STATEMENT OF MARTIN A. FROMER, COUNSEL, CHEESE Mr. FROMER. I would like to say first I represent the Cheese Importers Association, a Nation-wide organization which has within. its membership a major portion of the importers of cheese in the United States. I believe that we are the only dairy interests represented here today opposed to section 104. I have listened very attentively, as I know you have, to the statements of the various witnesses who preceded me. The offices of the association are located at 51 Chambers Street, New York City. We strenuously oppose renewal of the import restrictions on cheese. During, and since, World War II, there have been provisions in the law which permitted the Secretary of Agriculture to ban imports of fats and oils, including butter. This was the condition until July 1, 1951, when, instead of renewing the authority of the Secretary in the Second War Powers Act, the provision was added as a rider, which became section 104 of the Defense Production Act of 1951, and "cheese and other dairy products" were added to the products subject to import control. You are all familiar with the circumstances under which this was accomplished. There was no notice of the proposed action given to the industry; no opportunity to be heard was permitted, either to the industry or to consumers; suddenly, and without any moving cause or justification, we were faced with a ban on cheese imports. Section 104 of the Defense Production Act provides that when the Secretary of Agriculture determines that certain criteria set forth in the act, exist, no imports of the listed commodity "shall be admitted to the United States." The Secretary has interpreted the section to be mandatory. In the case of cheese, he has determined that the act compels him to limit imports to the yearly average imports for the years 1948, 1949, and 1950. The years 1948 and 1949 were subnormal cheese-import years. European sources, with our help, were just getting back on their feet, and even by 1950 had not reached the level of their cheese exports of 1939, whereas, our own domestic-cheese production and consumption had increased during the same period by over 50 percent. We imported cheese in these base years as follows: The Secretary's order, made necessary under the terms and provisions of the act, has cut cheese imports to an average annual amount of about 37,253,000 pounds, or about 33 percent less than 1950 and about 40 percent less than the rate of imports for the first half of 1951. The volume of cheese imports does not injure the domestic industry. Section 104 of the Defense Production Act, among other things hereafter proven, confiscates and destroys a substantial portion of the business of American cheese importers. This is a very serious and dangerous precedent unless supported by very substantial and compelling reasons. We submit that there are no such reasons and in support of this contention cite the following: We submit herewith a group of schedules and graphs containing statistics with regard to cheese imports; United States cheese production; and cheese exports. We draw to your attention facts contained in these statistics. 1. Cheese imports prior to World War II were as high and higher than current importation of cheese. During the year 1939, the last prewar year, cheese imports amounted to 59,071,000 pounds, as compared with 56,189,000 pounds during 1950, and about 52,000,000 pounds for 1951. 2. Domestic-cheese production has increased during the same period, from 1939 to 1950, from 708,500,000 pounds to 1,171,825,000 pounds per annum. 3. Cheese exports during recent years have exceeded our imports and continued to do so during 1951 when cheese exports totaled 79 million pounds against imports of 52 million pounds. 4. The average percent of imports of cheese compared to domestic production and consumption for the years 1931-39, the last normal representative period, is 9.4 percent, and 8.7 percent, respectively, compared with a ratio in 1950 of 4.8 percent. 5. Cheese consumption has increased from 766,091,000 pounds in 1939 to 1,173,000,000 pounds in 1950. 6. Based upon domestic production of 1,171,825,000 pounds and domestic consumption of 1,173,324,000 pounds during the year 1950, the proper ratio of imports based upon the said average for the years 1931-39 would be 110,074,000 pounds. 7. Cheese imports in 1950 were only about one-half of the normal proportionate amount based upon domestic production and consumption. 8. The average of cheese imports for the years 1948-50 is 37,297,000 pounds, which is only about one-third of the normal proportionate amount of domestic cheese consumption and production, or only about 3 percent of domestic production and consumption. These were the facts on cheese imports compared with domestic production and consumption when section 104 was added as a rider to the Defense Production Act without an opportunity on the part of the industry to be heard. The continued growth of domestic cheese production, and particularly of foreign types of cheese, and the relative insignificant amount of cheese imported, became even more pronounced in 1951. The total United States cheese production in 1951 was 1,157,560,000 pounds, the fourth highest of record, and 1 percent greater than the 1945-49 average. Swiss cheese production during 1951, at 100,020,000 pounds, reached a new record high, 52 percent above the 1945-49 average. Domestic Italian type cheese production totaled 61,950,000 pounds, highest of record, except for 1946, and 12 percent more than the 1945-49 average. Contrast this growth and volume with the fact that supplies of milk for manufacturing is being steadily reduced by increased fluid-milk consumption without compensating increased milk production. The Department of Agriculture's publication Dairy Situation for JanuaryFebruary 1952, reports that supplies of dairy products per person in 1952 are the lowest in three decades and that the quantity of milk available for manufacturing (including the milk equivalent of farm separated cream) will reach another record low for 1952. The output of cheese, evaporated milk, condensed milk, and dry whole milk probably will be about the same as in 1951. With supplies of the various products no greater than in 1951 and consumer demand at least as strong, it is likely that prices will average higher than a year earlier during 1952. (NOTE. With supplies no greater than 1951, and imports reduced. an estimated 20,000,000 pounds between 1951 and 1952, the question arises how this deficiency will be filled.) It is apparent that the volume of cheese imports is not such as to cause or threaten injury to the domèstic industry. On the contrary, cheese imports have a stimulative effect upon domestic production. The domestic production of various foreign type cheeses, such as blue mold cheese, Swiss and Swiss Gruyere cheese, Italian types, Holland types, French types, and so forth, were all induced and stimulated by imports. The production in this country of such popular cheeses as blue cheese only started in 1937, and process Gruyere cheese even after that. Imports are of definite benefit therefore to domestic cheese production. The price of imported cheese does not injure the domestic industry. The price of imported cheese is higher than the price of domestically produced cheese, and many types of imported cheese are not produced in the United States, yet the import restrictions apply equally to all. Most of the cheese we import from Italy is made from sheep's milk, as is also Roquefort cheese from France. We do not make cheese from sheep's milk in the United States, and this cheese is distinctly different from any cheese we make here. A great number of specialty cheeses which we do not manufacture here are also imported from abroad. Wholesale prices of both imported and domestic cheese are reported each day in the New York Journal of Commerce. These reports prove that both at the time the legislation here involved was enacted, and at the present time, prices of imported cheese were higher than those of domestic cheese with the possible exception of blue cheese. With regard to the latter, we would like to point out that only for the brief period from December 1950 to August 1951 was the price of the imported product reported as lower than the domestic. The difference in price was on an average less than 5 percent. The conditions under which this came about were gone into in considerable detail last month in a hearing before the United States Tariff Commission under the "escape clause" provision of the Tariff Act. Total imports of blue mold cheese from all sources in 1950, including Blue cheese from Denmark, Gorgonzola from Italy, Stilton from England, amounted to only 31⁄2 million pounds, or only 6 percent of cheese imports. Import restrictions are causing shortages and inflation. Prices of foreign types of cheese have been skyrocketing and are out of proportion to other types. For example, the New York Journal of Commerce of August 24, 1951, quotes domestic Cheddar cheese, at wholesale, at 41-42 cents per pound and domestic Cheddar cheese, at wholesale, at 41-42 cents per pound and domestic Swiss cheese at 45-49 cents per pound. On May 2, 1952, the same source quotes domestic Cheddar cheese at 41-43 cents per pound and domestic Swiss cheese at 61-65 cents per pound. Note that Cheddar cheese had not gone up in price while Swiss cheese went up 16 cents per pound. Inflated prices for domestically produced foreign types of cheese have apparently stimulated production of these types at the expense of the production of American types, in a market of limited milk supply. Department of Agriculture production figures for March indicate that production of American types dropped from 65,495,000 in March 1951 to 59,070,000 pounds in March 1952-a drop of 10 percent. In the same period, domestic Italian type cheese production increased 4 percent from 6,020,000 to 6,240,000 pounds; Swiss increased 3 percent from 7,550,000 to 7,800,000 and blue mold cheese production increased 65 percent from 510,000 pounds to 840,000 pounds. Cheese, dairy, and agricultural products exports exceed imports. As noted above, our cheese exports exceed our cheese imports. This was not merely "give away," but in actual value as well as poundage. ECA financed procurement amounted to only 2 percent of cheese exports. In 1950, we exported $86 million worth of dairy products compared to imports of $34 million worth. As stated recently by Willard L. Thorp, Assistant Secretary of State for Economic Affairs, who has testified at this hearing: The United States is an exporting nation. We are organized to sell abroad. Last year, we exported the equivalent of nearly 1 out of every 2 bushels of wheat harvested, 1 out of every 3 bales of cotton picked, every fourth pound of tobacco produced, and about 1 out of every 2 pounds of prunes dried. Our movies and our manufactured goods industries have large foreign markets. In fact, most United States producers have an interest one way or another in the export market. The continuance of section 104 seriously jeopardizes our own agricultural exports. Recognizing this fact, the American Farm Bureau Federation and many other Farm and Agricultural groups have strenuously opposed this section of the act. Our agricultural exports in 1950, to the countries which have formally protested against import restrictions (Canada, France, Italy, Netherlands, Switzerland, Denmark and New Zealand), amounts to in excess of $818,000,000, compared with agricultural imports from those countries of only $346,000,000. Cheese imports have not resulted in any price support program for cheese: There have been no purchases of cheese for support purposes for over seven months, and the total amount purchased in 1951 was negligible. Less than 1 million pounds compared to 109 million pounds in 1950. The price of milk and butterfat are over parity. Alternative statutes to accomplish the necessary protection of domestic industry are in full force and effect. In addition to the duty imposed on cheese imports under the tariff act, other statutes authorize import controls under proper safeguards against arbitrary, unwarranted and unreasonable regulation, which include investigation, hearings and findings, and which are within the framework of existing international agreements. These statutes include section 22 of the Agricultural Adjustment Act and section 7 of the Trade Agreements Extension Act. By section 709, the control functions exercised under the Defense Production Act are specifically excluded from the operation of the Administrative Procedure Act. Although a hardship provision is included in the Defense Food Order promulgated under the act, there is no provision for judicial review of any arbitrary or discriminatory 97026-52-pt. 2- -6 determination. Stenographic minutes are not even taken upon any appeal based on hardship and no review could be had even if such minutes were taken. Contrast this with the democratic procedure established under the provisions of the other statutes authorizing import controls. Domestic producers have been fancying and predicting all sorts of dire results if cheese import controls are not continued in section. 104, including the support of world cheese prices. None of these things have ever occurred before, and no such conditions existed or were threatening when section 104 was put in as a rider to the Defense Production Act; nor are they threatening now. Congress is not going out of business. It is still here and will be here to protect the interest of this country even after the Defense Production Act is acted upon, if and when such conditions arise which require legislation in addition to that already existing. Section 104 is harmful to our political, military, and economic well-being. The United States has actively encouraged friendly nations to again produce the cheese for this market with which they had previously supplied us so that we could help them become strong economically and physically, for our own good. We sent our representatives to Denmark, the Netherlands, and other countries, and urged them to produce cheese for this market so that they could earn dollars to build defenses instead of our having to give dollars to them. Now, after they have produced the cheese, we say, "No; you cannot ship any more cheese into this country than 33 percent less than you shipped last year, even though what you are shipping is less than what we imported in 1939." Such action can only serve to let the world know that this Nation is irresponsible, and, therefore, cannot be relied upon. Such action plays right into the hands of the Commu-nists, who now in effect are telling these nations: "See-the United States does not want you to sell to the east, and now it will not let you sell to the west, either." The gap between United States exports and imports is increasing all the time. The gap is currently at the rate of $5 billion per year. The more the United States urges its allies, who incidentally are our principal sources for imported cheese, to rearm, the more dollars they will need, and the only way for them to get dollars is to earn them or get them for free out of the United States Treasury. The latter is no way to build a strong economy. Section 104 violates the Trade Agreements Act to which the United States is a partner, the basic concept of the Marshall plan into which we have poured billions of dollars, and the objectives of the Mutual Security Act. The President of the United States is opposed to section 104 as harmful to our political and economic strength. The Secretary of Agriculture is opposed to section 104 as harmful to our agricultural interests. The Secretary of State is opposed to section 104 and has stated: Section 104 requires the United States to take action contrary to the basic provisions of agreements under the Trade Agreements Act to which the United States is a party, and to take action contrary to the objectives of the Mutual Security Act. Apart from the immediate effects of the particular measure, inconsistencies of this sort tend to undermine the basis on which our position of leader |