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EXTENSION OF RECIPROCAL TRADE AGREEMENTS ACT

MONDAY, FEBRUARY 21, 1949

UNITED STATES SENATE,
COMMITTEE ON FINANCE,

Washington, D.C. The committee met at 10 a. m., pursuant to adjournment, in room 312, Senate Office Building, Senator Walter F. George, chairman, presiding.

Present: Senators George (chairman), Connally, Lucas, Hoey, McGrath, Millikin, Butler, Brewster, Martin, and Williams.

The CHAIRMAN. The committee will come to order.

The first witness scheduled for this morning is Mr. H. L. Coe of the Bicycle Institute of America.

Senator CONNALLY. Mr. Chairman, may I interrupt? I have a telegram here from one of these witnesses scheduled, and he will not be here. He wants this telegram put in the record, if I may have consent to do that. The telegram is from Mr. Ernest O. Thompson, member of the Railroad Commission of Texas.

The CHAIRMAN. Yes, Senator, you may put it in the record.

Mr. Russell Brown, here, has more or less charge of the arrangements for the entire petroleum group, but you may put this into the record.

Senator CONNALLY. I will not quote it all: My interest in protecting the general economy of my State is connected with the conservation of oil and gas. Any importation of foreign oil that would seriously curtail the demand for oil produced in Texas under strict conservation measures would necessarily be harmful to this State's economy.

That is the view. I would like to put the whole telegram, explaining this, in the record.

The CHAIRMAN. Yes, it will be inserted in the record.

(The telegram referred to is as follows:) Senator Tom CONNALLY,

Senate Office Building, Washington, D. C.: Just returned to Austin in time to get wire from Senate Finance Committee Clerk Elizabeth Springer advising me Governor Jester had asked that I appear before Senate Finance Committee hearings Monday, February 21, on extension of reciprocal trade matters outlined in H. R. 1211.. Since it will be impossible for me to appear I will appreciate your getting into the record the following statement: "My interest in protecting the general economy of my State is connected with the conservation of oil and gas. Any importation of foreign oil that would seriously curtail the demand for oil produced in Texas under strict conservation measures would necessarily be harmful to this State's economy." I am sure that you appreciate this just as much as I do. Am sorry that the invitation reached me too late to comply with the Governor's request. I appreciate the committee's courtesy.

ERNEST 0. THOMPSON, Member, Railroad Commission of Texas.

Senator CONNALLY. Mr. Thompson, as I said, is a member of the Texas Railroad Commission, and is very active in all railroad matters.

The CHAIRMAN. Is Mr. H. L. Coe here?
(No response.)
Dr. John L. Coulter?

Dr. Coulter, you are appearing in behalf of the National Renderers Association?

STATEMENT OF DR. JOHN LEE COULTER, CONSULTING ECONOMIST, WASHINGTON, D. C., IN BEHALF OF NATIONAL RENDERERS ASSOCIATION

Dr. COULTER. Yes, sir.

The CHAIRMAN. You may have a seat and proceed with your prepared statement, if you have one.

Dr. COULTER. I have a relatively short statement, which I would like to present at the outset, and then develop any phase of the subject the committee may wish to explore by questioning.

The CHAIRMAN. Yes, sir. You may proceed.

Dr. COULTER. My name is John Lee Coulter, and I am a consulting economist, speaking on behalf of the National Renderers Association.

The National Renderers Association is a nonprofit trade organization with headquarters at 945 Pennsylvania Avenue NW., Washington, D. C. This organization has a total of approximately 275 member companies scattered from the Atlantic to the Pacific coasts, and from the Canadian border to the Gulf of Mexico.

These companies, largely single, independently operating establishments, are primarily engaged in the production of inedible tallow and grease but have as major joint products hides and skins, protein foods, tankage, bones, dried blood, and so forth. .

This entire industry is built around the recovering of oil- and fatbearing materials resulting from livestock industry operations. In turn, the United States is perhaps unquestionably the leading nation of the world from the standpoint of number and classes of livestock, including poultry.

Many different kinds of animals are produced in great numbers in practically every one of the 3,000 counties of the United States and on most of the more than 6,000,000 farms. Livestock of all classes are an important part of the domestic economy, not only for the edible commodities they yield, such as meat, dairy and poultry products, but also because joint products, such as fats and oils, hides and skins, protein feeds, tankage, bones, dried blood, glands, and so forth have a perfectly tremendous value when recovered properly.

It is not within the power of those engaged in this industry, or within the power of the Government, to artifically restrict the number or classes of animals produced on farms, or slaughtered, or which fall from accident or disease, or to control the percentages of most fats and oils, or the yield of other joint products or byproducts which naturally flow from the livestock industry.

In other words, it is not a flexible industry. It is not easily controlled by individual farmers or individual rendering plants, or individual packers. They have to take the result of the weather and the grass and the animals, and so forth.

Therefore, when we bind ourselves in trade agreements not to impose tariffs or excise taxes or to restrict imports except as a part of an agricultural program, unless we agree to reduce domestic production pro rata we are promising to do the impossible. This is one of the reasons why we are vitally interested in the pending bill, H. R. 1211, to amend and extend the Trade Agreements Act.

Senator MILLIKIN. Dr. Coulter, I would like to ask you a question about that last paragraph. You say:

Therefore, when we bind ourselves in trade agreements not to impose tariffs or excise taxes or to restrict imports except as a part of an agricultural program, unless we agree to reduce domestic production pro rata we are promising to do the impossible.

The impossible in what respect?

Dr. COULTER. In the respect that we could not promise to reduce pro rata our production as a part of an agreement with another country; and unless we did promise to restrict our production we would be binding ourselves not to impose a tariff or an excise or processing tax or a quota.

Senator MILLIKIN. And we cannot do that, because

Dr. COULTER. Because of the nature of the business; the livestock business being spread over every part of the Nation, every county in the Nation. And we would be binding ourselves as if we were saying “We never will ask for any concessions in any agreement."

CONSERVATION AND UTILIZATION OF USEFUL PRODUCTS OF

LIVESTOCK INDUSTRY

It is to be remembered that about half of the land in the United States is not in farms but is waste or forest land. Furthermore, fully half of all land in farms is primarily devoted to the production of pasture, hay, and forage crops. Most of this land is not adapted to the direct production of such human foods as cereals, grains, seeds, fruits, nuts, and vegetables, vegetable fats and oils, cotton, tobacco, and other commercial crops. Furthermore, such crops as are grown commercially as feed for livestock are almost universally produced in rotation with cereals and other food or fiber crops, and it has been scientifically ascertained that the original soils under cultivation would have more rapidly deteriorated as a result of overcropping and exhaustion, and loss from that process would have been supplemented by wind and water erosion, had it not been for the livestock economy. In other words, the livestock industry is the sine qua non for the preservation of soil fertility as well as the food supplies and many other useful commodities for the human race.

HEALTH AND SANITATION

The major function of members of the National Renderers Association is the production of inedible tallow and grease, animal proteins, and other products from literally billions of pounds of material which would otherwise become a sanitation and health hazard. It is a matter of record that the operations of the industry are very closely supervised and regulated by city, county, or State health authorities and it is now a general practice that members of the industry be bonded and otherwise licensed to assure diligent performance of this

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special type of assignment. Moreover, were it not for existence of this industry, city, county, or State units of government would have to provide for collection and disposal of such materials at great additional expense to the taxpayer.

While eliminating the possibility of extra local tax assessments by their operations, members of the association also pay very large sums of money annually to farmers, ranchers, feed-lot operators, meat packers, slaughtering establishments, retail meat shops and chain stores, hotels, restaurants, institutions, military establishments, and even the homes of the Nation—through the household grease salvage programfor the privilege of collecting these oil- and fat-bearing animal materials. Payments of this nature actually have the effect of lowering the cost to consumers of such primary articles as meat, dairy, and poultry products, and also result in a somewhat increased return to the producer of the animals.

CONSTITUTIONAL DUTY OF CONGRESS TO REGULATE FOREIGN TRADE

I think there is no need to consume time in discussion of the general proposition that during periods of war or other extraordinary emergencies it is a proper function of the National Government to provide such regulation of foreign trade as may be necessary in order to maintain economic stability in this country or in the world. Section 8 of article I of the Constitution specifically provides that it shall be the duty of Congress to regulate the trade of the United States with foreign countries.

Senator MILLIKIN. Will you not have a large increase in your business in the snow-bound areas?

Dr. COULTER. That is unquestionably going to be one of the things which we will be confronted with.

Senator MILLIKIN. So if you are going to regulate that part of it, you would have to regulate the snow.

Dr. COULTER. We would have to regulate the amount of grass and the amount of fat which the animals put on their bodies. And if you do that, and limit your livestock, you immediately are encouraging erosion. It is nothing but the livestock industry in the pastures, the hay, and so forth, that now makes possible prevention of erosion.

The CHAIRMAN. Where are you taking up now, Doctor?
Dr. COULTER. On page 4.

INTERCHANGEABILITY OF ANIMAL, VEGETABLE, AND MARINE FATS AND OILS

Animal fats and oils of domestic origin over any considerable period of years normally provide substantially more than one-half of the total quantity of fats and oils derived from all sources and used for all purposes in the United States. It is well known that butter, lard, tallow, and grease are the major items in this group of commodities derived from the livestock industry. One-third or more of the total animal fats and oils comes within the classification of tallow and grease. Production of those items has for a number of years been in the neighborhood of 2,000,000,000 pounds annually. It is this item with which the National Renderers Association is most directly concerned. It must be added at once, however, that indirectly we are equally concerned with the situation as it pertains to all fats and oils and oil-bearing materials because of the general widespread interchangeability among the different fats and oils without regard to whether they are of foreign or domestic origin and without regard to whether they are from animal or vegetable origin because of the extreme extent to which interchangeability in use is possible.

It is well known that a considerable number of extremely important American industries are dependent upon imports for special technological reasons. Thus the tin and terne plate branch of the iron and steel industry has found it highly desirable to secure, from foreign sources, about 40,000,000 or 50,000,000 pounds of palm oil annually.

Senator CONNALLY. Is palm oil used in the production of edible fats?

Dr. COULTER. Yes; as a matter of fact, while I am not representing the edible fats group, it is significant that just before World War II started, in 1937, 38, and '39, we were importing as much as 400,000,000 pounds of palm oil. Now, the tin-plate industry only needs about 40,000,000 pounds. And that is nontaxable. Now, then, the rest of the 400,000,000 pounds used to go into the soap kettle. But that was the lowest-priced field. Therefore other industries quickly took palm oil into their hands, and commenced using as high as 20,000,000 pounds in the margarine and shortening industry.

Senator CONNALLY. That is what I was asking about, whether or not its mixture with domestic oils, such as cottonseed oil, would make an edible product out of it.

Dr. COULTER. Yes. And soybean oil and corn oil. That is right. So while we started in with this as a product from Liberia that the iron and steel people needed for the tin-plate industry, and it then got into the soap industry, it eventually found its way to the extent of two or three hundred million pounds into the margarine and shortening field, displacing the other oils.

Again, in the paint, varnish and floor covering, oil paper and oilcloth and related industries, the American market normally has found it desirable to secure in the neighborhood of 100,000,000 pounds of tung, oiticica, and other quick drying oils to supplement or complement the very much larger volume of linseed oil produced from domestic or imported flaxseed.

Again, the soap industry ordinarily finds it highly desirable to import substantially 20 percent of their fats or oils requirements in order to provide the lauric acid present in such tropical oils as those derived from copra, palm kernels, babassu and others in that particular group. Ordinarily, this means that there is a basic American market for substantially 400,000,000 to 500,000,000 pounds of these oils which come in the lauric acid group.

Again, the American market has become accustomed through long use or tradition to use large quantities of olive oil largely secured from Mediterranean countries although considerable quantities are produced in the United States and other domestic oils are in large measure used interchangeably with the imported olive oil. Other less important illustrations could be cited.

But the same thing applies there, Senator. Linseed oil may be used in many other uses than just paints and varnishes, and coconut oil, copra, and palm kernel oil, oil derived from babassu, and the others, are used, of course, in tremendous volume-half a billion pounds—in the edible field. So that these imports not only affect our

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