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We are pointing out that if that is the intention, then it is quite certain that in the absence of 104, or some alternative action that would result in similar regulations, that almost certainly milk production in the United States would be reduced and probably the manufacture of other manufactured dairy products would be reduced.

One further thought: Over a period of time, I think it is quite clear that prices to consumers, for fluid milk, would almost certainly be raised, not reduced. In other words, there are two effects, one a short-term effect, and the other a longer-term effect.

In addition to that, in the event of an emergency, as was the case during the last year, it is practically certain there would be no imports. During the last war, you may remember that we exported, in the case of cheese, if I remember the figure, up to in the neighborhood of 400 million pounds, or almost 50 percent of the total cheese production in the United States. We were exporters in that case.

A somewhat similar situation was the case with reference to nonfat dry milk solids and evaporated milk.

Mr. DOLLINGER. When was cheese added to this prohibition of import? At what particular time? If my memory serves me correctly, at one particular time that had been excluded.

Mr. GAUMNITZ. Section 104 was passed a year ago.
Mr. DOLLINGER. Prior to that, did Public Law 590 control it?
Mr. GAUMNITZ. Yes, sir.
Mr. DOLLINGER. Cheese was excluded from that, was it not?

Mr. Gaumnitz. No action was taken with reference to cheese under that act. There was no prohibition. As I remember the action taken with reference to one of the other dairy products, specifically butter, it was taken in part upon the condition

Mr. DOLLINGER. You see, I am trying to find out when it was decided that it was necessary to prohibit the importation of cheese into this country.

Mr. GAUMNITZ. There is no prohibition on the importation of cheese.

Mr. DOLLINGER. In effect it does that?
Mr. GAUMNITZ. No, sir.

Mr. DOLLINGER. Because the prices are out of reach of the consuming public; is that correct?

Mr. GAUMNITZ. No, sir, quotas are established at the present time for the importation of cheese which are based on the average importation during the years 1948, 1949, and 1950. In the case of other products, there may be a hundred percent quota. In other cases, the quota may be zero.

Mr. DOLLINGER. That is all.
The CHAIRMAN. Dr. Talle.

Mr. Talle. I notice, Mr. Fifer, according to my information, butter production has been decreasing, is that correct?

Mr. FIFER. It has been, yes. In the last 3 years, particularly. Last year it was about 12 percent below 1950, and this year production is down under last year to some extent.

Mr. Talle. How does it rank with the production of other manufactured dairy products?

Mr. FIFER. But even at that butter still serves the purpose of the balance wheel because butter even at the present time utilizes about

20 to 22 or 23 percent of the total milk supply, or about the total of all the other manufactured dairy products put together.

Fluid milk takes about half, and butter almost a quarter, and the other products about the same. So that means that butter produced, particularly in the months of May, June, and July, takes up the surplus at the greatest production period of the year. So even though production is down, its function as a balance wheel is still quite important and we should not in any way at all discourage the production of butter or the production of cream throughout the country.

Mr. TALLE. It furnishes flexibility in the industry, does it not?

Mr. FIFER. That is right. And at the present time, our industry is encouraging the so-called green pastures program, setting up ways by which the farmer can increase his efficiency on the farm, and increase his butterfat dollars per acre, and make more money from grassland farming and have more cows.

Mr. Hull. With the boys going into the Army, who is going to milk the cows?

Mr. FIFER. That is a problem, and, of course, in our case, most of the milk that goes for butter comes from the family-sized farm. They have more problems on commercial farms than on the butter farms. It is a problem, though, just the same. It is hard work, and it is a problem.

Mr. HULL. Excuse me, Dr. Talle.
Mr. TALLE. That is quite all right, Mr. Hull.
On page 2 of your statement, Mr. Fifer, I quote this sentence:

The 50 percent cut in the duty of 14 cents down to 7 cents per pound for the first 60 million pounds of foreign butter admitted per yearand then you follow with another thing, but I want to refer to this first point.

Now that cut, from 14 cents to 7 cents, that was made under the authority the President has is called the flexible tariff law, is it not?

Mr. FIFER. The Reciprocal Trade Agreements Act.

Mr. TALLE. Well, the President does have power under the flexible tariff regulations to reduce it by 50 percent?

Mr. GAUMNITZ. If I may interrupt, I believe this was made under the Trade Agreements Act of 1934, which was since extended several times, rather than under the flexible provision of the Tariff Act of 1930.

Mr. Talle. Yes. Now, I want to ask another question with reference to foreign nations, on the matter of butter. It revives the old oleo fight. What has oleo done to butter, if anything?

Mr. FIFER. Well, it has, of course, served as a substitute to many people. It is not a substitute, actually, it is merely an imitation, but people are buying it and using it for a spread on their tables. It is being used commercially in a lot of places, too, as a substitute for butter, in public eating places.

We estimated last week-a figure which is very easy to prove that there are 70 million meals eaten in public eating places in America every day and the food and drug history of enforcement on oleo shows there is about an 18 percent violation. That is on 30,000 restaurants checked. If you apply that to the 70 million meals served daily, you come up with a figure of $33 million a year that

the American public is paying for butter, and not getting it. That is quite a figure.

Mr. TALLE. Eighteen percent violation?

Mr. FIFER. Yes, that is a Nation-wide history, for the last 18 months, based on 30,000 inspections made.

Mr. TALLE. I should think it would be a rather difficult thing to check, so that the 18 percent is probably a low figure.

Mr. FIFER. It might be a low figure. It brings out the point we have made for all these years, that it never can be enforced as long as the oleo is permitted to be colored yellow in semblance and imitation of butter

Mr. Talle. On that same subject, Mr. Fifer, I notice that you make this statement: "They import oleomargarine and export butter."

Does that relate to Denmark?

Mr. FIFER. Yes, that actually existed, that they had a ration on butter up until late in 1950, and allowed free all the oleo that their people could use, and Denmark, as I understand it, is one of the largest importing countries per capita of oleomargarine of any foreign country, that import from this country and that is what gives them the opportunity to threaten the world with their butter production, because the people do not consume butter at home where it should be consumed. They consume oleomargarine.

Mr. Talle. Historically, Denmark has shipped its butter and bacon to England, is that not right?

Mr. FIFER. I think that is still their largest market on butter and bacon.

Mr. TALLE. It certainly is for bacon, at least.
Mr. FIFER. That is true.

Mr. Talle. Because they make their bacon to suit the English taste.

Mr. FIFER. That is right. And their bacon comes from skimmed milk, I might add. When they make butter they feed their skim and produce bacon. That is one of their methods of producing pork, and they like that idea.

Mr. TALLE. I would like to turn to your second point, Mr. Fifer, on page 2 of your statement:

The progressive devaluation of sterling bloc currency by 42 percent in terms of the United States dollar.

Mr. FIFER. Yes; we proceed to show the results of that in the following two paragraphs where we point out there that the devaluation took place from $4.86 down to $2.80, an amount of 42 percent. And had the currency remained at the old basis of $4.86 or almost $5, butter would today, on that basis of currency, with the 24-cent duty, be actually higher than our present market in this country.

Mr. TALLE. Well now, if there were free trade the world over, then each country would devote itself to that enterprise of those enterprises in which it had the best advantage or least disadvantage. And if, let us say, England had advantages in everything, we would not cut off our production but we would produce those things in which our disadvantages were the least; would we not?

Mr. FIFER. That is right.

Mr. TALLE. We must look at the world as it is-we must face reality, and we do not want to rely on Russia for gunpowder, for instance, we want to make it here for our own security.

Mr. FIFER. That is right.

Mr. TALLE. And for that reason and other reasons, we protect certain industries. We do it in order to preserve our own lives. We must do the things that conditions in the world we live in require us to do for our survival.

Mr. FIFER. That is right.

Mr. TALLE. Now, what do some other pations do in order to protect their interests? Let us mention some of them.

The CHAIRMAN. Doctor, if that is argument for high protective tariffs, silence does not mean consent on my part.

Mr. Talle. No, I am not making a high protective argument.

Mr. FIFER. Every country has some type of import controls. They require import licenses. Mr. Gaumnitz might go into more detail on that. I am sure all of them have controls of their own to restrict imports into their own countries.

Mr. TALLE. That is right, there are tariffs, and quota arrangements, pricing arrangements, barter arrangements, various kinds of licensing, and then we have, of course, the one that is used a great deal now, the depreciation of the currency. In that way foreign nations get around trade agreements; they move their currency downward in order to increase their exports.

Mr. FIFER. In addition to having price fixing authority in their own countries.

Mr. TALLE. Yes and they have State trading, where one government buys up all exportable goods and the other government does likewise and the two governments deal with one another. So, of course, the world is far removed from free trade. In a peaceful world, where the lion and the lamb lie down together, free trade would work, no doubt, very well.

The CHAIRMAN. Well, we cannot settle that mighty argument at this particular time.

Mr. TALLE. Mr. Chairman, let me close with just one item. In reading the Senate hearings, Mr. Fifer, I discovered that you conducted a famous cow walking trip a few years ago.

Mr. FIFER. That was back in 1929 when I walked a couple of dairy cows from Vermont to St. Louis, and I want to recommend to anyone •who wants to see the countryside, if you walk along the road leading a couple of cows, you will see the whole countryside. A 1,300-mile trip in about 4 weeks' time.

The CHAIRMAN. Has the Commodity Credit Corporation purchased any dairy products under the price-support program?

Mr. FIFER. In the present year they have purchased, to my knowledge, only dry nonfat milk solids.

The CHAIRMAN. The embargo on dairy products is placed there, as I understand it, by the Defense Production Act of last year. What comparable legislation was there on the statute books before that? There was no embargo before the enactment of that section in the Defense Production Act, was there?

· Mr. FIFER. There is no embargo in the present act. It is merely discretionary control based on some factors.

The CHAIRMAN. Well, it amounts to that. Was there any comparable legislation on the statute books before the enactment of that?

Mr. FIFER. Before that they had Public Law 590, and that was in the Second War Powers Act. That expired last June 30, 1951, and

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was taken over by section 104 in this act. That control only worked in the disposition, acquisition and distribution of products that were in world short supply, or required allocations, such as oils, fats, and so forth, which is not true today.

The second provision protected stocks held by the Commodity Credit Corporation, and since they today hold no butter and no cheese, that act would not be applicable today. Public Law 590 would not have any effect whatever. That is my opinion.

Mr. GAUMNITZ. I think I would agree with that. The other two statutes commonly mentioned are section 22 of the Agricultural Adjustment Act and section 7 of the Trade Agreements Act.

The CHAIRMAN. Well, there was no legislation comparable to that legislation on the statute books.

What effect did foreign competition have upon your industry before the enactment of section 104?

Mr. FIFER. It so happened that during the period of the Second War Powers Act, the Government did hold stocks of butter during that time. There was a shortage of oils, so there was allocation. So it worked the same way as section 104 has worked. There were no licenses given for importing butter during that period to my knowledge, except in limited quantities.

So from the period of World War II to the present time butter imports have been at a very low level, almost nonexistent and before that the tariff duty and the rate of valuation of currency acted as your barrier. So that gives us the whole picture.

The CHAIRMAN. How much dairy products did the Commodity Credit Corporation have to purchase in order to maintain the support price before the enactment of this act?

Mr. FiFER. 207 million pounds, as I recall, of butter, in the years 1950 and 1951.

The CHAIRMAN. What did that maintain, 90 percent of parity?

Mr. FIFER. This year it is 90 percent of parity. In 1951 it was about 79 percent of parity, or 80 percent. The law requires between 75 and 90 percent of parity. Last year it was 79 percent and this year it is 90 percent of parity.

The CHAIRMAN. Well, the dairy herds have been reduced right along, have they not?

Mr. FIFER. Yes, sir.
The CHAIRMAN. And they are still being reduced?
Mr. FIFER. The trend is not encouraging,

The CHAIRMAN. Is that because the beef industry is more alluring to those who own dairy herds than the dairying industry.

Mr. FIFER. It has been the fact that the beef returns are higher, and there is less labor required. The parity for beef is considerably over the parity for milk and butter and other dairy products.

In fact, it is about 40 percent higher than the average on dairy products.

The CHAIRMAN. And he who is in dairying industry can probably make more money out of his cattle by slaughtering them than by using them for the purposes of the dairying industry, is that true?

Mr. FIFER. That is right.

The CHAIRMAN. What effect has oleomargarine had upon the price of butter?

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