And so, obviously, it cannot be argued that failing to pass this legislation is somehow going to make things different.

We don't have this legislation in law now, and that still occurred. The bigger point, I think, that needs to be made is that we ought to make a distinction between objectives and instruments, and I happen to have the view-and I would like any of the three panelists in closing to respond to this-my view is that in foreign aid and in outlays and programs of that kind, it is perfectly appropriate, and we probably have the moral obligation to adhere to the finest and highest standards of human rights provisions as we possibly can. And I do think that is the U.S. role in the world.

But that is foreign aid and foreign aid programs and policy.

In the area of trade, it has always struck me as somewhat odd, to say the very least, that we, in effect, say to a nation, "We don't agree with this and this, about your government or your policies or your society, so what we are going to do about that is refuse to trade with you, refuse to create business opportunities with you that will put some of our own people to work."

That is like saying, "I don't agree with you, so I am going to slash my wrists." And that always has struck me as sort of a curiosity, to say the least.

I wonder if any of the panelists would care to comment in one way or the other about that.

Mr. Phillips, would you agree?

Mr. PHILLIPS. I agree with you, Mr. Chairman.

Mr. AUCOIN. Mr. Hyde.

Mr. HYDE. Well, we "trade" with them, but we don't "aid" with them. That is the distinction.

Mr. AUCOIN. Well, therein lies a world of difference.

Mr. HYDE. And inconsistency reigns supreme.

Mr. AUCOIN. And that is the case in the world today.

Thank you, gentlemen, very much for your testimony. We appreciate it.

We are going to move forward in the hearing and ask Earl Pryor, Mr. Becherer, Joseph G. Ministeri, and Jesse Maffuid -would you gentlemen come forward?

It is my understanding that Mr. Becherer, of Deere & Co., has been detained and will not be able to join us at this moment, but we will await his arrival.

In the meantime, we will proceed as soon as the names are put in place, and if you gentlemen would come forward.

Mr. HYDE. Mr. Chairman, I am embarrassed. I have a luncheon engagement with a group of letter carriers from my district who traveled to Washington to importune me in some manner. And I really do not like to leave, because I do not like to have just one member here.

These gentlemen-we do have copies of your statements. I will try to get back before you are finished, because I do want to participate in the hearings, and this is a very important issue.

So, I hope I may have the indulgence of the witnesses, and you, because of this previous commitment.

Mr. AUCOIN. You do, indeed, Mr. Hyde. We appreciate that. The only reason we are going through the lunch hour is because of a

previous commitment of time in this room to another committee, and it is going to require us to proceed. But we look forward to your return.

Mr. Pryor, you are the first witness of the second panel, and we welcome you and look forward to your testimony.

STATEMENT OF EARL PRYOR, FIRST VICE PRESIDENT, OREGON WHEAT GROWERS LEAGUE, MEMBER, EXECUTIVE BOARD, NATIONAL ASSOCIATION OF WHEAT GROWERS

Mr. PRYOR. Thank you, Mr. Chairman, and there are no other members of your subcommittee, so I am speaking to you.

For the information of the audience, my name is Earl Pryor. I am a grains and livestock producer, residing in eastern Oregon, at Condon, Oreg. I am presently the first vice president of the Oregon Wheat Growers League and a member of the National Association of Wheat Growers executive board.

The OWGL is a producer organization dedicated to the protection and stabilization of the wheat industry in Oregon. This policy directs our primary activities to the production, utilization, and marketing aspects of our commodity.

The OWGL, through contact with the Oregon Wheat Commission, opened the first market promotion office in Tokyo, Japan, in 1956. It developed into a regional program in 1959 when Western Wheat Associates was formed. A sister organization, Great Plains Wheat, has since been formed, and jointly they promote the sales of U.S. wheat worldwide.

Oregon producers historically export approximately 80 percent of our soft white wheat, principally to Pacific Rim countries. In the first 6 months marketing year June 1977-December 1977, Pacific Northwest wheat exports have totaled 136,892,000 bushels.

This table indicates that Japan is our largest importer, of 30 percent of the total export of which 58 percent is soft white. Korea runs close second, at 28 percent, with 68 percent in the soft white category. Iran, which is an on-and-off type producer but represents a new and very significant market, has 16 percent of that total, and 100 percent of that is soft white wheat, which is grown in the Pacific Northwest. The Philippines and Taiwan and Indonesia round out the balance of the major countries.

[The table referred to may be found on the first page of Mr. Pryor's prepared statement.]

Hard Red wheats and Durum, principally bread wheats, constitute 56,549,000, or 41 percent of the total export; and 80,343,000, or 59 percent of it is in white wheats.

An interesting observation is that noodle and flat breads production are based upon white wheat flour.

In visiting with Dick Baum, the president of the Western Wheat Association, in appraising potential People's Republic of China grain requirements and comparing them with Taiwan, which began with virtually 100 percent soft white wheats and now only requires 20 percent of this variety, they are now using 35 percent in noodles, 40 percent Chinese bread and 25 percent specialty items which require Durum aud Hard Red varieties.

23-798 - 78 - 5

The average production of all wheat in the Pacific Northwest for the period 1974 through 1976 was 214.7 million bushels. Montana grain, principally Hard Red Winter and Springs, are finding an outlet through the Port of Portland, in increasing quantities, adding another 160 million bushels, creating a potential marketable supply of approximately 375 million bushels, excluding domestic use.

Pacific Northwest wheat carryover has increased over 250 percent from 1975 through 1977 marketing years, 27 million bushels to 76.2 million bushels. Export movement is currently 22 percent behind a year ago. It is readily apparent that an additional market for 30 million bushels annually would have a dramatic effect on our Pacific Northwest markets.

So, this, in part, I believe, points out why I am here today representing wheat producers.

Wheat flour trade may once again flourish with the PRC. Pillsbury Mills operated in Astoria from 1929-1961. I recently visited with George Ostram, miller for Pillsbury during this period. He stated the mill had a grind capacity of 3,000 bushels per 8-hour shift. Mr. Ostram recalled one Chinese order bagged in 49-pound cotton sacks taking 3 months of continuous milling to fill. The mill ran fron new crop September 1 until April or May, depending on business. He estimated 75 percent of the production orders went to China. A season run would produce 70.435 million pounds of flour consuming 1.625 million bushels of grain annually for the China trade during this period.

This table of Chinese wheat imports and exports has been compiled by the Foreign Agriculture Service, USDA. I think it points out significantly what has happened to our U.S. trade. You will see in 1972 and 1973, we were exporting 591 thousand metric tons. That expanded rapidly in the 1973-74 crop and again started tapering off in 1974 and

1975.

[The table referred to by Mr. Pryor may be found on page 3 of his prepared statement.]

Mr. PRYOR. There was a cessation of wheat sale from the United States at that point, which I will speak to a little later.

In summarizing that table, about 350 to 410 million bushels moved annually to the Chinese market from the major exporting countries. Looking down a little bit further, it classifies the U.S. wheat exports to China.

You will note, on the bottom line, there is a fabulous figure there, which is an error. This referred to thousands of bushels, and not tons. That should be corrected to read, 210,000 metric tons of Hard Red Winter, and 1,282,000 metric tons of Soft Red Winter.

I might add that, since November 1976, the People's Republic of China has purchased about 12 million tons of grain, of which none has originated in the United States. An unofficial estimate by FAS projects future sales to China, assuming some degree of normalization, in the area of 30 percent of their annual grain import demand, and an average demand based on the 1971 to 1978 usage would mean 1,465,000 metric tons.

Having examined the potential impact of expanded grain trade with the People's Republic of China, I should speak of the problems and possible solutions needed to expedite Sino-American grain trade.

Agricultural products-primarily wheat, cotton, soybeans, and corn-accounted for over 80 percent of U.S. exports to China from 1972 through 1974. Reductions in trade since 1974 has largely been the result of lost grain sales opportunity. The People's Republic of China canceled orders for 983,000 tons of U.S. wheat in January and February of 1975.

Producers on the west coast were informed that our grain was ininfested with "Tilletia Controversa Kuhn," commonly referred to as "TCK," a dwarf bunt smut. Our area lost approximately one-half billion in wheat sales, not counting losses incurred by supporting industries.

A joint industry and regional commission cooperative effort has sponsored a 5-year program, spending $539,185 for 11 projects designed to focus on two major aspects of the TCK problem: Control on the farm directed toward control and/or eradication of the disease; and TCK in the market. Market problems require better spore identification to eliminate confusion with other smut species, and the need to search out TCK-infested growing areas and contaminated storage facilities.

There was some question-when the Chinese indicated they could not accept Pacific Northwest imports, that they were infested with TCK-there was some question as to the positive identification. And this is one of the thrusts in this area.

A cooperative grain team visit to Peking this summer revealed that TCK is no longer grounds for rejection of cargo, but rather a discount of $3.50 to $4 per ton would be taken for "sterilization."

Another marketing problem arises in final certification of the weight, quality, and condition of grains, and the arbitration of any disputes in contract. The traditional final certification at point-ofexport is not acceptable to the People's Republic of China; and weight, specification, and quality conditions as determined by the China Commodity Inspection Bureau and the Animal and Plant Quarantine Service is final.

Any compensation of quality damage and/or short weight and/or off specification must be made by sellers to buyers based on this Chinese certification.

Arbitration does not follow traditional grain trade procedures. In case settlement of contract dispute is not reached, it is submitted for arbitration to the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade, Peking, in accordance with the provisional rules. The decision by the Commission is final and binding upon both parties.

In visiting with members of that trade team, they were very apprehensive because they had never met this sort of situation before. In fact, they cabled the USDA asking for some sort of advice on this for the team.

The financial risk inherent with these deviations from normal grain trade practices make grain export firms very reluctant to enter into PRC negotiations.

The U.S. Export-Import Bank could provide credit insurance to grain exporters to protect them against such commercial risks and political action inherent under these conditions. Another solution

might be for the USDA to receive authority to provide export risk insurance for commodity exporters entering new markets for a 3-year probationary period.

It would appear that the Humphrey-Findley bill, H.R. 10377, is a viable vehicle to accomplish similar goals within the Public Law 480 program. This bill would authorize the Commodity Credit Corporation to finance export credit sales of agricultural commodities from private stocks for up to 3 years, and export sales of agricultural commodities out of CCC and private stocks in excess of 3 years but not more than 10 years, with no cargo preference required. Additionally, nonmarket economy countries would be eligible to participate in these programs.

It came to my attention last night that, just this past Monday there has been another bill introduced in the Senate, which is S. 2405, which was presented by Senator Richard Lugar, I believe that, if you are interested in examining that bill, it would be of interest to you.

My view is that it has some very good statutes in it. I would be glad to survey that, if we have the time.

Mr. AUCOIN. That legislation you refer to is not within the jurisdiction of this committee, but in any event I do appreciate your calling it to our attention.

If you could summarize the balance of your testimony, I think we will have time for some questions and answers of all the witnesses once they make their statements, as well.

Mr. PRYOR. I would like to speak briefly to what I view as some matters that are even more important than getting grain movement going again.

I think it is absolutely necessary and mandatory that the wheat industry and government work together, and by whatever means necessary, to work off our stifling inventory that the grain industry has.

I think probably the mechanics of reestablishing grain trade are minimal in relation to the political and legal barriers.

I have some suggestions-well, not being in the category of the statesman Mr. Ball is, I was pleased to see that we are thinking somewhat along the same lines. The settlement of old debts, and the status of Taiwan are undoubtedly of major importance.

Steps that might be taken are: Resumption of negotiation on the issue of blocked Chinese assets and private U.S. claims against the PRC; establishment of a bilateral trade agreement; the extension of most-favored-nation treatment for Chinese exports, or at least a Presidential waiver, as was accorded in the case of Romania; a granting of "deferred payments" is paramount. I would like to emphasize that one particular statement.

There are barter arrangements that could be coming onstream, particularly grain in return for oil shipments.

The Oregon Wheat Growers League and NAWG support expanded trade with the PRC. We believe that trade activity will be a stabilizing factor in domestic supplies and price, and also an effective means for influencing domestic political stability in the PRC, and creating better understanding between our nations through trade activity.