tries as shoe manufacturing: Tariff Commission advice based upon mandatory public hearings, the designation of an agency or interagency committee to hold further public hearings, and the authority vested in the President to increase any duty or impose any other import restriction he determines to be necessary to prevent or remedy serious injury to an industry. In regard to the last provision, the shoe industry has requested the institution of an orderly marketing arrangement similar to the quota system approved for cotton textiles. I trust that the Finance Committee will consider the particular situation of these and similar labor intensive industries as it studies and amends the provisions of H.R. 11970. Sincerely, LEVERETT SALTON STALL, U.S. Senator. Hon. HARRY F. BYRD, STRASSER, SPIEGELBERG, KAMPELMAN & MCLAUGHLIN, Chairman, Senate Finance Committee, DEAR MR. CHAIRMAN: This letter is written on behalf of our client, the Tapioca Importers Association, in connection with your committee's consideration of the Trade Expansion Act of 1962 (H.R. 11970) as a statement to the committee, in lieu of oral testimony, and we hope that it will be considered by the committee and incorporated, together with the charts and tables attached hereto, in the published hearings on this legislation. The Tapioca Importers Association is in agreement with the objectives of H.R. 11970 and urges its enactment. The statement is submitted primarily because the tentative list of witnesses to be heard by the Committee on the Trade Expansion Act of 1962 includes the name of Mr. David W. Kendall, a spokesman for the Corn Starch Industry Committee. Although we are not certain as to the nature of the testimony which the corn starch industry proposes to offer before the committee, we surmise. based on past experience, that the testimony will be similar in nature to that presented to the Ways and Means Committee of the House of Representatives on March 23, 1962, by representatives of the Corn Starch Industry Committee. In view of the fact that the deadline for submission of written statements to the committee has been set on August 1, it is necessary for us to submit this statement, in response to what we expect Mr. Kendall will tell the committee in his testimony, before such testimony is actually given. We anticipate that the persons testifying on behalf of the Corn Starch Industry Committee will tell the committee that tapioca starch is being imported into the United States in very great quantity, and that these imports of tapioca Callegedly produced in tremendous quantities at very low cost in tropical countries) are making substantial inroads into the markets for domestic corn starch and potato starch and creating grave hardships for these domestic industries. These are not new issues. They are nothing more than a rehash of contentions advanced before and fully considered by the Tariff Commission in 1960, and before then at periodic intervals ever since 1883. It is our desire to bring tổ the attention of this committee certain facts which will place the contentions of the domestic producers in proper perspective. Tapioca flour has been imported into the United States free of duty since 1883. Since that time, American manufacturers of corn starch, and more recently manufacturers of potato starch, have made numerous efforts to persuade the Government that imports of tapioca are detrimental to the domestic starch industry, and therefore should be subject to discriminatory action. In 1908, 1913, 1922, and 1929, the corn starch industry attempted unsnecessfully to persuade Congress to impose a tariff on tapioca. In 1933, they attempted to induce the Secretary of Agriculture to fix a compensatory tax on the first domestic processing of tapioca. In 1935, they filed a complaint under section 3(e) of the National Recovery Act, and in addition sought to remove tapioca from the free list in relation to the Netherlands. In 1946, they laid their ense before the Committee for Reciprocity in Foreign Trade. In each of the cases, the efforts of the domestic starch producers were based on vague and unsupportable allegations that tapioca imports were in some way injurious to the domestic starch industry. But all of these efforts came to naught because the domestic producers could not demonstrate that imported tapioca was, in fact, competitive with domestic starches to any significant extent. Again, in 1960, the corn starch and potato starch producers were instrumental in bringing about a full-fledged investigation of the starch industrysquarely aimed at tapioca-by the Tariff Commission, pursuant to a resolution of the Senate Finance Committee under section 332 of the Tariff Act of 1930. The Tariff Commission conducted an extensive investigation and comprehensive hearings in the course of which the corn starch and potato starch producers made a full presentation of their case. Following the investigation and hearing, the Tariff Commission in March 1960, published a comprehensive "Report on the Starch Industry.' This report once more clearly established that tapioca imports are in no way detrimental to the domestic starch industry. It will be noted, Mr. Chairman, that since March 1960, spokesmen for the Corn Starch Industry Committee, when they have appeared before various congressional committees continuing to press their discredited contentions, have studiously avoided any reference to the Tariff Commission's report, except for a few oblique references out of context. The reason for this is obvious: the report contains all data relevant to their contentions, and simply does not support their position. We believe this committee will find the Tariff Commission's report to be a more accurate source of information than the testimony of the corn starch producers' representatives. The cornerstone of the domestic producers' case is their contention that tapioca starch is interchangeable with domestic starches in most industrial applications so that tapioca imports automatically displace domestic starches in these applications. This is clearly and demonstrably not the case. On page 36 of the Tariff Commission's report, it is pointed out that almost one-half of the total U.S. consumption of all starches goes into the manufacture of sirup and sugar, and that in this use, corn starch is virtually the only kind used. It is pointed out also that there is little or no interchangeability among the various starches for use in laundry starch, and food products. Thus, for the bulk of starch consumption in the United States, there is no conceivable competition or interchangeability between tapioca starch and domestic starches. Moreover, even in those areas of industry in which industrial consumers of starch buy corn starch, potato starch, and tapioca starch, the three starches are interchangeable to only a limited extent. For example, all three starches are used in the papermaking industry, the textile industry, and in the manufacture of adhesives and dextrines. But, as the Tariff Commission points out, there are many uses of starch in these industries in which the various starches are not interchangeable. For example, potato starch is totally unsuitale for use in corrugating box paper. To a very substantial extent, therefore, industrial consumers of starch make their decision as to whether to use tapioca starch, potato starch, or corn starch on the basis of the varying technical characteristics of each for the precise application in question, and the decision in this respect seldom turns upon considerations of price. Similarly, it is alleged that tapioca is replacing domestic starches in the paper, paper box, and textile industries. The domestic producers' concern in this respect is not supported by statistical evidence. It is true that tapioca imports have been increasing in recent years, but it is not true that the increasing imports of tapioca have been displacing or replacing domestic starches in industrial applications. Rather, tapioca starch, based upon consumer preference for its characteristics in certain applications, has been sharing in the expanding demand for all kinds of starches. I am including as part of this statement a set of charts and tables which were included in the brief which we filed with the Tariff Commission on behalf of the Tapioca Importers Association in 1960. I believe this material will enable the committee to draw its own conclusions with respect to these matters. It will be noted in figure 3 that the proportion of total domestic consumption of starches and dextrines represented by tapioca was considerably less in 1958 than it was in 1940, and has remained relatively constant since 1950, despite considerable increases in imports of tapioca. Figure 6 shows the relative proportions of tapioca and corn starch used in various industrial applications, and it is clear from this chart that tapioca has not made any particular inroads on the markets for corn starch in these industries in recent years, despite increasing imports of tapioca. Regrettably, the information presently available extends only through 1958; it is our understanding and belief, however, that were the data incorporated in these charts and tables extended through the present date, there would be no significant difference in the conclusions to be drawn from them. Although the corn starch producers contend that their plants are operating at only 75 percent of capacity, the plain fact of the matter is that their markets for corn starch are steadily expanding and not contracting, their 1961 shipments were substantially above 1960, and, despite a recent price cut, their sales and earnings are at a record high. Complaint is also made that tapioca is being imported via the St. Lawrence Seaway "into the very backyard of midwestern corn producers." The facts of the matter are, Mr. Chairman, that almost all of the tapioca that has entered through the Great Lakes has been used in only two plants. In one of these, tapioca has always been used and no other starch is at all suitable for the particular application. In the other case, tapioca was used in lieu of potato starch, which was previously used, because potato starch was unavailable. Tapioca is no longer used in this plant; corn starch is now being used. The domestic potato starch industry has problems of its own which are in no way attributable to tapioca. Historically, producers of potato starch have been able without difficulty to sell every pound of starch they have been able to produce. There is only one factor which has limited their sales, and that is the unavailability of potatoes. Indeed, in recent years, a large part of the tapioca imported through New England ports has been consigned to potato starch plants for the processing of modified products which are not competitive with potato base materials, and it has been the availability of tapioca to these plants which has permitted them to continue in operation during periods in which potatoes were not available. It is true that this problem did not exist in 1961 when there was a very large fall potato crop and the Department of Agriculture made funds available to divert large quantities of potatoes from the usual market channels to potato starch plants. It is true, also, that despite the availability of potatoes, some marginal potato starch plants were forced to remain inoperative because of inability to market their products at competitive prices. But tapioca imports had little to do with this situation. It will be noted that tapioca starch represents considerably less than 10 percent of total starch consumption in the United States, whereas corn starch amounts to over 80 percent of this consumption. Accordingly, to the extent that there is in fact direct competition among the various starches, tapioca is competitive with potato starch to only an insignificant extent as compared with corn starch. The real problem of the marginal potato starch producers is that they cannot produce starch for sale at prices competitive with the prices of corn starch products. Finally, we would like to comment on the usual contention of the domestic producers that "much larger supplies of tapioca are in the making and are certain to break upon the U.S. market in the near future." In support of this contention, they point to the fact that the dominant producing country, Thailand. is rapidly increasing her production of cassava, the plant from which tapioca is produced. While this may be true, it is also true that almost all of the cassava production of Thailand which is not used for food is now going into production of manioc meal which produces higher returns than tapioca. As a result of this, several tapioca producers in Thailand have defaulted on their obligations to American tapioca importers, and at the present time tapioca is virtually unobtainable in Thailand. The domestic producers also point to the prospect of vast imports of tapioca from Indonesia. This is sheer unsupportable speculation. As the Tariff Commission report pointed out, most of Indonesia's tapioca plants were destroyed in World War II and have not been rebuilt. Also, the shortage of food in Indonesia is so acute that almost all cassava production is virtually needed as a food staple. For these reasons, it is almost inconceivable that there will be any significant Indonesian exports of tapioca at any time in the foreseeable future. Sincerely yours, HAROLD P. GREEN, |