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The situation is similar to artificial shortages which appear under various maximum price-control experiments or under subsidized consumption schemes.
Under conditions of international grants and nonfree movement of gold the fundamentals of free trade are lacking. Arguments with reference to the prohibition of imports or the expansion of exports under such conditions as a means of promoting free trade, therefore, become meaningless.
An examination of the data as to imports for various dairy products in the United States shows that imports prior to World War II varied as between products. Imports of cheese prewar were around 54 million pounds. Imports in 1950 had reached the level of 56 million pounds and then were somewhat reduced in 1951. Imports of butter prewar ranged around 9 million pounds and imports of dry milk around 6 million pounds.
Import data for the years 1934 to 1938 and for the year 1950 are as follows:
United States imports and exports of specified dairy products, average for years
1934-38 and 1950
United States import of cheese by varieties for the years 1931-52 are shown in the attached table.
It is to be noted that during the war periods imports were very low. Since that time they have expanded materially, with the expansion in imports being particularly marked in the case of blue cheese, the Italian types, and Edam and Gouda. Imports of cheese by variety by country of origin for the year of 1937 and for the individual years of 1947 to 1950 are shown on the attached table.
In connection with imports attention is directed to the fact that a considerable number of exporting countries have devalued their currencies. Such devaluation has ranged to more than 35 percent. These currency devaluations have been particularly difficult to anticipate since the exchange rates apparently have been determined very largely by arbitrary governmental action.
Whenever exchange rates do not have a common denominator which results in exchange rates being self-adjusted, international settlements are fictitious, and international trade is likewise arbitrary. Under such conditions "demand and supply" in terms of prices become meaningless terms. The volume of goods exported from the United States, for example, under such conditions are, in no sense, the result of free trade since such quantities may well have been moved under what to all intents and purposes are "hidden subsidies."
Were exchange free and gold movement free it is not only possible but probable that United States exports would be materially reduced
and limited. Export data as well as import data, under these conditions, are fictitious.
It is of interest to note that no counter actions were taken following such arbitrary devaluations on the part of countries exporting to the United States.
A somewhat new and unique element in international trade has recently become evident and should be given weight in considering section 104. Reference is made to the arbitrary and discriminatory export pricing arrangements of certain countries exporting to the United States. As examples of such arrangements reference is made to the specific pricing mechanisms of Denmark and the Netherlands.
For example as to Denmark, in the public hearing before the United States Tariff Commission on April 14, 1952, in connection with the investigation regarding Blue Mold cheese under section 7 of the Trade Agreements Extension Act of 1951 at least one witness stated that export prices of Danish blue mold cheese are controlled by arbitrary action through a Danish Cheese Export Committee in which the Danish Government participates and through which it controls exports; that different export prices are arbitrarily established between countries; that such prices could be raised or lowered by edict; and that such export prices apparently are not related to the prices of other dairy products. As a matter of fact it was also testified that apparently a somewhat similar situation exists in Italy.
Another example as to the Netherlands: In response to an inquiry addressed to the Under Secretary of Agriculture recently, the assistand to the Under Secretary under date of April 23, 1952, made reply. Two paragraphs of that letter are as follows:
Apparently some misunderstanding has developed over his reference to the policy followed by many of the foreign countries of selling specialty cheeses strictly as luxury products at prices substantially above those for comparable types of cheese produced domestically. The particular example he had in mind was Dutch cheese, as the Netherlands Government sets minimum prices for exported dairy products, based upon production costs plus a small amount charged to make up for certain domestic subsidies. As it happens, the export prices of Dutch cheeses so far have been higher than the prices of American Gouda and Edam. If this situation should change, the Netherlands Embassy informs us, it is contemplated to raise the price of Dutch cheese so it will remain above the price of the American product.
Roquefort exporters also maintain complete control over prices to keep them substantially above the market for domestic Blue cheese.
It is certainly apparent from these illustrations that international trade is not being conducted under conditions contemplated by any concept of free trade. Very apparently pricing at arbitrarily high levels is merely one of transferring funds.
In connection with imports it should be noted that under the Trade Agreements Act import duties on practically all dairy products have been reduced materially from the levels established by the Tariff Act of 1930. In the case of most dairy products these reductions on a dollars-and-cents basis have amounted to about 50 percent. For example, the rate on whole milk has been reduced from 62 cents per gallon to 2 cents per gallon for not more than 3 million gallons in any calendar year. The rate on butter has been reduced from 14 cents per pound to 7 cents per pound up to 60 million pounds--the quantitative limitations relate to specific periods of the year. The rate on dry skim and buttermilk has been reduced from 3 cents per pound to 1% cents per pound.
Rates of tariff for the various types of cheese are shown on the -attached table. For the most part, the rates provided in the act of 1930 were 7 cents per pound but not less than 35 percent ad valorem. Currently, the rates range from 3 to 5 cents per pound and from 15 to 25 percent ad valorem.
Under the Agricultural Act of 1949, the United States Department of Agriculture is required to support the prices of milk and butterfat at between 75 and 90 percent of parity and under certain conditions prices may be supported at above the 90 percent level. Currently support prices are in effect for butter, cheese, and nonfat dry milk solids. While the method of support is through the offer to purchase butter, Cheddar cheese, and nonfat dry-milk solids through such support prices, the prices to producers for milk for all uses is supported regardless of product.
The situation is well stated in a letter from the Secretary of Agriculture to Senator Fulbright on September 17, 1951, and appearing in the hearings before the Committee on Banking and Currency on S. 2104. The Secretary's statement on this point follows:
Since all dairy products are manufactured from milk or butterfat, there is a very close relationship between the prices at which the various dairy products are purchased under the price-support program. Purchases of any one of the major dairy products tend to support the returns to farmers for milk and butterfat sold. It is, therefore, reasonable to expect that imports of cheese on an unrestricted basis would result in increased purchases of dairy products under the price-support program,
The law states that import controls are necessary for cheese and makes no distinction as between types of cheese. The different types are competitive with each other in varying degrees. In view of the recent substantial increases in imports of most types of cheese in combination with recent decreases in United States production of most types of cheese, and also in view of the probability of having to purchase supplies of Cheddar cheese under the price-support program, the Department determined that import restrictions would be applied in the same manner to all types of cheese.
With the present situation in international trade it is apparent that the unrestricted entry of dairy products into the United States, during a period when milk and butterfat prices are being supported by the United States Government, could well result in an attempt to support or underwrite world prices of dairy products.
In hearings before the Committee on Banking and Currency regarding S. 2104 several witnesses indicated, and the committee stated, that section 104 was unnecessary because alternative statutes were in effect under which necessary protection of domestic industry could be afforded. At the same time it was argued that action under section 104 was contrary to certain provisions of the General Agreement on Tariffs and Trade.
It is difficult to understand how it can be argued that action under section 104 would violate the General Agreement on Tariffs and Trade without action under any of the suggested alternative statutes having the same effect. As a matter of fact it appears that action under section 104 is within the exceptions provided in article 21 of the General Agreement on Tariffs and Trade, in view of the congressional declaration contained in section 104 stating broadly that import controls of certain products are necessary for the protection and essential security interests and economy of the United States in the existing emergency in international relations.
In conclusion, in view of the above facts and considerations, the extension or reenactment of section 104, as presently contained in the Defense Production Act of 1950, as amended, is strongly recommended. In the absence of such reenactment it is quite likely that the production of milk and of the various dairy products in the United States will be reduced.
In this connection and specifically in conjunction with the United States Tariff Commission consideration of the investigation of blue mold cheese previously mentioned, the United States Department of Agriculture filed a statement with the Tariff Commission. Under the hearing Suggested Action the following statement appears:
Under section 7, authority is provided for the withdrawal or modification of a tariff concession, its suspension in whole or in part or the establishment of import quotas to the extent and for the time necessary to prevent or remedy injury to the domestic industry. Import quotas would, in our opinion, give the most definite assurance that imports would not result in serious injury to the domestic industry. Quota limitations on imports would thus permit domestic producers to plan their production of blue mold cheese on a basis of knowing the maximum quantities which could be imported and sold in competition with their supplies. Furthermore, quota limitations would make it impossible for foreign countries to negate the effect of a tariff increase by devaluation of their dollar exchange rates.
The attention of the committee is directed to the fact that "import quotas” are recommended by the United States Department of Agriculture and, incidentally, at about the level now provided under section 104 regulations. The point is that the United States Department of Agriculture recognizes that quotas are the most logical form of relief under present circumstances and the relief recommended is similar to that now provided under section 104.
Apparently, the only point raised by the Department is whether the relief should be under section 104 or under some other statute. The Department seemingly believes proper action is possible under other statutes. We believe proper action under other statutes is possible in theory but is unlikely in fact, unless the Congress expresses its intention in clear and unmistakable form.
Mr. Chairman, I would like to submit the attached charts for the record.
The CHAIRMAN. Without objection they will be made a part of the record at this point.
(The charts above referred to are as follows:)
Milk production on farms, United States, 1930–511
Production on farms (million pounds)
(million pounds) 1930.. 100, 158 | 1941
115, 088 1931. 103, 029 1942
118, 533 1932 103, 810 1943
117, 017 1933. 104, 762 1944.
117, 023 1934. 101, 621 1945
119, 828 1935. 101, 205 1946
117, 697 1936. 102, 410 1947
116, 814 1937 101, 908 1948.
112, 671 1938. 105, 807 1949
116, 103 1939. 106, 792/1950
116, 602 1940. 109, 412 1951.
115, 591 1 Excludes milk produced by cows not on farms. Source: Compiled from reports of the U. S. Department of Agriculture, Bureau of Agricultural Economics.
Cheese: Quantities manufactured in the United States, 1931 to date
(Quantities in thousand pounds)
8,508 33, 637 7, 897 31, 608 9, 469 33, 438 9, 425 40, 458 9, 535 38, 971 11, 982 40, 448 8, 165 43, 987 9, 307 44, 056 8, 971 47, 961 8, 198 51, 183 8, 088 50, 012 8, 441 47, 554 6, 653 1 70, 451 7, 510
60, 440 8, 777 66, 912 9, 548 78, 803 7, 753 66, 503 7, 358
56, 816 7, 180 58, 495 6, 003 69, 459 6, 460 70, 310
3, 493 3, 795 4, 759 5, 517 10, 628 11. 361 13, 520 16, 461 20, 509 25, 002 34, 363 34, 916 43, 003 41, 721 64, 628 75, 388 38, 100 43, 579 55, 127 61, 845 61, 950
4,851 491, 963 4,010 483, 878 4, 076 543, 055 4, 676 579, 013 5, 890 620, 731 7, 234 641, 554 9, 171 648, 825 11,055 725, 325 11, 941 708, 527 11, 440 785, 490 18, 409 956, 161 19, 435 1, 112, 314 21, 788 993, 294 20, 659 1, 017, 206 25, 627 1, 116, 772 52, 824 1, 106, 347 24, 241 1, 182, 946 25, 719 1,098, 366 23, 860 1. 200, 011 25, 033 1, 192, 557 23, 880 1, 157, 560
6, 835 9, 828 12, 451 10, 580 9, 289 8, 141 7. 657 5, 170
1 Neufchatel cheese included for 1943 and following years. : Prior to 1943 included in "All other varieties.” 3 Included in "All other." Source: Compiled from reports of the U.S. Department of Agriculture.