more than 1,000 persons who are working for us in different States of the Union.

Most of the commodities with which we come in contact are of such a nature that their inherent properties are determined through our senses of sight and touch. But, unfortunately, in the case of coconut oil, its properties are revealed only through the medium of chemistry. Few of our citizens ever come in contact with coconut oil except in the finished manufactured product, and they have, therefore, no opportunity to form impressions concerning its characteristics and, consequently, have no means of forming ideas concerning its economic relationship to other commodities and other fats and oils. Because of its being a vegetable oil, it is natural that the impression is so easily formed that it must compete with all domestic vegetable oils and fats.

Coconut oil is in reality a hard fat. Its solidifying point is almost that of body temperature, 76° F., whereas other vegetable oils liquefy at temperatures only slightly above the freezing point of water, and some of them below.

I have here a few samples of refined oil and crude oil, which I will set out in order that you can see how they differ in their appearance. But, unfortunately, that does not disclose the major characteristics of the oils, which are revealed to us only through the laws of chemistry. In order to determine the competition or absence of competition between coconut oil and animal and vegetable fats and oils, it will be necessary to classify the groups through which these various fats and oils move into the fields of consumption. I shall arrange this classification not in the order of importance of coconut oil to each group, but rather in the order of the fields from which the greatest amount of misinformation has been furnished by Philippine independence propagandists.

The principal outlets to consumption in which all fats and oils are used in the United States are in the following major groups of consumable products:

(1) Table fats-butter and margarine; (2) cooking fats and oils, shortening-hog lard, vegetable lard, cooking oils, and salad oils; (3) confectionery and fancy biscuits; (4) soap-toilet and laundry; and (5) drying oils-paint, varnish, and linoleum.

It is quite generally understood by everyone that a basic motive for granting Philippine independence is to make the present tariff of 2 cents a pound on coconut oil effective on the oils imported from the Philippines, the major part of such agitation actually coming from the dairy interests of the country. They apparently have been misled by many of their representatives and spokesmen to believe that if the cost of Philippine coconut oil were inflated, to the extent of the present tariff upon foreign coconut oil, the alleged competition between butter and margarine would be so minimized that the dairy farmers would procure much higher prices and greatly increased consumption for their butter.

In the first place, the coconut-oil supply of the margarine manufacturers can not be shut off by the application of our present tariff on Philippine coconut oil, for the simple reason that copra enters the country duty free from all countries, and the coconut oil for edible requirements would thus be imported in the form of dutyfree copra.

It was stated here by some of the witnesses appearing for the agricultural interests that their object was to equalize the prices of margarine and butter. Now, speaking to that point, I want to present the facts which will show the relative insignificance of placing a duty on coconut oil when it comes to equalizing the price of margarine and butter. In the first place, margarine is not a factor in controlling the price of butter. We have made a study and prepared a chart which shows the variation of the price of domestic butter with respect to the world price of butter, and it has absolutely no relationship with the consumption of margarine. In the year 1927 the New York price of 92 score butter exceeded the world market price by more than 11 cents a pound, yet the per capita consumption of margarine varied only three-tenths per pound per capita as compared to the year 1925, when the domestic price of 92 score butter was six-tenths of a cent per pound under the world price level.

The solid upper line on the chart shows the variation of the domestic price of butter, with respect to the world price of butter, at Copenhagen. The lower dotted line shows the per capita consumption of margarine in the United States.

You will see that, regardless of the variations in the domestic price of butter, as compared to the world level of price, the consumption of margarine in the United States proceeded along in a straight line and has only varied slightly with general business in our periods of inflation and depression.

I would like permission to introduce this chart into the record. The CHAIRMAN. If there is no objection on the part of the committee, it will be introduced.

(The chart referred to, marked "No. 1A," is shown on following page.)

Mr. CRAIG. Now, assuming that the cost of the margarine manufacturers' supply of coconut oil could be inflated to the extent of the 2-cent tariff, it can easily be seen that no margarine, either the vegetable or animal variety, is a factor in determining the price of butter.

The controlling factors which set the price of domestic butter are, first, the price of foreign butter plus the duty, and, second, the rate of domestic butter production. If the production of domestic butter is below domestic requirements, the price of butter tends to advance to the cost of foreign butter delivered to New York, plus the duty of 14 cents per pound. If the production of domestic butter exceeds the domestic demand, then the competition between domestic butter producers and their efforts to dispose of their surplus production result in the price of butter declining below the duty-paid New York price of foreign butter, as is the case now.

We are not using anywhere near the full tariff protection granted us of 14 cents a pound. In fact, on the basis of the prices prevailing recently, we are utilizing only 10 or 11 cents of this 14-cent protection on butter. The average price spread between butter and margarine for the past 10 years has been 21.9 cents a pound. In other words, the price of butter has averaged 21.9 cents a pound above the price of oleomargarine. The minimum spread has not been less than 15 cents.

Now, if we apply this 2-cent tariff on the price of coconut oil, you will change the price of margarine to the extent of only 1.16 cents. The average pound of margarine contains 0.53 pound of coco

Lack of relationship between per capita consumption of oleomargarine in United States and price of butter in United
States as compared to world-price level
CENTS PER LB.

POUNDS PER CAPITA.

2 2 2 5 2 2 2 2 pound, by the effect of this coconut-oil tariff which would amount

to 1.16 cents on the pound of margarine manufactured therefrom. You can see that the tariff on coconut oil would not in any way affect the competition between butter and margarine.

nut oil. That makes the duty of 2 cents on the oil increase the cost of the margarine by only 1.06 cents a pound, and allowing 10 per cent profit on this additional cost, the difference would be 1.16 cents.

Now, it seems absurd to believe that you can reduce this average price difference between butter and oleomargarine of 21.9 cents per

It was stated here that the object is to equalize the price of butter and margarine. Well, this shows conclusively that it can not be done through a tariff on coconut oil.

I would like permission to insert this chart and the one showing the price difference between butter and oleomargarine for the past 10 years, which will show that the facts shown on chart No. 1 hold good over a period of many years.

The CHAIRMAN. If there is no objection, it will be inserted in the record.

(The charts referred to, marked "Charts Nos. 1 and 2," are as follows:)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 3940

Prices of butter and oleomargarine for the 10-year period from

BUTTER

1921 to 1930

OLEOMARGARINE

AVERAGE PRICE DIFFERENCE OVER

TEN YEAR PERIOD 21.9c. PER LB.

1921 1922 1923 1924 1925 1926 1927 1928 1929 1930

Mr. CRAIG. Now, that you see that the tariff can not put oleomargarine on a competing basis with butter from the standpoint of price, assume that coconut oil can be completely removed from the picture. What will be the situation then? According to the report of the Secretary of the Treasury, in the fiscal year ending June, 1931, the consumption of coconut oil in margarine in the United States amounted to 156,000,000 pounds, not 600,000,000 or 700,000,000 pounds, as one would be led to believe from the erroneous statements made by some of the agitators for Philippine independence. The total imports of coconut oil as such and in the form of copra expressed in terms of oil in this period amounted to 677,000,000 pounds, of which the Philippines supplied 77 per cent.

On that point, we take usually between 75 per cent and 80 per cent of the Philippine Islands production of coconut oil and copra, but it is also necessary for us to import approximately 50 per cent of our copra requirements from other copra-producing countries. The manufacturers of margarine, therefore, in this period, used only about 23 per cent of the total imports of coconut oil instead of 100 per cent, as stated by the would-be benefactors of the American dairy

men.

If the manufacturers decided to cease making coconut oil margarine, which is very unlikely, no matter how high the duty on coconut oil, they would need only to find other ingredients to replace this 156,000,000 pounds of coconut oil, and not the total imports, as they have no interest in the balance of the coconut oil importations.

Coconut oil, when used in the manufacture of margarine, only serves to make it possible for the consumer of margarine to select for his table a product which is made from 100 per cent vegetable fats and oils as the fat or oil base. If any move were made, which resulted in a substantial increase in the price of coconut oil, it would merely mean that the consumer might have to pay more for this kind of margarine, or, if he were unwilling to do so, he would purchase other types of oleomargarine which are composed of mixtures of animal and vegetable products, or entirely of animal oils and fats.

Since in the 1930-31 fiscal year, the United States manufacturers of margaine used 156,000,000 pounds of coconut oil, it is of interest to see the other raw materials available over and above what actually were used and which would have been used, had coconut oil been unobtainable.

Suppose consumers forgot their taste for coconut oil margarine, which they will not, duty or no duty, the manufacturers would merely have to increase their use of these other raw materials. For this purpose they have available, according to the census figures of 1929, exclusive of 4,200,000,000 pounds of hog lard and butter, the following domestic products: Cottonseed oil, 1,584,000,000 pounds; peanut oil, 16,000,000 pounds; corn oil, 133,000,000 pounds; neutral lard, 43,000,000 pounds; edible tallow, 43,000,000 pounds; oleo stearine, 59,000,000 pounds; and oleo oil, 122,000,000 pounds, which makes a grand total of 2,000,000,000 pounds of domestic fats and oils available if needed for oleomargarine manufacture.

These fats and oils are all prime first-class margarine ingredients, none of them subject to duty, none of them going into products which sell at as high a price as margarine; hence, the margarine