No. 3, that in order to maintain sound economic structure in foreign. nations friendly to us, and to freedom, that we must permit them to export the products which they produce.

I wrote back that I agreed with all three of those generalities, and I do. It is important that we do those things. But I pointed out that in doing so we must have some realistic approach to it, and mentioned the devaluation problem which we have discussed.

There is one other thing I want to ask you, in that connection: Is it not true that these countries which you have mentioned as exporting your product, that they have certain restrictions upon imports from the United States-not necessarily dairy products, but they certainly have import restrictions, do they not, upon products from the United States? In other words, they are not free trade countries, are they?

Mr. PAUL. Well, I think that is true. Now for instance, in the case of Denmark, they have a managed economy. It is a socialistic. state. They have, through law and regulations, determined the size of the farms in their country.

They have, through the same means, kept their people on the farms, whereas in this country, we have operated on the laissez-faire principle of letting the farmer go to the city, or into any other job where he thought he could do the best for himself.

There, by their managed economy, they have kept their people on the farms, they have made it impossible to reduce the number of their farms, and through this system of management they have contributed to their own trouble by these farm surpluses.

Mr. COLE. But the point I am getting at is, that they are also looking after their individual interests in their own countries by certain embargoes or trade restrictions, in order to restrict or prevent the importation of all sorts of commodities from the United States; is that not true?

Mr. PAUL. That is right. They make churns over there and we make churns in this country, and I do not imagine that many of our churns in this country find their way to Denmark.

Mr. COLE. The point I am making is that section 104 gives a certain latitude, on the part of the Secretary of Agriculture, to make his regulations according to a realistic situation, as it arises.

We have the right, in this country, in view of all of the enlightened foreign policy, to protect our own people, just as Denmark has the right, in view of an enlightened foreign policy, to protect her people. It is a matter of adjustment between the two countries.

Mr. PAUL. That is right.

Mr. COLE. That is all we are asking for here, all this section 104 asks, that there be an enlightened bargaining and determination of respective needs.

Mr. PAUL. That is right. We have tried to point out here very clearly and conclusively that section 104 is flexible.

Mr. COLE. Yes.

Mr. PAUL. And that the Secretary of Agriculture has full discretion in implementing it.

Mr. COLE. That is all, thank you.

The CHAIRMAN. What have been our exports of dairy products? Mr. PAUL. Will you answer that, Mr. Reed?

Mr. REED. I can give you those in terms of values of all dairy products exported.

To go back to the prewar year of 1940, our total exports were 16,920,000 dollars.

Wartime exports, primarily under lend-lease, reached a peak of $261 million in 1944.

I want to reiterate that those were lend-lease shipments and in no sense of the word commercial exports.

And in 1951, our exports had declined to $116 million, of which some significant amount represented government-to-government sales on our part at reduced prices of commodities from Commodity Credit Corporation stocks.

The CHAIRMAN. There were no imports during the embargo years; particularly?

Mr. REED. With respect to butter, there have been no imports during the embargo years.

The CHAIRMAN. Well now, before the embargo was put into effect, what were the exports with reference to imports? Take a year before the embargo was put into effect.

Mr. REED. Well, during the war we had no commercial trading in butter if my memory serves me correctly.

So the figure we should probably refer to, covering exports of all dairy products, was $16,920,000, and in the same year, 1940, we imported $9,082,000, of which most would have been cheese. We imported very, very little butter.

The CHAIRMAN. You do not want to lose your foreign market under normal conditions, do you?

Mr. REED. I think it would be a fair statement to say, Mr. Chairman, that we certainly hope to keep foreign markets where the trading in the commodity approaches what we commonly think of as commercial trading, but I think we would also go along to say that we do not wish to have foreign-trade figures quoted to us as indicating a commercial trade, when in effect they are government-to-government trading programs.

In other words, this whole business of free trade cannot be placed at the present time in its proper setting.

We show in our statement that the Australian Government, and the New Zealand Government, and the Government of Denmark, sell a large portion of their supplies to the United Kingdom at prices ranging from 36.3 cents to 39.3 cents per pound. That is not commercial trade. That is government-to-government contracts.

They want to sell the same butter in this country, at around 60 cents per pound laid down in New York.

I myself find it extraordinarily difficult to understand why the price would be so variable, on the same commodity, exported to different countries, if there were anything even closely approaching freetrade conditions, from the commercial point of view.

The CHAIRMAN. Mr. Deane.

Mr. DEANE. No questions, thank you.

The CHAIRMAN. Mr. Hull.

Mr. HULL. I have no questions.

The CHAIRMAN. Mr. Dollinger.

Mr. DOLLINGER. Mr. Paul, you testified that controls reduce production. Is that correct?

Mr. PAUL. Controls reduce production?

Mr. DOLLINGER. Yes.

Mr. PAUL. Yes.

Mr. DOLLINGER. Can you explain to me, Mr. Paul, why it was that during the OPA days, milk products were at an all-time high?

Mr. PAUL. During the OPA days milk products were at an all-time high?

Mr. DOLLINGER. Yes.

Mr. PAUL. Just a moment and I will try to get the figures.
Mr. REED. I think we can give you some figures on that.

In the first place, I think it probably is true to state that that was a wartime push; there was a tremendous push to secure production at whatever cost.

In addition to that, however, the prices of dairy products were maintained at reasonably favorable relationships, in view of their costs, and in addition, very large-scale subsidies were paid directly to the farmers.

In addition to that, every effort was made to channel as much of the limited manpower as was possible to farm production.

Mr. DOLLINGER. That could be done at the present time.

Mr. REED. No, I do not think it follows at all that that would be the case, because while OPA was operating to hold down prices, there were a number of other activities undertaken by the Government to increase production, in addition, of course, to the sheer push that farmers put out to produce more during the war, that does not exist today.

Mr. DOLLINGER. The farmers still have subsidies today?

Mr. REED. No; and we do not want them.

Mr. DOLLINGER. You do not want them?

Mr. PAUL. No.

Mr. DOLLINGER. But they still have them, do they not?
Mr. PAUL. No.

Mr. DOLLINGER. Let me ask you this question, then. I do not seem to understand. You testified, Mr. Paul, that you want to continue section 104 of the act. That is correct; is it not?

Mr. PAUL. That is right.

Mr. DOLLINGER. Two days ago Mr. Allan B. Kline, president of the American Farm Bureau Federation, testified before this committee that his association urged that section 104 be eliminated. Will you please explain to me the reason for the difference between these two farm groups?

Mr. PAUL. Well, Mr. Kline is the head of a Nation-wide organization that has diversified interests, and in the main it is doing a good job. However, in doing that job I do not want him or the Department of Agriculture or the Department of State, or any importers or exporters, to begin the liquidation of the dairy industry, as the first step in what the present administration would do to establish free trade in the United States.

In other words, we do not have a free-trade climate existing in this country at the present time. There are restrictions all around us, and yet they want the dairy industry to be the guinea pig and accept free trade.

Now Mr. Kline has stated that under section 22 of the Agricultural Adjustment Act, that possibly the same end could be served.

How

ever, such a method would be so time consuming that our dairy industry could be sold down the river and destroyed before that could be brought into play.

Mr. DOLLINGER. Your members do not belong to Mr. Kline's organization, do they?

Mr. PAUL. Well, individually, a great many of them do. I happen to be a member of the Farm Bureau myself, in the State of Iowa. Mr. DOLLINGER. You see I asked that question because we are here to legislate for the best interests of the people of the United States. Where two farm organizations are at odds as to what should be done under the circumstances, I wonder how it can be expected that Members of Congress will be correct in their decision?

Mr. PAUL. As I explained, the Farm Bureau Federation has attempted to do a job for all types of farmers, and if in doing so they overlooked one important segment of the industry, I hope that will be forgiven.

Mr. DOLLINGER. I imply no criticism; I am just trying to get information.

Mr. PAUL. Well the dairy industry is not in favor of Mr. Kline's position on that.

Mr. DOLLINGER. That is all.

Mr. BROWN. Mr. Fugate.

Mr. FUGATE. Mr. Paul, you have attached to your statement an appendix, and on page 2 of the appendix you give a table in which you indicate the trends in cattle population, production, and so forth. In 1945 it appears that there were more cows 2 years and older on the farms than at any other time in the history of the country. Mr. PAUL. That is right.

Mr. FUGATE. At the same time you will notice, according to your table, that there were 6,307,000 heifers 1 and 2 years old in 1945. There has been a gradual decrease in the number of heifers along with the number of cows. Today you have 23,000,000 cows, and 5,700,000 heifers.

Mr. PAUL. Yes.

Mr. FUGATE. Is not that a further indication that in the next several years there are going to be even less cows because these heifers, being fewer in number, coming into production, are going to continue to reduce the population of cows?

Mr. PAUL. Yes. Of course you could carry that on to its logical conclusion and have a continually declining number of heifers coming into milk.

Mr. FUGATE. Yes.

Mr. PAUL. Because of the decreased number of milk cows. That is quite true.

Of course

Mr. FUGATE. Will that not have an effect on the industry of reducing production, over a period of years, and making the prospect for the future continually one of lesser production?

Mr. PAUL. That is quite true, unless the trend can be reversed by making it more profitable to produce milk.

Mr. FUGATE. That is the point I am making.

Mr. PAUL. Yes; that is correct.

Mr. FUGATE. Now during this 6- or 7-year period you have had an increase of about 15 million people in the United States.

Mr. PAUL. Yes.

Mr. FUGATE. So we are getting into the position of not being able to provide the actual needs for our people because of conditions existing in the dairy industry, primarily with respect to producing grade A milk?

Mr. PAUL. That is true.

Mr. FUGATE. The cost of setting up a grade A operation today is almost beyond any farmer, is it not?

Mr. PAUL. It is a very expensive proposition to set up a grade A milk farm.

Mr. FUGATE. Well do you not think that accounts for the fact that there are so many dispersals of dairy herds today? Cost of operation? Mr. PAUL. That is one of the things, the cost of operation. Mr. FUGATE. And maintenance of that type of thing?

Mr. PAUL. Yes, and shortage of labor, and things of that character. Mr. FUGATE. And it appears to me that the dairy industry is getting into a pretty bad way because of conditions which actually exist, and we cannot permit anything to come in here that would have a depressing effect on it.

Mr. PAUL. That is quite true and the failure to enact section 104 would have a very depressing effect upon any hope for future increase in production of milk.

Mr. FUGATE. One word with reference to Mr. Dollinger's statement with regard to Mr. Kline.

Mr. Kline was testifying on the premise that we decontrol, that we eliminate all controls.

Mr. PAUL. That was his main premise.

Mr. FUGATE. That is right.

Your position is that if controls are extended, then 104 should be a part of the extension, is that correct?

Mr. PAUL. That is right.

Mr. FUGATE. That is your view?

Mr. PAUL. Yes, sir.

Mr. FUGATE. And it is not in conflict with Mr. Kline's position, as I see it.

Mr. PAUL. Not essentially with regard to the price control provision of the law, no.

Mr. FUGATE. That is all, Mr. Chairman.

Mr. BROWN. Mr. Widnall.

Mr. WIDNALL. Just one question.

Back in 1941, Mr. Paul, I noticed that our milk production was around 115 billion pounds.

In 1951 it is again 115 billion pounds, roughly. And that is with 2 million less cows, we are obtaining exactly the same production. What about milk consumption? We have had a change in population during that period, of about 20 million people. Is consumption of fluid milk going down?

Mr. PAUL. No; consumption has not decreased any. It has increased. Better husbandry practices have increased the amount of production per cow. That is true But we have also seen this thing happening: in order to get enough grade A fluid milk for the needs of the people of this country, we have been taking it away from manufactured dairy products, such as butter, so that the figures I quoted here awhile ago, our annual per capital consumption of butter is down to 9.6 pounds per capita at the present time.