its books as a receivable. In order that the implementation of the wheat agreement may not be impeded by delays in the making of appropriations or by the insufficiency of any appropriation made or of the payments therefrom, Commodity Credit Corporation is expressly authorized to proceed in advance of such appropriations or payments and to utilize its capital funds and other assets in so doing. The net cost to Commodity Credit Corporation would include, among other proper charges, the following:
(1) For wheat acquired by the Corporation under the price-support program and sold pursuant to the wheat agreement, the amount by which the domestic market price exceeds the sales price for such wheat. The Corporation would not include as part of its net cost under the wheat agreement the amount by which its cost of wheat acquired under the price-support program exceeds domestic market price.
(2) For wheat or wheat flour acquired by the Corporation under its supply program and sold pursuant to the wheat agreement, the amount by which the cost to the Corporation exceeds the sales price for such wheat or wheat flour.
(3) Payments made by the Corporation to exporters for wheat or wheat flour purchased on the open market and sold pursuant to the international wheat agreement.
(4) Administrative expenses incurred by the Corporation in implementing the wheat agreement.
NATIONAL GRAIN TRADE COUNCIL,
September 27, 1949. Hon. OLIN D. JOHNSTON, Committee on Agriculture and Forestry,
Senate Office Building, Washington, D. C. DEAR SENATOR: The Department of Agriculture's observations on the provisions of S. 2287 and S. 2383, contained in Mr. Ralph S. Trigg's letter to you of September 26, 1949, convinces us that Mr. Sanford's objections to the provisions of these bills are well taken. The National Grain Trade Council, therefore, wishes to record again its opinion that in legislation to implement the international wheat agreement, there is no justification to grant to the Government authority to control imports; that exports can be controlled by subsidy payments and a requirement for the recording of sales; that the reporting requirements and investigatory requirements of section 3 (b) of S. 2383 are unwarranted; and that the forfeiture provisions of section 3 (d) of S. 2383, calling for treble damages, are too harsh.
Apparently the only justification for authority to control imports is the alleged need to prevent reentry United States wh on which an export subsidy has been paid. The Department seems to argue that, in the absence of import controls, such wheat might be returned to the United States and sold above the wheat agreement ceiling with a resulting element of unjust enrichment.
This might occur only when our domestic price is well above the maximum price of the agreement, for to reship United States wheat for import into the United States would require the payment of ocean freight plus the payment of our import duty plus the payment of freight to an interior point for delivery or processing: If our domestic price was high enough to absorb these added charges, a short domestic supply situation would permit our being relieved of our export obligations under the agreement-in which case we would have subsidized no exports-or our domestic needs would require us to import wheat at any cost.
The Department's position, that import controls are necessary, disregards the function of the International Wheat Council. As the Council would require us to channel exports to meet our export obligations under the agreement, it should follow that the Council will require importing nations to handle their import quotas so that the exporting nations, such as the United States, will not be harmed or embarrassed in carrying out their export obligations. The United States should look to the Council and its mechanism to prevent the reentry of United States wheat rather than rely on detailed import rules and regulations that will inevitably lead to international ill will.