Senator CLARK. You said a moment ago that the American farmers were your best customers. It is also true that your employees and officers in the industry as a whole in this country are the best customers of American agriculture. That is equally true, isn't it? Mr. BUDD. That is why I say I think we both have a common stake in this. Senator CLARK. And if by increasing the export business of the automobile industry and other industries in this country they are made more prosperous, it is necessarily reflected in agriculture and every other element in the country? Mr. BUDD. By increased buying in the home market, yes. I would also like to emphasize that under normal conditions, between 10 and 15 percent of our total production is exported, while from 85 to 90 percent is sold in the home market. The 15 percent that goes to export represents hundreds of millions of dollars and is of extreme importance to successful operations. My main purpose, however, in citing these percentages is to define the relative size of the two portions of our market and to assure this committee that we give full weight to their relative importance. It would be suicidal for us to try to increase our business in 15 percent of our market by methods which would jeopardize 85 percent of our market. Now, on yesterday we had testimony from a gentleman, Mr. Mollin, of the Cattlemen's Association, who took precisely the contrary view. He said that our foreign trade only amounted to 5 percent, and that it would be necessary to increase our foreign trade a hundred percent in order to make up for the damage done by the relatively small importation of say 5 percent. You do not agree with that theory at all, do you, from your experience? Mr. BUDD. No; I do not agree with it. Senator JOHNSON. Do they import any automobiles into this country? Mr. BUDD. Very few, if any. The quantity is negligible. Senator JOHNSON. That is the difference between your position and Mr. Mollin's position. In Mr. Mollin's industry, they import 8.9 percent of our total consumption of beef Senator CLARK (interposing). There was some dispute about those figures, Senator. That is based on the Federally inspected slaughter and not on the total slaughter in the United States. Senator JOHNSON. That is right. Senator CLARK. As Mr. Mollin admitted during his examination. Senator JOHNSON. He did not pretend anything else. His testimony did not show anything else. But in the automobile industry, we receive no importations. Now, I am glad that you make reference in your testimony here showing your gratification at your home. market, but I would like to give you this illustration. In my State of Colorado, we find that in our sugar-producing section, that for every 15 tons of sugar that we produce, our people in that section buy one automobile, we find also that for every 415 tons of sugar that Cuba sells on the American market, that Cuba buys one automobile. Now, you have 15 tons versus 415 tons. Do such statistics mean anything to you? Mr. BUDD. No; not a great deal. Senator JOHNSON. Why? Mr. BUDD. Well, I think you have got to look at it in a much broader sense than that. This country absorbs some 41⁄2 or 5 million cons of sugar a year, doesn't it? We do not produce all of that sugar. Now, it does not necessarily mean that if the State of Colorado produced 4,000,000 tons, that we would sell one car for every 15 tons in that State. Senator JOHNSON. Yes; you would. We are curtailed in the production of our sugar by the administration and by the Congress. They do not let us produce sugar; they curtail us and stop us and place an embargo on it and give our market to Cuba. Mr. BUDD. Well, I don't know Senator JOHNSON (interposing). And the automobile industry suffers. Mr. BUDD. You are getting me into a business that I don't know much about. I am not a sugar man. Senator JOHNSON. It is your business to know and sell automobiles. Mr. BUDD. That is true, but not sugar. Senator JOHNSON. But sugar has a very definite bearing upon the sale of automobiles? Mr. BUDD. What I mean is, that I do not pretend to be an expert on sugar, and I do not think I would argue that point. Senator JOHNSON. You do not believe that you are losing the sale of so many automobiles by having sugar purchased in Cuba as against in Colorado and other domestic producing sections? I do not think that you can laugh down that testimony. Mr. BUDD. I do not think you can balance one business against another in that respect. Senator CLARK. Senator, will you permit me to interrupt to ask you a question on your statistics? Senator JOHNSON. Yes. Senator CLARK. How do you arrive at those statistics? It is necessary to do that simply to take all of the figures for sugar production in Colorado and all of the figures for automobiles purchased in Colorado Senator JOHNSON (interposing). Not in all of Colorado. produce sugar in certain sections. We only Senator CLARK. You certainly make the assumption that every dollar of revenue from sugar goes directly into the purchase of an automobile, don't you? Senator JOHNSON. No. Senator CLARK. It is necessary to do that in setting up any such formula without reference to the actual purchase or what actually happens to the money. Senator JOHNSON. As a matter of fact, Senator, the producer of sugar does not receive all of the revenue from that sugar. Senator CLARK. I understand. Senator JOHNSON. In our sugar-producing area, we have little cities and towns where business flourishes and every one gets a portion of the sugar dollar and, by the way, others get a larger portion than the actual farmer who produces it, but it is spread around among the lawyers and the dentists and every one else. Senator CLARK. That is usually true under the high protection tariff. Senator JOHNSON. And the merchants everywhere receive a portion of that sugar dollar, and naturally of course they buy automobiles, too, but it is very much in the interest of the automobile industry that all of these professional men and business men and industry as a whole in this country have an opportunity to make these dollars and spend them, because when they do make a dollar, they spend it for an automobile. Senator CLARK. Let me finish my question, Senator. In arriving at the number of sugar automobiles, let us say, in Cuba, what you do is simply take the amount of sugar exported from Cuba Senator JOHNSON (interposing). The importation. Senator CLARK. I mean the importation of Cuban sugar into the United States, and divide into it the number of automobiles sold in Cuba? Senator JOHNSON. From the United States. Senator CLARK. From the United States. Senator JOHNSON. That is exactly right. Senator CLARK. In other words, you arbitrarily and violently assume, it seems to me, that there is a direct ratio between the automobile business and the sugar business which does not necessarily hold good at all. In other words, the revenue from sugar might go into a great many other American commodities as well as automobiles, and the revenue from sugar in Colorado might equally as well be spread over several other different commodities, so that it seems to me that by taking just two sets of figures without any apparent relationship to each other, you present a false picture. Senator JOHNSON. We give credit for all the automobiles they buy. Senator CLARK. And you divide into it Senator JOHNSON (interposing). We give the Colorado sugar-beet section credit for all of the automobiles they buy. Senator CLARK. But you divide into that only the amount of sugar imported into the United States. Senator JOHNSON. That is right, and I think it makes a startling and vivid concrete example. Senator CLARK. I think startling is a very mild word. I think it is a grotesque picture. Senator JOHNSON. It shows the advantages to the automobile manufacturer. Now, just one more question. You indicate that you are very well satisfied with the conditions as they are under the reciprocal-trade agreements now existing? Mr. BUDD. Yes. Senator JOHNSON. You are very well satisfied with your foreign market? Mr. BUDD. No. With the foreign market as a whole? Senator JOHNSON. Yes. You are very well satisfied with your export of automobiles, aren't you? You are very well satisfied with that situation? Mr. BUDD. I don't think I understand your question. Naturally we are satisfied with the trade agreements that are signed; yes. Senator JOHNSON. Of course you are. But are you satisfied with the automobiles which you are selling at the present time? Are you satisfied with your present exports? Mr. BUDD. No. Senator JOHNSON. You are not satisfied? Mr. BUDD. No. Senator JOHNSON. How much do you want to increase them? Mr. BUDD. All that we can increase them. We try to create as wide a market as we can. Isn't that natural? Senator JOHNSON. Yes; but what are your reasonable expectations for increasing them? You work a year ahead and you know about what you are going to sell next year and the year after that. Mr. BUDD. I don't think anybody could answer that question today, with existing conditions, because too much of it depends on what is going to happen in Europe. We cannot anticipate today more than 30 or 60 days ahead. The world markets, the export markets today, are too greatly affected by the European conditions to forecast far in advance. Senator JOHNSON. Are you likely to sell more automobiles next year than you sold last year abroad? Mr. BUDD. No; If conditions exist-do you mean in 1940? Mr. BUDD. If your present conditions continue, and I mean conditions as they are today, we will probably sell less cars in 1940 than we did in 1939. Senator JOHNSON. And the next year you probably will sell still less? Mr. BUDD. Well, it all depends on what happens. We are under a restricted market at the moment. If these conditions change, we would go back up to a much larger market. Senator JOHNSON. Isn't your home market the thing that you have to tie to, the thing that you can depend upon? Mr. BUDD. Yes; to the extent of 85 percent. I agree with that, and I have said that in my testimony, that we won't try to increase that 15 percent at the expense of the 85 percent. What we are attempting to do is to expand our whole market, the 100 percent, and we try abroad to do that just as we try in the domestic market. Practically all of the companies in the industry have two divisions, one an export division, and in the export division we do not pay a great deal of attention to the domestic market. The domestic division attempts to get all of the market it possibly can, and we try to get all that we can. On top of that, you might say that the company as a whole is trying to expand its total market, regardless of where it may be expanded in any place where we can expand it. Senator JOHNSON. And entirely regardless of what may happen to the rest of the country? Mr. BUDD. Oh, no, no. I think I covered that point, that we certainly are conscious of the relative importance of the 85 percent of our market and that we would not attempt to increase our export market at the expense of our domestic market. Senator JOHNSON. You say you still want to go out and sell more and expand more, knowing that that means more imports inte this country of competitive commodities, and still you want to sell more automobiles abroad? Mr. BUDD. We would not want to sell more if the imports jeopardized the home market. We do not believe they do. They have not to date, in our opinion. Senator JOHNSON. That is your opinion only? Mr. BUDD. That is all I stated it as-as my opinion. The CHAIRMAN. Thank you very much, Mr. Budd. Mr. R. W. Gifford, representing the Detroit Board of Commerce, was scheduled to appear today, but sent a wire indicating that he would not be present. The committee has received a statement from him, approving the pending legislation, which I will insert in the record at this point. To the Senate Finance Committee: DETROIT, MICH., February 28, 1940. RECIPROCAL TRADE AGREEMENTS You are now holding hearings on extension of the act which authorizes the negotiation of reciprocal trade agreements. The board of directors of the Detroit Board of Commerce on recommendation of our foreign trade committee has voted to give this foreign trade policy its wholehearted support. We had reserved time with your committee for personal testimony but upon receipt of a telegram from Mr. F. M. Johnston, clerk of the Committee on Finance, stating the record of the House Ways and Means Committee is in the hands of you gentlemen and that there is a desire to avoid duplication and shorten the hearing as much as possible, we have canceled that appointment. At pages 1452 to 1483, you will find the formal statement presented in behalf of this organization together with a rather extended discussion between the House Committee members and myself. We ask that you favorably report the joint resolution in question. Yours very truly, R. W. GIFFord, Chairman, Foreign Trade Committee. The CHAIRMAN. The next witness is John G. Lerch, of New York City, representing the Wool Hat Manufacturers' Association of America, and other domestic interests. STATEMENT OF JOHN G. LERCH, REPRESENTING WOOL HAT MANUFACTURERS' ASSOCIATION, OF AMERICA, AND OTHER DOMESTIC INTERESTS, NEW YORK CITY Mr. LERCH. I have been advised by the clerk that you desired the appearances to be as brief as possible. I have here, representing three different groups, a statement of the Wool Hat Manufacturers of America, which I would like to submit for the record without taking the time to read it. The CHAIRMAN. It will be placed in the record. (Same is as follows:) Re extension of the Trade Agreements Act. CHAIRMAN, SENATE FINANCE COMMITTEE, United States Senate, Washington, D. C. SIR: The wool felt hat industry is opposed to the Doughton resolution to continue for 3 years the administration's reciprocal-trade-agreement program. It is opposed generally as uneconomic, unconstitutional, and impregnated with tendencies destructive of our objectives to remain at peace with foreign powers. Specifically, we object on the grounds following: The organic law (sec. 350 amending the Tariff Act of 1930, approved June 12, 1934, H. R. 8687) by section 2 (a) thereof repeals section 516 of the Tariff Act of 1930. Section 516 provides the only remedy at law to which a domestic producer can resort in matters affecting customs. Without it, the producer is at the mercy of the Committee for Reciprocity Information and the other administrative officials whose activities are secret and whose determinations are not subject to judicial review. Nevertheless, they are exercising a power after proclamation by the President directly affecting the general welfare and our economic and social existence. The act erects a plenary power divorced from judicial review. Congress, by its delegation of its power over taxation and foreign trade, divests itself of powers granted exclusively to it by the Constitution and by the same token removes from the exercise of the power all possibility of judicial review. The above is true as manifested by the fact that practically the last amendment in the Senate when the bill was originally before that body for enactment was the amendment sponsored by the chairman of the Finance Committee, who, upon question, explained to the Senate that the purpose of the repeal of section 516 |