for differences in costs for previous years should be considered only in so far as the r consideration may throw light upon the present situation as to differences in cost. It is evident that an average of cost differences over a period of years, during which the value of money is changing, will necessarily distort the facts and prove confusing rather than helpful in reaching a reasoned judgment. To illustrate this point by a hypothetical consideration: Assume that the difference in cost of production of a pound of sugar six years ago was 4 cents, that the difference in cost at the present time is 2 cents, and that during these six years the purchasing power of money has doubled. It is evident that, since the purchasing power of money has doubled, the 2 cents difference n cost now is the equivalent of the 4 cents difference in cost six years ago. An average of the difference in money cost would be 4X2÷2=3, whereas the real cost difference measured in terms of the present purchasing power of money would be 2 cents. The differences in costs must be calculated in terms of the present purchasing power of money because the adjustments of rates will be in terms of the present purchasing power of money and will be made for the purpose of adjusting differences in cost in terms of present money. During the past six years there have been marked differences in the level of prices. The index number, according to the Bureau of Labor Statistics, for the year 1920, for instance, was 226, whereas for the years 1921-22, which it appeared advisable to take as a basis for adjusting the rates on sugar, the index numbers were 147 and 149, respectively. For purposes of tariff adjustment to meet existing conditions and present d fferences in cost, calculated in terms of the present purchasing power of money, it would not measure to the standard of scientific accuracy should we take an arithmetic average of the difference in money cost over a period of six years as a basis for the proposed adjustment in the rates on sugar. The application by the United States Sugar Association requesting an investigation looking toward a reduction in duty was based upon the conditions in the industry at the t me when that application was made. The application was dated November, 1922, and averred "that the duty is excessive, unwarranted, and too high, and does not equalize the difference in cost of production in the United States, its insular possessions, and the Republic of Cuba, which latter country is the principal competing country with that of the United States in the matter of sugar production." On March 17, 1923, the commission voted an investigation, which investigation would not have been voted on the ground that the period for cost comparisons. should be extended over any considerable number of years. There is but one time for which cost differences may be equalized by tariff adjustments. It is obvious from the emergency nature of the tariff that the law does not contemplate the adjustments of long-past differences in cost, and that it can not contemplate the equalization of cost differences in advance of the time when an investigation is made. It was evidently the intent of Congress that an invest gation for purposes of tariff adjustments should be limited to the conditions which such adjustments are intended to remedy. The logical period for investigation was that sugar-crop period which was closed last preceding the beginning of the investigation. It is true that the commiss on considered costs with respect to wheat for a period of three years, due to the fact that there were great differences in yields for the different years, and it was thought, on the part of some of the commission, that by reason of the marked differences in yield advisable to take an average of the three years. In the case of wheat, furthermore, the differences in yield per acre in the different years were reflected in the costs per bushel. These conditions, however, do not prevail in the sugar industry, where the yields year by year do not materially differ. In accordance with its original plan to limit the investigation to the crop of 1922, the schedules were prepared to secure the data for that year, but in the course of the investigation it was found convenient to secure the data for 1921 and, in order to secure a more comprehensive range of view, data were secured, where convenient, for other years. But it was not the intention of the commission in securing such data to make them the basis of a recommendation for tariff adjustment, and the trade in a number of instances were so informed and imparted the information with the understanding that it was not to be used as a basis for tariff adjustment, but rather as a means whereby the commission's staff could study the trends of certain elements in the cost of producing sugar. For instance, one of the largest producers investigated by the commission refused access to its cost information for previous years until he was assured that any information for previous years which he might reveal would not be used as a basis for tariff adjustment. It was only after receiving assurance by the commission's expert that such information would not be used as a basis for rate adjustment that he revealed his costs for years previous to 1921–22. Following this outstanding example, a few of the leading companies in the same region imparted their data for the earlier years. The circumstances under which the investigation was made would appear to preclude the commission from using the data for these earlier years as a basis for adjustment of tariff rates. All interested parties—both representatives of the Cuban and the domestic interests-contended for the use of current costs of production and the exclusion of years prior to the crop year 1921-22. To quote from the brief on behalf of the applicants (United States Sugar Association) by Edwin P. Shattuck (pp. 25–6): This same brief goes on to state that "it is unthinkable that the Tariff Commission would take an obsolete year and a broken down year in Cuba upon which to base its comparison. * * * "Not only was the 1921-22 crop for Cuba produced at subnormal prices but it is a crop far distant to meet the conditions imposed by the flexible tariff provisions" (p. 33). Statements from other briefs as well as from the testimony given by interested parties, producers of both Cuban and domestic sugars. favor the restriction of the data for cost purposes to current conditions. The undersigned commissioners would limit the period for cost comparison to the year 1922, to be specific, to the Cuban, Porto Rican, and Hawaiian crops of 1921-22 and the Louisiana and United States beet crops of 1922-23. The following reasons support the limitation of the data to this period: (1) Cost is a function of price and the crops in these various regions are marketing at virtually the same time. (2) The costs of producing sugar in the same regions for the period above defined take place at approximately the same time. (3) The data for this period have been secured and verified in the present investigation. (4) Although the commission has data for the preceding crop, such data are too remote from the present situation to be of use in adjusting a tariff rate to remedy the present conditions. (5) The commission has obtained only partial data, not a sufficiency for the extensive cost comparisons required in this investigation, for the year 1923. Some data for 1923 for Cuba, Porto Rico, and Hawaii have been obtained. No data for Louisiana nor the United States beet crops have been obtained for that year. The Cuban data are incomplete and are subject to the criticism of being ex parte, unchecked, and unverified, and the amount and character of the data gathered in the regular way are insufficient to represent the Cuban industry in 1923. Complete Cuban data for the full year's operation were obtained by the commission from the books of the Cuban companies for only 2.86 per cent of the 1923 Cuban sugar crop. The commission's agents gathered additional data on 13.89 per cent of the Cuban crop. These data, however, cover only a part of the year's operations and no data on investment in Cuba for this period are available. The other Cuban data available to the commission were taken from statements submitted by correspondence. The commission has not audited the books of the companies to vertify these statements. For these reasons it is impossible to use the 1923 data for any comparisons in this investigation. The above statement shows that it is necessary to compare the 1921-22 Cuban, Porto Rican, and Hawaiian crops with the 1922-23 United States beet sugar and Louisiana cane crops. EXHIBIT No. 13 Costs of United States beet sugar compared with Cuban costs, f. o. b. mill, including investment-by States-raw basis-crop year 1 Beet sugar is put on the raw basis by subtracting from the cost of refined beet sugar the general costs of refining beet sugar as shown in the sugar report submitted to the President July 31, 1924, by Commissioners Culbertson, Lewis, and Costigan. EXHIBIT NO. 14 Weighted average costs of producing sugar-United States and Cuba-in cents per pound raw basis Weighted by total annual production of each region, respectively. 2 United States costs of producing refined beet sugar less the costs of refining beet sugar f. o. b. mill, as shown in Table XI of the report to the President. 3 Weighted on basis of total cane sugar produced in continental United States. Simple average costs of producing sugar-United States and Cuba-in cents per pound, raw basis 1 Taken from Tables V to IX in the report to the President. 2 Average of averages. Each year is counted as one. No weights used. United States costs of producing refined beet sugar less the costs of refining beet sugar f. o. b. mill, as shown in Table XI of the report to the President. EXHIBIT No. 15 Costs of production of sugar, f. o. b. mill Cuba and United States sugar regions-Raw sugar basis-The Louisiana and United States beet crops are compared with the succeeding Cuban crop-Crop years 1920-21 and 1921-22 1 Showing the amounts by which the Cuban costs are lower than the indicated domestic costs. 2. 1622 Cost of production of sugar f. o. b. mill Cuba and United States sugar regions-Raw-sugar basis-The Louisiana and United States beet crops are compared with the succeeding Cuban crop-Crop years 1920-21, 1921-22, and 1922-23 United States as a whole.... 502, 194 4. 6572 Cents Cents Cents Cents Cents Cents Long per per per per per per tons pound pound pound pound pound pound 602, 910 3. 8801 3.5476 469, 000 5. 2681 4. 9743 0. 7064 2. 1606 1. 3880 1. 4267 338, 456 5.8436 5. 2260 1. 1331 1. 8894 1. 9635 1. 6784 280, 933:5, 2921 5. 5420 3. 9022 1. 7986 1. 41201. 9944 645, 210 5. 4573 5. 9626 3. 1392 2. 2120 1. 5772 2. 4150 2, 163, 930 6. 48472, 168, 792 4. 5815 1, 733, 599,5. 4564 5. 5291 2. 1742 2. 0849 1. 5763 1.9815 1 Showing the amounts by which the Cuban costs are lower than the indicated domestic costs. 28096-30-22 |