pally by deficiency payments, in 1961-62 are $2.02 per bushel of wheat, $1.52 per bushel for rye, $1.66 per bushel of barley, $1.10 per bushel of oats, $4.08 per 100 pounds of milk, $16 per ton of sugarbeets, and 52 cents per dozen for eggs. In late 1961, a deficiency payment of about 7 cents per pound carcass weight was made on grade 1 steers. Total Government expenditures for agriculture amounted to $717 million in 1960–61, but is expected to rise to $965 million in 1961-62 largely due to increased costs of programs for fat cattle, sheep, pigs, and cereals.

Mr. BYRNES. I understand one thing is happening, and I wonder to what extent you have checked into it, and how this fits into this whole program, is that I understand some of our exports of this $3.5 billion is wheat and some goes to Germany.

In fact, you suggested in your statement that we are concerned with maintaining our Common Market export for wheat and sorghum grains and rice. One of them was wheat.

I understand what happens there is that they are buying the wheat which we subsidize for export, as I remember your figure it is about 50 cents a bushel, and they buy that wheat which we have subsidized for export purposes, giving it an export subsidy on it, West Germany, and then they resell it in their market at the West German market price which is higher, of course, than the subsidized price at which they buy the wheat from us.

Then the Government uses that difference as a method of subsidizing in direct payments to their wheat farmers. It is a situation that I have a little difficulty understanding who comes out best in this kind of a deal, where we sit in this picture, and how it relates to this basic trade program, particularly with the Common Market.

Secretary FREEMAN. We are happy to sell wheat, which we produce much more efficiently and have a higher quality, to West Germany. Mr. BYRNES. Always keep in mind, though, this 50 cents a bushel that the U.S. taxpayers are paying on it.

is benefity Secretary FREEMAN. I am sure you are not the only one, I can as・from ar sure you, Congressman, that keeps me reminded of that fact. But perm even with that 50-cent assist along the way, it is to our benefit to make these sales. As such, our control, so long as this benefits us, it might su also benefit the Government of West Germany as they seek to handle their agricultural matters, is hardly something that we can determine. Mr. BYRNES. The only thing that occurs to me, Mr. Secretary, is that this 50 cents, which is paid by our taxpayers, then is converted to 50 cents that is then turned over by the German Government to their wheat growers.

Secretary FREEMAN. Our problem in this regard is not to do this to help out the West German Government, because we want to sell to West Germany. If we did not sell at that price, Canada or Argentine or someone else would.

Mr. BYRNES. Would they sell at the subsidized rate?

Secretary FREEMAN. Yes. Canada subsidizes their wheat and has a number of indirect subsidies to which Congressman Curtis referred a moment ago.

So what we are doing in the Common Market in subsidizing wheat is to meet the competition of other countries and then they are going to profit from this, if they have a higher price level artificially imposed internally.

That is something we have no control over. But it is our conclusion that it is to our advantage to sell wheat, even though we subsidize it 50 cents.

Mr. BYRNES. You think there is nothing peculiar in this sort of a setup?

is

Secretary FREEMAN. I do not know how you define "peculiar.”
Mr. BYRNES. Anything we ought to look into and see whether this

Secreary FREEMAN. From my negotiations and contracts with the officials of West Germany, if we told them that they ought not to handle their wheat in this fashion, I am sure they would listen politely, but I doubt very much if we are going to change it very fast.

Mr. BYRNES. I am talking in terms of expanding trade. We can expand this wheat, for instance. I am not saying what the answer is to this question, but I am trying to hear the expert, to get an answer from you.

Secretary FREEMAN. I have the experts beside me.

Mr. BYRNES. We talk about expanding, which you do in your statement, about the need for expanding even greater our export of wheat and other products. Is corn subsidized?

Secretary FREEMAN. No.

Mr. BYRNES. But wheat is one of those you listed, that we should expand our exports into the Common Market. I wonder where we come out as we expand that under the basis of a 50-cents-a-bushel subsidy and then that subsidy is turned over, that 50 cents, to the German farmers.

Maybe it is all right. I just do not know. That is why I throw it out. Maybe you have a good logical explanation, that there is nothing we should do about it.

Secretary FREEMAN. I think it is pertinent to the point you make to just point out for the record that certainly export subsidies are not something that we consider desirable, and to be able to sell at world price is, and the farm porgram presently submitted to the Congress where wheat is concerned would move in the direction of world price. Mr. BYRNES. You tempt me awful at this late hour. Secretary FREEMAN. Forgive me.

Mr. BYRNES. I have to forgo the temptation. You tempt me by referring to the farm program that you sent up. My temptation is very great to launch into a discussion of that.

I will limit myself to this program at this time.

Would you turn, Mr. Secretary to section 212 of the bill relating to agricultural commodities? Under that section, it would permit the President, in conjunction with negotiations with the European Economic Community, to eliminate a duty or duties on agricultural commodities.

I will read the wordage:

To any agricultural commodity or product thereof without regard to the limitation expressed in section 201 (b) of this Act.

That is the section dealing with the 50-percent limitation. This says

on those items he can really go down to zero, if he determines that such agree ment will tend to assure the maintenance or expansion of U.S. exports or commodity thereof.

I have two questions about that language. No. 1: In the last sentence it refers to the maintenance of the expansion of U.S. exports of such commodity.

Does that mean a similar commodity, or could you say if agricultural commodities generally would be expanded, that then you can take a single commodity out of it and bring it down to zero?

Secretary FREEMAN. No. It refers to a commodity-by-commodity agreement that we could enter into in the negotiation with the six, which are complicated, as you well know, and the requirement set down, the guideline is, that it would increase our trade in that particular product.

Mr. BYRNES. I understand that is what it is supposed to do, but I want to know a little more about how this works.

What disturbs me even more, though, is this broad language of any agricultural commodity or product thereof. I assume that agricultural commodity would mean cotton.

Secretary FREEMAN. Yes, sir.

Mr. BYRNES. Would it mean a cotton cloth?
Secretary FREEMAN. NO.

Mr. BYRNES. Why not? What is the product of cotton?

Secretary FREEMAN. We can best define this, I think, by the list of items that we define as agricultural products.

Mr. BYRNES. Where do you define it? Where is it defined? It is not in this bill, Mr. Secretary. I can find no definition of what is meant by agricultural commodity or products thereof.

This does not say agricultural product. This says agricultural commodity, which would be cotton. Or product thereof. That is the reading of the wording.

As I read the English language, certainly a product of cotton is cotton cloth.

Secretary FREEMAN. The clause in question is intended to cover the items that have traditionally been regarded as agricultural products, in previous tariff negotiations and which are listed in agricultural handbook No. 143, which I have at hand.

Ag preben Mr. BYRNES. But the President can change his mind as to what a he is going to call a product, or anybody can change their mind. There fo is no reference to any specific listing.

√ could as to machin) Normally, I would say, Mr. Secretary, what we talk about in our tariff acts are items of chief value, or chief use, as a restrictive item. Proding But this sort of came up and hit me in the face, this section, as it is worded here, without any definitions or limitations.

It could go all the way to the finished dress or pants. That is certainly a product of an agricultural commodity.

Secretary FREEMAN. Within the traditional use of the term in the sense in which it is used here are those items which we have considered agricultural products and which I have said are listed in the document I have named.

Mr. BYRNES. But the bill makes no reference to that.

There is no definition within this bill of that. That is your interpretation of it, and I am willing to accept it as an interpretation, but I do not think that this committee could be satisfied in passing a bill on the understanding that, "Well, the Secretary told us this is what he intended."

Secretary FREEMAN. It is not what the Secretary intended. The Secretary did not draft the bill, as the Congressman knows. But the language involved in it, as we participated in the discussion of it, was intended to cover what I have named, and if it does not do so explicitly enough, it would appear to me that that could be easily corrected by this committee.

Mr. BYRNES. I think we will have to.

Secretary FREEMAN. I think the record is quite clear. The executive branch of Government is always very careful to follow the legislative history and intent of Congress.

Mr. BYRNES. If we did not do any more than pass this bill, there would not be much legislative intent except that we intend to give the President authority to bring any product of an agricultural commodity down to zero, if he so desired, with this one limitation, that it would maintain or expand U.S. exports.

Secretary FREEMAN. It would appear to me that the Congressman has made a pretty good historical record as to the definition of this term here this morning.

Mr. BYRNES. I am afraid they do not go to the hearings. They will go, in any court interpretation, to committee reports. But I doubt that they go very far into the hearings.

That is all, Mr. Secretary; thank you very much.

Mr. KING (presiding). Are there any further questions?
Mr. Knox will inquire.

Mr. KNOX. Mr. Secretary, I believe the waterfront has been pretty well covered this morning as far as your Department is concerned.

However, in the last paragraph on page 8 of your statement, you say the bill would provide special authority to reduce tariffs on tropical, agricultural, and forest products beyond 50 percent.

Would you define tropical, agricultural, forest products?

Secretary FREEMAN. I think it is defined in the bill, Congressman. On page 6, starting at line 10

For the purpose of this section, a tropical commodity is a commodity with respect to which the President determines that the principal world output is in the area of the world between 20° north and 20° south latitude.

Mr. KNOX. What is the area?

Secretary FREEMAN. Do you mean what are the countries?

Mr. KNOX. What is the area you have described?

Secretary FREEMAN. Do you mean between those latitudes?
Mr. KNOX. Yes.

Secretary FREEMAN. Generally speaking, this is the equatorial belt, which would include the Central American countries, the northern Latin American countries, and a belt that would run across between those parallels central Africa, for example.

Mr. Knox. Mr. Secretary, Mr. Ullman, in his interrogation, was deeply concerned about the lumber industry here in the United States.

I, too, am greatly disturbed about the distress that is in the timber industry today and the fact that we continue to import timber products, much of it, of course, which is already processed, such as plywood.

The plywood industry today is suffering greatly from the imports, d inasmuch as the plywood imports today have more than 50 percent of our domestic market.

The question that I raise is this special authority that would be granted to the President to cut beyond 50 percent in the tropical, agricultural, and forest products. Of course, we fully understand as far as Manila is concerned, the Philippine Islands, that they are a great producer of timber for the manufacture of plywood.

It is certainly coming in here in large quantities, in direct competition with our hardwood veneers and plywood.

Is that true?

protest

Secretary FREEMAN. No, this would not apply to this section at thid wha all. It would not involve any competitive commodities or products with the timber industry.

Mr. KNOX. I am most happy to have your interpretation of it, because of the fact that I am greatly concerned about the product.

I want to ask you a question now relative to the processing of agricultural products. Mr. Byrnes mentioned section 212. With this authority to be granted to the President, can you inform the committee how the elimination of the U.S. duty on agricultural commodities or products thereof would increase the exports of that commodity or product?

Secretary FREEMAN. Yes. One good illustration might be a commodity considered earlier here this morning and that would be tobacco. We are anxious to negotiate down the tariff on tobacco in the Common Market countries.

If we could do so through the medium of lowering our tariff, we would benefit very, very substantially. This is but one illustration of the use of section 212.

Mr. KNOX. What tariff would you reduce?

Secretary FREEMAN. Pardon me?

Mr. Knox. What tariff would you reduce? Or would this be an exchange in reducing it from some other commodity?

Secretary FREEMAN. No, this is a product-by-product kind of negotiation. For example, we have a tariff on cigarette leaf tobacco of 1234 cents.

This could well be negotiated with the Common Market countries in return for lowering the present tariff, which we are anxious to lower, and the net result would be very, very favorable to the United States.

Mr. Knox. Of course, you would then expect that the country or countries which you were exporting into would have to give some reduction in tariffs on those commodities which they were exporting into the United States?

This

Secretary FREEMAN. We would give them a tariff reduction, to come back to the tobacco example, in return for getting one. would be tobacco for tobacco, and we would benefit from it. Section 212 provides that this could be done in those instances where we would benefit, tradewise.

Mr. KNOX. Is it my understanding, then, that your interpretation is that this legislation would not permit you to permit exports of other commodities into this country in return for the tobacco which is exported into that country?