Defense Production Act Amendments of 1952

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 nations 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?

Mr. FIFER. As I pointed out it has had some effect because it has acted to replace some of the markets for butter, and there is no possible way of competing on the price basis because the oil that goes into oleo is today 9 or 10 cents a pound and the fat in butter is around 70 or 80 cents a pound, and the two products have the same fat content. There is no way of competing.

And eventually if we cannot maintain honest dealing, it might mean further disruption of butter markets, because they are taking them over in an underhanded way.

The CHAIRMAN. Well, there is hardly any limit to the production of oleomargarine, is there?

Mr. FIFER. No limit whatever. The production of butter is limited to the production of milk, because butter takes the product that is left over after the amount of fluid milk is taken off. Today it is taking around 23 percent of the total milk supply.

The CHAIRMAN. Do you believe that it is essential to have a foreign market for dairy products?

Mr. FIFER. Well, I think

The CHAIRMAN. I mean do you think it is essential to cultivate a foreign market to take our surplus in dairy products?

Mr. FIFER. It may be necessary for certain dairy products, but I think we could develop a market for all of our butter here for at least reasonable years to come, because production and consumption are down. I think a market might be developed for dry-milk products and cheeses.

Mr. GAUMNITZ. I would say, Mr. Chairman, that under normal circumstances, the volume of exports of dairy products which may logically be expected by United States producers is extremely small. It is limited almost entirely to a little evaporated milk, some nonfat dry milk and some cheese, and it is not in the European territory.

The CHAIRMAN. The cultivation of business relations, though, it seems to me, might increase that, might it not? What have been our exportations of dairy products?

Mr. FIFER. Our exportations prewar were almost negligible.

During the war, and strictly under a war condition, we exported large quantities of cheese, evaporated milk, nonfat dry-milk solids and butter.

Following the war, in the rehabilitation period, a lot of that export was continued. Likewise, under the ECA program it was continued. I expect it may be continued under the Mutual Security Program, also through the United Nations program.

Now, the facts, however, would indicate-it is pretty hard to reduce it to a dollars-and-cents figure-but it has been estimated that up to 50 percent of the export of dairy products, in effect, was purchased with United States dollars. It is not a commercial proposition. It has not been a commercial proposition, at any time-was not during the war and has not been since the war. It has been strictly a matter of a partial give-away type of program.

Now there is no indication, there is no inference that I can see that can be logically drawn, that because there were exports of a considerable magnitude under a war condition or under a give-away program, that exports might be expected to continue on a commercial basis following the cessation of the gift program.