COTTON EXPORTS

Mr. MICHEL. Mr. Chairman, I don't know if you put the question earlier, while I stepped out of the room for a few minutes, as to how the Secretary would account, for example, for the decline of cotton sales to Japan and Hong Kong, where we were told this condition did exist, in this past year.

Is there an answer for it?

Secretary FREEMAN. I think the chairman gave the answer, that we did get in a position where we were not competitive. That position has been corrected through the bid system, which the chairman and others of this committee had urged and sponsored.

We are competitive now. Our cotton exports will go up sharply this year and we intend to remain competitive. Cotton is a peculiar commodity. For one thing, it has a cycle all of its own which no one quite understands.

I think the chairman will agree that there are a lot of imponderables in connection with it that are extremely difficult to pin down.

The substitution business is a big enigma. The argument is made and it can be backed up with some figures, that substitution of synthetic fibers is taking place rapidly where they have access to cotton at these low prices in these countries. Whether it will be so in the case of this country, I don't know. The textile industry says it is not true in this country, and makes a very persuasive case.

In this instance, it is my judgment that we ought to find out. So long as we do have significant stocks on hand, we can find out with an actual dollar savings. That is the program presently under consideration, and I would hope it will be given a trial. If that does not prove to be the case, then we have to face the problem of the substitution of synthetic fibers on a long-term basis and how cheap you would have to make cotton and just what the situation is. But it is a part of the technological adjustment which is taking place in a lot of other areas of our economy as well.

Mr. MICHEL. I might say, by way of observation here, that when Mr. Addabbo and I were privileged to sit in on the Far East Conference in Tokyo, and to hear firsthand the reports of our attachés in these countries, for example, where our cotton export to Hong Kong declined, it was practically picked up by volume from Pakistan, a country which has been the recipient of foreign aid, which again, underscores the point made by the chairman here in the discussion on livestock. It really is a real serious problem and one which the Department of Agriculture, it seems to me, ought to be making more of a case with the State Department. At least let our position be better known so we don't get ourselves in this kind of a bind time after time.

Secretary FREEMAN. We are seeking to do exactly that. And those items that are in significant oversupply in this country, we certainly are trying to do other than to stimulate their increased production in other countries.

Cotton again is a peculiar one, because regardless of what we did or do not do, it happens to be a commodity which has a market, worldwide, and for countries seeking dollars, as a part of the development of their economy, we are not controlling in that situation. We cer

tainly, as a matter of policy, try not to stimulate production of those items, but we certainly have no power or way to prevent their doing so and in many instances, they do.

The best deterrent really is for us to be in a competitive position, worldwide, and to maintain our proportionate share of the world market. This we are doing with every resource at our command.

POLICY ON IMPORTS OF FARM PRODUCTS

Mr. MICHEL. Just one final question, Mr. Chairman, before you move on to another commodity.

Mr. Secretary, is our Department of Agriculture making our position very clear in the current meeting of GATT in Geneva, particularly with respect to the problem of meat imports in our own country, and are we thinking in terms of—well, establishing set quotas, for example?

Secretary FREEMAN. We have now, with the main supplying countries, where the big volume has been forthcoming, mainly New Zealand and Australia, stopped it for a 2-year period. And we go on from there now negotiating in the GATT group, seeking to bring some kind of sense out of this on an international basis.

Mr. MICHEL. I want to say for the record that our attaché from Australia, who was at the conference in Tokyo, gave a very descriptive, penetrating discussion of the situation that does exist down there, and I might say here he is a man of real high character, who impressed us very much.

Mr. HORAN. What was his name?
Secretary FREEMAN. Rodman.

Mr. MICHEL. Bill Rodman.

Secretary FREEMAN. He is a very able fellow.

Mr. MICHEL. A very fine and outstanding man and one we can be proud of.

Secretary FREEMAN. I called him in here subsequent to this so we could have the benefit of his background in these on-the-spot negotiations.

Mr. ADDABBO. He has some very good observations.

ATTACK ON FARM PROGRAMS

Mr. HORAN. The chairman began these hearings this afternoon by reminding you of the thing which the Supreme Court decision put into focus yesterday, that the rural representation in the Congress will be affected by that decision and will be reduced.

I was attracted by an article in Nation's Business, a magazine published by the Chamber of Commerce of the United States. It has a challenging headline and I read it and I suggest that you read it, if you haven't already done so.

The headline of it is "Crisis Forces Showdown on Farm Subsidies." Of course, the chairman's observations at the beginning of this hearing this afternoon would indicate, I think, to those of us who are aware of what the farmer has been through in the last 3 or 4 decades, we might or might not come out with justice on his side.

And the subheading says, "Farmers, Like Businessmen and Consumers, Are Now Finding Supports Raised Prices, but Curbed Sales."

Part of this article, which treats three or four price-supported commodities, it says, consider cotton. And then it points out the fact that historically we have been a very important cotton producer, so much so, that England, with her looms a hundred years ago, saw fit to maintain her contacts with the Confederates during the War Between the States.

Mr. WHITTEN. I thought that was because they recognized the soundness of our position.

Mr. HORAN. And he points out the fact that about 30 years ago, when we started taking over acreage controls under price supports, that we dominated the world fiber market. At that time, we were producing about 13 million bales and the rest of the world was producing about 11 billion bales. And today, we have reduced our acreage through the law around 10 million productive acres, from about 25 to 27 million acres of cotton domestically, to around 16 million acres, I believe it is, today.

Secretary FREEMAN. Yes.

COTTON PROGRAM

Mr. HORAN. A reduction of about 10 million acres, and that today we are producing about 16 million bales, but that cotton production in the meantime, outside of the United States, has climbed to a production of 34 million bales in 1963.

And world output of manmade fibers has surged from the equivalent of 1.2 million bales of cotton to more than 23 million bales during the same period.

He goes on to quote the gentleman who served in the Department, and I think with great credit, Dr. Don Paarlberg, during the Benson regime down there, quotes him from his position at Purdue University and quotes him as saying "During the past 25 years, worldwide per capita consumption of all fibers increased from 7.5 pounds to about 11 pounds and world population increased by nearly a billion people." This was an enormous growing market, much of it ours if we had gone after it. But we did not.

American cotton conceded to its rivals-foreign cotton and synthetic fiber-virtually the entire growth in the world fiber market. So complex has the cotton situation become that the Government doesn't stop at subsidizing the cotton farmer through price proposals, and basic 3212 cents a pound, it also subsidizes exports of cotton and additionally a half cent a pound, and we have a measure that has already passed the House which would subsidize textile mills an additional 812 cents a pound.

Is that right?

Secretary FREEMAN. That is right.

Mr. HORAN. Does that make sense?

Secretary FREEMAN. What part of it do you refer to, Congressman? That was a very long statement.

Mr. HORAN. Triple subsidy.

Secretary FREEMAN. Let's put it this way: The judgment that I have to bring to any piece of legislation is, is it workable and is it passable? And on that basis I would say that the program in question makes sense because there isn't anything else that is both passable and workable. I would not agree with a good part of that article because

I think we wouldn't be producing as much cotton or selling as much as we are right now, because there aren't very many American producers that feel that they can or would produce at world prices. And it would mean a tremendous sociological and economic shock to this country if we suddenly had cotton at world prices with no kind of support program. I think it would be catastrophic.

Mr. HORAN. He quotes Dr. M. K. Horne, chief economist of the National Cotton Council, who represents growers and processors. And Dr. Horan says:

There is simply no future for American cotton unless our domestic market price is moved down to a competitive level on some basis which gives our textile industry and the whole world real confidence that it will stay competitive in the years ahead.

Secretary FREEMAN. I think the record ought to show positively at that point Dr. Horne testified in favor of the Cooley bill before the Housing Agriculture Committee.

Mr. HORAN. I suspect he did.

Mr. WHITTEN. Dr. Horne and I went to school together and he Horne firmly believes the statements that you read. While there is a basis for a feeling that price is quite a factor, I never have felt that was the sole factor to the degree that Dr. Horne does. I have the highest regard for Dr. Horne and his ability.

Mr. HORAN. Dr. Horne in effect said:

Cottongrowers in the Mississippi River Delta area and the southwestern Cotton Belt, ranging from Texas to California, insist they could more than compete in price with foreign cotton on the world market if they could plant as much land as they wanted.

Mr. WHITTEN. That is Dr. Horne speaking?

Mr. HORAN. Dr. Horne agrees.

Mr. WHITTEN. Dr. Horne draws a salary like I do. He doesn't farm and I don't farm, and for that reason it is easy to believe the other fellow can do lots of things.

Mr. HORAN. Don't ruin his argument here. It is pretty good.

Dr. Horne agrees, assuming producers would have enough assurance of freedom from future Government restrictions to put advanced technology to full

use.

He had already in this article made the point that in many instances the production and acreage had denied them the full use of advanced technologies which we are developing in another branch of the Department of Agriculture— Agriculture Engineering-and "to put advance technology to full use. We can really outstrip the rest of the world in technology."

he says.

Instead of permitting U.S. competition in the world market, however— and I am now quoting Mr. Horne

in effect, encouraging foreign production. Reductions in U.S. acreage allotments are almost invariably matched by increase in land planted to cotton by Mexico, the United Arab Republic, and other large producers.

I would say amen to that, because I have pointed that out in speeches when our bill was on the floor in previous years.

U.S. cotton men consider the present export subsidy as better than nothing but "containing the seeds of its own destruction."

and again, in Dr. Horne's words:

Among other faults the U.S. subsidy for export sales simply puts a price umbrella over world prices.

That is not new.

Mr. WHITTEN. May I say that is absolutely incorrect. I say that for the record because whatever our price support level is, the Government has a right to sell competitively in world trade at what the price cotton will bring. It does enter into what the Government losses are. But price supports and our offering price in world trade have no connection whatever except as to how much the loss might be to the Government. You see what I am talking about.

Mr. HORAN. Definitely and I think that is a very very serious weakness because we can sell at the world market cotton that we have supported at 32.5 cents, but we can't sell at the world market to our own textile mills and that is the reason why we had the measure on the floor to consider and why we attempted to make it available to them and I don't blame the textile mills. I don't care whether they are getting rich or not. I am a user of cotton and not synthetics and I want them to prosper. I need their product.

Mr. WHITTEN. I realize that there is some need for adjustments, and I am for the cotton bill, but again, to have world markets, you have to sell competitively. The law has always recognized that formerly, it "authorized" Commodity Credit Corporation to sell cotton competitively. Now it "requires" you to keep competitive in world trade.

SUBSIDIES TO DOMESTIC MILLS

The domestic mills are paid a subsidy so that they get cotton that they buy for foreign export of the finished goods at the world price. That is not usually mentioned, but it is a fact.

One of the major problems is that, since they get cotton at the world price to the extent that they export the finished goods, paying a high price on the domestic product would not hurt them near as much if section 22 were used to keep foreign production from coming back in here to compete with them. The major problem comes because section 22 is not used to help the mills and this price differential primarily damages the producer, in that it promotes increased use of synthetics.

I want to say that at this point because these are some of the things that Dr. Horne does not stress in his article, or at least you have not read them.

Mr. HORAN. I don't think Dr. Horne wrote this article. uing]:

Foreign cotton producers

The article goes on—

[Contin

price their fiber enough under the U.S. pegged price to sell all their supplies produced with cheap labor.

Mr. WHITTEN. Again, we don't have a pegged price for world markets we do it by affirmative action, erroneously, may I say.

Mr. HORAN (continuing):

The United States is left to supply whatever worldwide needs, if any, remain. Colombia has found this U.S. practice so lucrative that it has built up its own cotton industry into a net exporter instead of buying American cotton. Iron