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Senator HAWES. Do you know of any one nation that is a colonizing nation that leaves the administration of its colonies in the hands of its War Department?

Mr. RUSSELL. No, sir; I do not.

Senator HAWES. The United States is the only nation in the world where the War Department has control over its colonies, as I understand it. Is that correct?

Mr. RUSSELL. Yes, sir; so far as my observation goes, in many parts of the world. The British Government, of course, maintains a military force in India, but the Government of India is civil, not military.

Senator METCALF. Have you any further questions, Senator?
Senator HAWES. That is all.

STATEMENT OF JAMES D. CRAIG, REPRESENTING SPENCER
KELLOGG & SONS (INC.), BUFFALO, N. Y.

Mr. Chairman, my name is James D. Craig.
Senator METCALF. You represent whom?

Mr. CRAIG. I represent Spencer Kellogg & Sons (Inc.), an American firm with general headquarters in Buffalo, N. Y.

Mr. Chairman, because I am not accustomed to argumentation, I am going to ask that I be permitted to proceed with the presentation of my cause without interruption, and when I have finished, I shall be glad to respond to questions.

Senator METCALF. You may proceed.

Mr. CRAIG. We are here, not for any political purpose, not to take a stand on the political question of Philippine independence, but to let our Government know what effect the enactment of S. 3377, the Hawes-Cutting bill, will have on our investments, and our company has large investments in the coconut-oil industry in the Philippines. We crush the copra in the Philippine Islands, and process the oil in this country in plants located in Edgewater, N. J., just across the river from New York City, and in Kansas City. We are also engaged in the crushing of domestic oil seeds in plants located in various parts of this country.

The Philippine coconut-oil industry exists by virtue of the fact that its product, coconut oil, has free entry to the United States under the American tariff. This free entry is the life blood of our industry. Withdrawing this free entry would cause its destruction. Furthermore, the placing of a limitation on the importation of Philippine coconut oil in the United States, as proposed in section 6 of the Hawes-Cutting bill will be highly detrimental to our interests and can easily result in the eventual complete collapse of the industry. That means the destruction of our investments, and is the reason we are here to appeal to our Government to proceed cautiously and protect the interests of American nationals in the Philippines.

We have no interests in the Philippines that are not identical with the best economic interests of the Filipino people, especially those in our employ and those with whom we trade on a commercial basis. To-day I wish to confine my statements entirely to the question of limitation and its inevitable resultant injury to the American crusher of copra in the Philippines. The question of the alleged competition between coconut oil from the Philippines and fats and oils produced by American agriculture I shall not discuss^-day,

except to refer your committee to our exhaustive treatment of this subject, on February 1 of this year, before the House Committee on Insular Affairs, wherein we show conclusively, by the use of uncontestible scientific facts and unchallengeable data from government and other unprejudiced sources that there is no foundation in fact to support any contentions that Philippine coconut oil offers injurious competition to products of American agriculture.

There can be, therefore, no reason of such an urgent nature as to warrant Congress terminating our trade relations with the Islands on coconut oil in the short period suggested in this bill, the very shortness of which precludes any possibility of our being able to liquidate our investments without suffering heavy losses.

Senator HAWES. Mr. Chairman, I thought we had an understanding that we were to hear the Secretary of War in the discussion of the tariff in an explanatory way. I think it is all right for the witness to go ahead, of course, but if he proceeds, then we will open the doors, and we will have the three farm organizations, and the dairy organizations, and union labor, who have all been heard on the House side. We had tentatively agreed that it was not necessary for us to hear them here.

Was this testimony of yours given before the Senate committee two years ago?

Mr. CRAIG. No. You have introduced a new feature in your bill, and we are answering specifically that part of your bill which has to do with the limitation, in the amount of coconut oil which can be shipped from the Islands to the United States, to explain to you why that limitation will work a grievous injury to our interests in the Islands. It is very short, and I will take very little time.

Section 6, lines 13-21, in effect limits the coconut oil exportations of the American crusher of copra in the Philippines to the United States each year to only that quantity of coconut oil which was imported the previous year in the form of copra, taking the oil content of copra as 63 per cent. Any importations exceeding this amount are to be subject to the present tariff of 2 cents a pound applying on coconut oil from all foreign countries, 10 per cent of which duty is even more than sufficient to prevent any Philippine coconut oil from entering the United States. For you to understand clearly how this type of limitation will injure the business of the American crusher in the Philippines, your attention will first be directed to an analysis of:

United States imports and exports of copra and coconut oil

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From this analysis it can be easily seen that such an arrangement would prove to be largely to the disadvantage of the American crusher in the Philippines and greatly to the benefit of the crusher on the United States mainland.

Senator HAWES. I wanted to be clear about this, Mr. Chairman. In opening this up it is going to be necessary now to hear the farmers and the farm organizations.

Senator METCALF. As this refers exactly to one clause in your bill, is it not quite proper?

Senator HAWES. I think it is, but it means that the others will follow, too, of course. The representative of the Farmers' Union was just speaking to me. They did not expect to appear, but I assume, if they want to appear now, they will be permitted to do so-and union labor, as well.

Senator METCALF. It would seem a quite proper time to have this in, as it refers particularly to this clause.

Senator HAWES. I think you are right. I think it is entirely right. Mr. CRAIG. I merely want to explain what your limitation will do to our investments in the islands.

Senator HAWES. I hope the gentleman does not misunderstand me. I want you to proceed, but it is destroying the procedure we had agreed upon, and makes it necessary, now, to hear all this evidence that was given on the House side.

Mr. CRAIG. This objection was not introduced in my testimony before the House committee. This limitation feature embodied in the Hawes-Cutting bill was not in the Hare bill at the time I presented my testimony before the House Insular Affairs Committee. I appeared before this limitation feature was introduced as an amendment to the Hare bill.

In the first place, it will be placing a limitation on coconut oil from the Philippines materially below the amount which has been coming in from the American crushers located there, yet in no way does it affect the coconut oil consumption of the United States, for the simple reason that copra from all countries is on the free list. The crusher with mills in the United States has no limitation of any kind placed on his duty free copra, thus is free from limitation or restriction of any sort to expand or curtail his crushing activities as general business conditions dictate.

To illustrate better the discrimination against the American crusher in the Philippines, let us analyze the oil and copra imports for the last two years together with the basic factors affecting them. In the calendar year 1930 the oil imported in the form of copra was 185,406 short tons. The oil imported as oil was very much below this figure, being only 146,421 short tons. The copra imports in 1930 were unusually large, due partly to the anxieties of the crushers in the United States over the possibility of a tariff being placed on copra, and would, therefore, have entitled the American crushers in the Philippines to the privilege of bringing in a larger quantity of oil in 1931 than at any previous time. In the year 1931 the consumption of all commodities was greatly reduced, particularly that of coconut oil, and the actual imports of this oil were accordingly very much below what would have been permitted under this type of limitation, amounting to only 154,946 short tons. The copra imports in 1931 expressed in terms of oil were lower than at any

time during the past four years, being down to 134,222 short tons. This reduced amount would then be the limit of the amount of coconut oil American crushers in the Philippines could ship to the United States in the year 1932, thus placing them in the position of being unable to share in any increased consumption of coconut oil should general business conditions improve.

To explain the reason for the unusually low copra imports in 1931, it is necessary to point out that crushing mills in the islands must either crush copra or remain idle, since there are no other oil seeds available for them to crush. Copra-crushing mills on the mainland of the United States can, on the other hand, if they find the crushing of copra unprofitable, as it certainly was during 1931 for all mills whether in the United States or in the Philippines, turn to the crushing of other oil seeds. During this period some of the large Pacific Coast crushers did this very thing, and, therefore, greatly reduced their copra importations. By so doing, as just pointed out, they would place a severe handicap on their American competitors in the islands through lowering further the quantity of oil to be imported from that source the following year. It would destroy every opportunity to regain a portion of the previous year's loss in the ensuing year if increased demand and consumption are normally recovered.

Actually when the demand for coconut oil improves, the copra crushers located in the United States can easily and quickly return to the crushing of copra and consequently would be the only mills in a position to supply the increased demand. While they were profiting from the generally improved business conditions, their competitors in the Philippines would be forced to remain out of the market, solely by reason of the fact that they would be limited by the preceding year's abnormally low copra imports.

In periods of recovery after a severe depression, such as the present one, the American crusher whose mills are in the Philippine Islands would each year be held down to the previous year's level of the crushers in the United States, thus being held by Government restriction always one year behind these competitors. He would continually be the loser, because when consumption drops off again the privilege of being able to import a larger quantity of oil than the country will consume is of no value. The variations will, of course, not be uniform, but the trends are of such duration as to make a severe handicap always against him.

In case it should be contended that the Philippine mills can export coconut oil to Europe during the periods it is unprofitable to export it to the United States, it has already been explained in my earlier testimony before this committee, and further elaborated on in my testimony before the House Committee on Insular Affairs, that it is economically impracticable to do so, since the crushing of copra in the Islands is possible only by reason of the fact that the United States needs the oil but does not want a further quantity of oil cake to add to the present large exportable surplus. Furthermore, since the Europeans need both the oil and the oil cake, it is preferable for them to buy their coconut oil in the form of copra and crush it at the point of consumption.

It should be unnecessary to illustrate further the unfairness of this limitation and the undoubted tendency which it would possess to favor the copra crusher in the United States while discriminating

against the crushers in the islands. The crippling effect of this legislation on American crushers in the islands would be manifested from the very outset of its application. Since it can have no possible effect in limiting the coconut oil consumption of the United States, and let us repeat again there is no sound economic reason that it should be limited, why then should not the American crusher in the Philippines be free to export his coconut oil to our market where it is needed and wanted, so long as copra remains on the free list?

It is our sincere hope that this committee on Territories and Insular Affairs will not incorporate any type of limitation on the United States importations of coconut oil from the Phillippines in any legislation which it frames. It is our belief that when the American flag is lowered in the Philippines, Congress should grant a reasonable time for the continuance of present trade relations, sufficient to allow American investors in the islands to liquidate their investments in industries which will be destroyed as a result of the termination of existing trade relations.

Senator METCALF. Are there other Americans in this same business in the Philippines?

Mr. CRAIG. Yes.

Senator METCALF. It is quite a large business, then?

Mr. CRAIG. I would say that the coconut oil and copra business with the United States accounts for approximately 25 per cent of the Philippine trade with the United States. Sometimes it is lower, and sometimes it is a little higher.

Senator METCALF. Are there not other places whence they bring their copra in free?

Mr. CRAIG. Copra is brought into this country free from all countries, and is crushed on the Pacific Coast, and on the Atlantic Coast. By limiting coconut oil from the Philippines, you are not in anyway affecting the coconut oil consumption of this country. You are merely shifting the crushing operations to the mainland which will put the crushes of coconut oil in the islands out of business. It is also undesirable, for the reason that the United States does not want a further large production of oil cake, of which it already has an enormous exportable surplus.

Senator HAWES. What do you pay your laborers over there in your crushing plants?

Mr. CRAIG. A laborer working in the plant receives approximately 1 peso per day.

Senator HAWES. That is about how much in our money?

Mr. CRAIG. Fifty cents.

Senator HAWES. What do you pay the employees in the plants in the United States?

Mr. CRAIG. The wage varies from $4 to $5.

Senator HAWES. That is the difference in the wage scale between the Filipino and the American working man?

.

Mr. CRAIG. That is the difference in our particular industry. But, on that point, the labor cost is insignificant in the cost of producing oil. I will explain it this way. Approximately 90 per cent of our selling cost in normal times is represented by the raw material cost. The other factors which enter into the remaining 10 per cent are excessive power costs in the islands, in comparison to the lower power costs in this country; the expense of having to handle wet copra, in which we

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