In 1935 the Philippines was the best market of the United States for 70 items of American exports abroad. It ranks second as a market for cotton textiles and rubber manufacture; third for American tobacco products, grain preparations, and fish products; and fourth for paper manufactures and leather goods (appendix G).

Since American occupation, Philippine-American commerce has increased 40 times, from a little over $5,000,000 in 1899 to over $200,000,000 in 1929. American exports to the Philippines for that period have increased 91 times, from $1,350,000 in 1899 to $92,600,000 in 1929; on the other hand, Philippine exports to the United States have increased only 32 times from $3,935,000 in 1899 to $124,465,000 in 1929. These are significant figures, for they demonstrate the fact that the purchasing power of the Filipino people has increased in a much greater proportion than their sales to the United States.

The conversion of the Philippine market into an American monopoly since the United States took over the islands may be deduced from the following figures and statistics:

During the last 10-year perior of the Spanish regime, from 1885 to 1894, out of a total of $111,307,961 worth of merchandise imported by the Philippines during that period, the United States only supplied $3,202,432, or 2.87 percent. During the first 10-year period of American sovereignty, but before the establishment of free trade, from 1900 to 1909, out of a total value of $298,936,198 of Philippine imports, the United States supplied $45,459,084 or 15.21 percent. After the establishment of free trade, the United States has obtained a practical monopoly of the Philippine market. Of the total $1,121,124,449 worth of merchandise purchased by the Philippines for the 10-year period, 1924 to 1933, the United States supplied $684,361,995 or 61.04 percent.

These figures portray a concrete picture of the metamorphosis of Philippine commerce from one evenly distributed to all countries in the world before American occupation to practically a single country, the United States, after the establishment of free trade between the United States and the Philippines. As an agricultural country the value of the exports from the Philippines to the United States generally exceeds the value of imports from the United States to the Philippines. This situation is due to the fact that the Philippines must sell more goods to pay for the services rendered by the United States which are grouped in the so-called "invisible items" that make up the equilibrium as to trade balances between nations.

While the sales to the United States in the past few years have been relatively much greater in value than our purchases from the United States due to the changes in American tariffs and devaluation of monetary systems, there has been a tendency in the past year toward the other direction toward the establishment of the complete reciprocity in the American-Philippine commerce which existed during the 12-year period between 1910 and 1921. During that period the Philippines bought from the United States $502,000,000 worth of merchandise or 55.48 percent of its total purchases of $904,000,000 from all countries. For the same years the Philippines sold to the United States $525,000,000 worth of Philippine products or 55.60 percent of the total Philippine sales of $944,000,000 to all countries.

The United States Department of Commerce trade figures for last year, 1936, indicate this trend toward the situation which existed in 1910-21. Last year the United States exported $60,000,000 worth of merchandise or an increase of approximately $8,000,000 from the previous year and imported from the Philippines $98,000,000 worth of merchandise, or an increase of $2,000,000 worth from the previous year. The exports of the United States to the Philippines were, therefore, approximately 62 percent of the American imports from the islands.

Claim has been made that Cuba has in the past purchased more American goods than the Philippines. While this is true, the Philippines, however, purchase more than Cuba from the United States on the basis of the sales of each country to the United States. For example, taking the commerce trade figures for 1936, the United States exported to Cuba $67,000,000 worth of merchandise or an increase of $7,000,000 from the previous year and imported from Cuba $127,000,000 worth of merchandise or an increase of $23,000,000 from the previous year. The exports of the United States to Cuba were, therefore, 52 percent of its imports from Cuba.

The Philippines, therefore, bought much more relatively speaking, from the United States than Cuba did. Philippine purchases were 63 percent of the Philippine exports to the United States while Cuban purchases were only 52 percent of the Cuban exports to the United States. In other words, if the Philippines were able to export the same value of merchandise as Cuba did, the Philippine purchases in 1936 would have amounted to $79,000,000 instead of the amount of Cuban purchases of only $67,000,000.

American-Philippine trade relationship approaches an ilead state because the differences in climatic conditions and environment make the products of these two countries naturally interchangeable. America needs our raw products which she does not produce and we need American manufactured goods and farm products which we do not manufacture or grow.

United States Sugar Stabilization Plan

For the past 3 years the present administration has endeavored to stabilize the sugar industry in the United States and adopted a quota system for all the areas supplying the American sugar requirements.

The first step taken by the administration at stabilization was the calling of a conference of representatives of the sugar producers in the fall of 1933 under the supervision of the Department of Agriculture. The result of that conference was the signing of a marketing agreement by the producing areas, except Cuba.

The administration then adopted the quota system embodied in the JonesCostigan Act, which became law on May 9, 1934, under which each of the areas was given a sugar quota for marketing into the United States, based on the consumption of the United States as may be determined by the Secretary of Agriculture. Production adjustment contracts were entered into between the Secretary of Agriculture and the producers of continental United States, Hawaii, Puerto Rico, and the Phillines, and benefit payments were made to these producers.

Statistics and data relating to these efforts of the administration in placing the sugar industry on a stable basis are found in appendix H.

Despite the difficulties they encountered in the drastic reductions they made in their production and in the complicated problems which arose in carrying out the adjustment contracts with the 16,800 contracts entered into with small farmers, the Philippine sugar producers fully cooperated with the administration in effecting its sugar program in the Philippines.

The Honorable Frank Murphy, in his last annual report as Governor-General of the Philippines, touched upon this cooperation of the industry, as follows: "Cooperation of industry.-The sugar administration enjoyed the full support of the Philippine Sugar Association, representing the mill companies, and of the Confederacion de Asociaciones de Cana Dulce, Inc., representing the planters. Both entities realized the long-run advantages accruing to the local industry through limitation of off-shore quotas provided the same could be established and maintained by a fair and careful administration of allocation of marketing rights to mill companies and planters. In no instance having to do with the allocation or benefit payment programs was it necessary to have recourse to arrest or litigation and none of the sanctions provided either in the JonesCostigan Act or in the local sugar limitation law was invoked. It is my opinion that to a very high degree the success of the undertaking depended upon the uniformly helpful attitude of the industry."

Moreover, the Philippine Legislature passed a limitation law conforming with the objectives of the sugar program of the United States. This limitation law was extended by the Commonwealth of the Philippines for another three years unless terminated by the President of the Philippines before expiration.

ADJUSTMENT IN THE PHILIPPINE SUGAR INDUSTRY

Under the Independence Act, the amount of sugar allowed entry into the United States, duty free, from the Philippines was fixed at 800,000 long tons of unrefined sugar and 50,000 long tons of refined sugar, during the 10-year transition period provided for in that Act before complete independence. After independence sugar from the Philippines would be subject to the full American tariff levied on sugar from foreign countries.

The framers of the Independence Act and the present bill, H. R. 5326, undoubtedly recognized the necessity and equity of providing for an adjustment in the sugar industry of the islands, before the American market is closed to its product by the imposition of the full American tariff.

In a recent speech, the Resident Commissioner of the Philippines to the United States, Hon. Quintin Paredes, summed up the present economic status of the Philippines in the following vein:

"In summing up, may I stress the fact that, while preparing the Filipino people for self-government, culminating eventually in their complete independence, the United States by its free-trade policy, has drawn the Philippines closer and closer to the American economic system until the Philippines today finds it difficult to abruptly disassociate herself from America's economic unit in order to enjoy fully the blessings of freedom. From a moral standpoint, therefore, the Filipino people cannot believe that America means to destroy their economic life by severing American-Philippine economic ties which America established under our protest, without giving us a reasonable opportunity to build the foundation for our new economic system. From a business viewpoint, in helping us to maintain and continue our present industries, and, therefore, our present standard of living, the United States would also be helping herself for, as I have already demonstrated, we are, and shall continue to be America's potential market in the Far East.

"We are not trying to gain advantages from the United States, all we ask for is that we be given a helping hand to extricate ourselves from the muddle an imposed free trade has placed us."

SUMMARY

1. Previous to American occupation the Philippines had developed a competitive sugar industry based on a family-type economy or less economy of self-sufficiency.

2. The Filipino people opposed the establishment of free trade on the ground that it would in the future become highly prejudicial to their interests and might hinder the attainment of their independence. Despite their protests, however, Congress deemed it fit to impose free trade upon them.

3. Free trade stimulated sugar production in the Philippines and brought about a change in the methods of manufacture and cultivation from primitive muscovado mills to modern sugar factories based on a cooperative system.

4. Sugar became the main exportable product of the Philippines from which a great portion of the national income is derived, and contributed to the economic prosperity of the people and the raising of their standard of living above that of the people in the neighboring countries.

5. Sugar has been responsible to a great extent for the growth and development of American-Philippine commerce, so that today the Philippines has become one of the best customers of the United States in the world and ranks as the best market in 70 items of American exports.

6. American-Philippine commerce approaches an ideal state based on reciprocity.

7. The sugar producers of the Philippines have fully cooperated with the present administration in giving effect to its sugar stabilization program in the Philippines. The Philippine Legislature enacted a Philippine limitation law conforming with the objectives of the Jones-Costigan Act.

8. The necessity and equity of giving the sugar industry in the Philippines a reasonable opportunity to readjust itself before the American market is closed to its product by the imposition of the full American tariff is universally recognized.

APPENDIX A.-Exportation of sugar from the Philippine Islands from 1855 to

la 10-year period 1880-89 under Spanish regime.

2 Philippine sugar entering the United States subjected to full duty of 1.682 cents per pound, under the Dingley Tariff Act of July 24, 1897.

3 Philippine Tariff Act of Mar. 8, 1802, reducing the duty on Philippine sugar by 25 percent.

APPENDIX A.-Exportation of sugar from the Philippine Islands from 1855 to 1936-Continued

Payne-Aldrich tariff law of Aug. 5, 1909, establishing free trade. Philippine sugar imports limited to 300,000 tons per annum. Cuban reciprocity treaty went into effect Dec. 17, 1903, allowing Cuban sugar a preferential of 20 percent. Duty on cuban sugar 1.348 cents.

Underwood-Simmons Tariff Act of Oct. 3, 1913, removing the restrictions in the 1909 Tariff Act. Duty on Cuban sugar, reduced to 1.0048 cents. On Apr. 27, 1916, free sugar clause of Tariff Act of 1913 repealed. On May 27, 1929, Emergency Tariff Act, raising duty to 1.60 cents.

Fordney-McCumber Act of Sept. 22, 1922, raising duty to 1.7648 cents. 'Hawley-Smoot Tariff Act of June 17, 1930, raising duty to 2 cents. Under Jones-Costigan Act.