The second statement of policy says, generally, that the authority for regulating foreign trade in dairy products must be strengthened and revised to a degree that will prevent such trade from bringing disaster into our domestic dairy industry.

Our members have adopted these policy statements because they feel that the existence of the dairy industry in this country depends upon efficient and effective control of imports of manufactured dairy products.

The dairy industry is the prime industry in agriculture.

It is the largest single segment of the American agricultural economy, and as such it reaches into virtually every section in this country and affects many farm families' operations.

Therefore, it is important to the entire agricultural economy, and to the Nation generally, to see that we do not become an agricultural deficit nation. The dairy industry, once destroyed or once impaired, cannot be rebuilt in one season or 1 year.

It takes a considerable length of time to develop an efficient herd of milk cows.

We have been disturbed for several years over trends we have noticed in the administration of the foreign trade policies established by Congress.

To give you a little background on why we are disturbed, the Department of Agriculture has made three surveys on the hourly income of dairy farmers.

In eastern Wisconsin, dairy farmers receive an average of 43 cents an hour for their labor.

In western Wisconsin, 52 cents an hour, and in the central northeast part of the country, 70 cents an hour (Agriculture Information Bulletin No. 176, 1957).

So, you see, we are not attempting to develop restrictions on imports which will provide continuance of a real good thing for dairy farmers. It is a matter of survival.

Dairy farmers in this country are in a serious cost-price squeeze, as is evidenced by the fact that with all their investment and knowledge they can only make from 43 to 70 cents an hour for their labor.

In order to net even these small returns, which the dairy farmers get out of operating their farms, butter must be priced at New York at 5834 cents per pound.

Now we have noticed in some of the foreign trade circulars that Danish butter is being offered on the world market at 23.1 cents per pound (Foreign Crops and Markets, USDA, May 26, 1958, p. 34).

It costs about 4 cents a pound to get that butter to New York and the highest tariff that can be imposed on that butter is 14 cents a pound.

So butter can be landed here at slightly in excess of 41 cents a pound.

Now the support price for our butter in New York is 583 cents a pound, which leaves a profit which could accrue to importers of over 17.5 cents a pound for any butter which is allowed to come in here.

Senator KERR. How does that compare with the profit that farmer makes on the product that he sells?

Mr. HEALY. Well, about 1700 percent, I think, Senator.
Senator KERR. Greatly?

Mr. HEALY. Yes.

Now because of those facts, and they are facts, there is a great tendency to want to bring butter in here.

Importers can make a 66 percent profit on their investment in butter by landing it in New York.

Now we have chosen butter as an example, but the same problem exists with respect to other dairy products.

Therefore, any relaxation of the control over imports of dairy products could bring real disaster to our dairy industry.

We are now producing dairy products in slight surplus of our needs for our domestic economy. We realize that the dairy industry in this country is basically a domestic industry.

I know the Congress has been told many times in both Houses about how the General Agreement on Tariffs and Trade and the reciprocal trade agreements which are established foster the export of dairy products from this country, so we have looked into that pretty carefully, and there are practically no true commercial dairy exports from this country.

Exports of any size at all-there might be a little milk powder that goes to Mexico, there might be a little whole milk powder shipped to the Far East, Thailand, and so forth-but most of the substantial exports of dairy products are subsidized.

So our commercial market is truly domestic.
Now we produce a little surplus.

We produced last year somewhere between 42 and 5 percent more milk than we could sell commercially in this country. We do not feel that we have a right to dump that surplus on foreign markets indiscriminately so as to destroy markets which other domestic producers have built for themselves.

However, we know there are more people in this world to drink milk than there is milk for them to drink.

And we, as dairy farmers, have legislation before this Congress which would allow us in effect to donate that milk to develop markets. Markets which we know we would lose to these people who can produce butter for 23 cents; but we could, in turn, develop more and more markets until we got down here to market X, where we could develop a true commercial market for our own excess production.

Now because this dairy production industry-and again I do not speak for the whole industry, I speak for the dairy farmers-is truly a domestic industry, we feel that this Congress should take note of that and should make a strong domestic agricultural economy a part of any foreign trade policy which we develop.

We do not want to have to work with a foreign trade policy which is not cognizant of the distress of our own people.

We want to have the people who negotiate our trade agreements recognize that there is a domestic dairy industry which is important. to this country and which must be taken into account when they negotiate agreements.

Now, because of that, we have several suggestions which we would like to make relative to this bill H. R. 12591, which is before this committee.

First of all, we feel that any extension of this trade agreement authority should be limited to 1 year.

Senator KERR. If you already have a surplus, it just means that much more the Commodity Credit Corporation is going to have to buy.

Mr. HEALY. Now, what that meant was about $7 million additional expenditure to CCC. As you know, the Commodity Credit Corporation takes off the market all the butterfat which cannot be consumed here. Since they were taking some off anyway, there was a surplus, and any additional amount which comes into this country means they have to take that much more off the domestic market. I think it cost them about $7 million.

Senator KERR. And then they export that under a subsidized basis or a gift?

Mr. HEALY. Exactly.

Senator KERR. What happened was that that came in here and was bought and our Government then bought up a like amount and added to that which we were shipping to somewhere else and giving it away?

Mr. HEALY. The other thing was of course

Senator MARTIN. While we are on that, what is the surplus in our own country?

Mr. HEALY. About 5 percent now, Senator.

Senator MARTIN. What does that mean in pounds?

I am trying to compare it with what this

Mr. HEALY. Well, it means about 6 billion pounds of milk, which would mean about 230 million pounds of butterfat.

The CHAIRMAN. What is it in dollars?

Mr. HEALY. Well, 230 million pounds of butter, would be worth about a million

Senator BENNETT. 170.

Mr. HEALY. $170 million to $190 million-something in that neighborhood.

The other thing that must be remembered about these butter imports-although I have shown you where they can be landed here at 17.6 cents a pound cheaper than we can sell our butter, the American consumers do not get that 17.6 cents. The importer makes it. He sells the imports for half a cent or so under the domestic market, so it would be no great boon to Americans to have butter imported at such a reduced price.

It is a boon to 1 American who is cagey enough to go through the loopholes which are in this section 22 and make his 17 or 18 cents a pound on it.

Senator BENNETT. When the President by proclamation closed the second loophole to which you referred, have they tried again?

Mr. HEALY. Yes, sir; the second loophole was closed by saying anything from which butterfat could be commercially extracted and which contained 45 percent or more of butterfat was excluded. Now we know these same people are going through the country trying to get orders for a 44 percent fat product, so we have got the whole thing to go through with once more.

The CHAIRMAN. Why is it that the Danes can produce butter for 23 cents and it costs us 60 cents?

As I notice wages here are 43 cents in Wisconsin, 70 cents in central

and northeast

Mr. HEALY. Yes, sir.

The CHAIRMAN. Why does it cost more than twice as much? Senator KERR. They make that, I take it that they manufacture different products for different markets.

Some of them have a good cheese market.

The CHAIRMAN. I am speaking of the butter.

Mr. HEALY. Well, to a great degree most of the products which can hit this market are subsidized.

As a matter of fact, we reported to the House that some northern European butter is being subsidized to the extent of 21 cents per pound.

It is exported.

The CHAIRMAN. You said in your statement on page 4 the Danish butter is 23.1 cents per pound, and it costs, what did you say?

Mr. HEALY. Four cents to ship it.

The CHAIRMAN. Yes, sir.

Senator KERR. I did not understand the statement the way you do, Senator.

He says this is how much they make an hour on the basis of getting 6012 cents a pound for their butter and 35 cents for their cheese. The CHAIRMAN. That is what they get, is it not?

Mr. HEALY. Yes, that is a fact. The Danish butter does sell in Denmark for 23 cents, that is correct.

The CHAIRMAN. What are these figures-your hourly returns from dairy farmers on page 3, 43 cents in eastern Wisconsin. Is that what they get when they dispose of butter at 6012 cents per pound in New York?

Mr. HEALY. Yes, sir; that is their hourly return for——

The CHAIRMAN. That is a very low wage.

How is it then that the Danes can produce it for less than one-half? Mr. HEALY. I do not believe the Danes produce it for less than onehalf, Senator. I think this export price of 23 cents is a subsidized export price.

The CHAIRMAN. I have been through Denmark and seen those great farms there and I was told that the wages there were about 50 to 60 cents an hour in our money. Is that correct?

Mr. HEALY. Yes, sir.

Senator KERR. Does their machinery cost a lot less than ours?

Mr. HEALY. No, sir, I don't believe so. I do know that Europeans have subsidized their butter exports to the extent of 21 cents, which of course makes up a lot of this difference.

Senator BENNETT. Since you are using the Danish exports do you know that the Danes have done it?

Mr. HEALY. No, sir; I don't have the information about the Danes but I will supply that for the record.

The CHAIRMAN. Try to supply an explanation as to why they can produce it at 23 cents, while it costs us here 60 cents, based on wages to the dairymen of 43 cents an hour, which is about the same or less than the wages in Denmark.

(The information is as follows:)

MEMORANDUM

The figures given above ranging from 43 to 70 cents per hour represent the hourly returns of dairy farm operators, that is, the profit converted into cents per hour for the labor of the dairy farm operator. This is the figure which

would have to be reduced if the New York price of butter should be reduced to meet import prices. Obviously the farmers cannot work for less, nor, in fact, can they continue long to work for the low returns they now receive.

The profit to the dairy farm owner or operator is only a part of the cost of butter. Hired farm labor costs more than the dairy farmer himself makes and labor costs in manufacture, packaging, transportation, and distribution all enter into the picture. Higher labor costs also enter into the cost of equipment and other supplies the farmer buys as well as the equipment used all the way down the line to transport, process, package, and distribute butter.

Living standards in this country are high, not only for farmers but for labor used in processing as well.

We do not want to see these living standards reduced to the average world levels, nor do we want to see American wage rates reduced to the average world levels. We would prefer to see world standards raised rather than to see ours lowered.

The following comments indicate that much European butter exports are subsidized. We do not know the exact extent of Danish subsidies.

"On February 13, the wholesale price of Danish butter was reduced from 36.1 to 29.6 cents per pound. This is the lowest price since 1948, when dairies received 29.3 cents per pound.

"The price reduction was postponed for several months in the hope that the export price would improve. During this period the dairies were compensated for the low export price through the Danish dairy industry butter pool fund. The recent price reduction came when the fund was depleted" (Foreign Crops and Markets, Mar. 10, 1958, p. 26).

"Swedish citizens are taking advantage of the low Danish butter price (see Foreign Crops and Markets, Mar. 10 and Mar. 17, 1958) through shopping tours to Denmark. During the week of February 16 to 22, about 80,000 Swedish shoppers brought 1.7 million pounds of duty-free Danish foodstuffs into Sweden, including an estimated 545,000 pounds of butter. Until recently, the Swedish Customs Office has permitted the entrance of 10 kilograms (22 pounds) of duty-free food. Through pressure from various farm organizations, this limit was reduced to 5 kilograms.

"In February, when the wholesale price of Danish butter was reduced to 29.6 cents per pound, the wholesale price of butter in Sweden was 60.1 cents per pound" (Foreign Crops and Markets, Apr. 14, 1958, p. 15).

According to Amsterdam's De Telegraf, 90 percent of the annual export of butter leaves the Netherlands at prices below the cost of production. It is being subsidized to the extent of 21.1 cents per found (Foreign Crops and Markets, Feb. 10, 1958, p. 16).

"A temporary ban was placed today on import of Belgian butter into Britain, where the public is enjoying a glut of cheap butter. The British Government acted after reports that 1,000 tons of Belgian surplus butter stocks was being offered to the British market at 1 shilling 6 pence (21 cents) a pound.

"Reports from Brussels indicated that the difference between this price and the retail price in Belgium of 5 shillings 6 pence to 6 shillings (77 to 84 cents) a pound, would be made up to exporters out of an agricultural fund set up by the Belgian Government" (New York Times, May 19, 1958).

"Export subsidies paid by the Finnish Government for dairy and poultry products in 1957, totaled $39.4 million, compared with $18.3 million in 1956. The domestic consumer subsidy, already included in the wholesale price of butter, amounted to an additional $8.8 million on butter exported.

"Finland exported 55.6 million pounds of butter in 1957 under export subsidy of $28.1 million. Cheese exports were 29.5 million pounds and accounted for subsidy of $8.1 million. Exports also included 5.5 million pounds of milk powder with a subsidy of $1.3 million, and 9.9 million pounds of eggs subsidized at $1.9 million" (Foreign Crops and Markets, Mar. 10, 1958, p. 28).

The May retail price for finest quality New Zealand butter in British markets was about 30 cents per pound (Foreign Crops and Markets, May 19, 1958, p. 13). "Claims by the Italian press that European countries have been selling butter at less than production cost, thus forcing down prices in Italy, prompted the Italian Government to issue a decree on March 31, 1958, which temporarily suspends all imports of butter" (Foreign Crops and Markets, Apr. 21, 1958, p. 13). In April, Sweden was exporting large quanities of butter "at prices just onehalf the domestic factory price" (Foreign Crops and Markets, Apr. 7, 1958, p. 13).