EXPORT MARKETS FOR COTTONSEED CAKE LOST ALONG WITH COTTONSEED OIL FOREIGN OUTLETS We lost not only our export business in cottonseed oil, but with it went our exports of cottonseed cake and meal. Whereas in the crop year 1911 we exported 646,000 tons of cottonseed cake and meal and 564,000 tons in the 1912 crop year, exports sank to a much lower level following the passage of the Tariff Act of 1922 and as the downward tendency persisted, it was found impossible to export more than five or ten thousand tons per annum. In the 1938 fiscal year exports amounted to only 13,440 tons. The reason for the enormous decline in the exports of cottonseed cake and meal was that once the United States placed itself in a position where the cottonseed oil trade of Europe was lost, it provided the European crushers not only with the opportunity to supply substitutes for our cottonseed oil but to supply substitutes for our cottonseed cake and meal in the form of protein concentrates obtained by crushing soybeans, peanuts, cottonseed, etc., in their own mills. The United States export trade in hog lard survived the Tariff Act of 1922 and continued in good volume until the drougnt cycle, which began in 1934, diminished the supply of lard available for export. Added to the diminished lard supply was the effect of the excise taxes levied on palm, palm kernel, and coconut oils levied in 1934, as exporters of lard were discouraged because the depreciated value in international markets of these oils furnished intensified competition for our hog lard in European and other markets. Our lard-export market following 1930 had also begun to diminish because of the tendency of our former customers to enter into bilateral trade agreements, to engage in barter arrangements, and in the case of the British market the system of inter-Empire preferences set up under the Ottawa agreement seriously cut in on our lard trade. When, therefore, under the reciprocal trade-agreements program, a comprehensive effort was made to regain the United States market for lard, it was greeted with the full approval of the oils and fats industries of the United States. TRADE AGREEMENTS ARREST DOWNWARD TENDENCY A profitable market for its lard exports has been restored to the United States in Cuba. Lard exports to Cuba in 1939 totaled 55,431,252 pounds, as compared to 10,908,351 pounds in 1933, the year prior to the consummation of the Cuban trade agreement. Concessions on lard have been obtained to date in 12 additional trade agreements with foreign countries, the most important of which was the removal of the 10-percent ad valorem duty on lard applying against imports into Great Britain. Exports of lard to Great Britain in 1939, the first complete year of its operation, totaled 150,220,644 pounds, as compared to 124,809,862 pounds in 1938. Exports would have been much larger had it not been for the outbreak of war. Concessions on oleo oil, stock and stearine exports have been obtained in trade agreements with four countries. Exports of oleo oil, which once exceeded 100 million pounds per annum, may again become an item of importance in our foreign commerce. Duty reductions on cottonseed oil, corn and soybean oils were obtained in the Cuban agreement. Concessions were granted on hydrogenated vegetable oils and on fats imported for soap-making purposes, inclusive of soap stock obtained from the refining of cottonseed oil. The oils and fats producers of the United States major need is enlarged export markets for their production of edible oils and fats. Exports in 1939 totaled 500 million pounds (inclusive of the oil content of exported soybeans), but the volume of domestic production being the largest on record, an exportation of one billion pounds would have been warranted. Only by the restoration of their export markets will the oils and fats producers of this country be able to obtain higher prices for their production of fine edible fats, such as pure lard, cottonseed oil, corn oil, etc. It is the earnest recommendation, therefore, of this association, that for this reason as well as for the others which we have enumerated, House Joint Resolution 407 be passed by the Senate without amendment and the reciprocal trade-agreements program extended for an additional 3 years. The CHAIRMAN. The committee will recess until 10 o'clock tomorrow morning. (Whereupon, at 3:30 p. m., a recess was taken until 10 a. m., Wednesday, March 6, 1940.) EXTENSION OF RECIPROCAL TRADE AGREEMENTS ACT WEDNESDAY, MARCH 6, 1940 UNITED STATES SENATE, The committee met, pursuant to recess, in the Finance Committee room, at 10 a. m., Senator Pat Harrison (chairman) presiding. The CHAIRMAN. The committee will come to order. Senator DAVIS. Mr. Chairman, Mr. Millard D. Brown, of the Continental Mills, Inc., manufacturers of textiles, Philadelphia, Pa., wrote me a letter under date of March 5, that I received this morning, as follows: In questioning Mr. Gaunt yesterday, Senator Harrison intimated that the protection for the wool industry ran as high as 101 percent. This is an erroneous idea, and I would like to correct it so far as you are concerned, at least. He is including in his figures specific duty which was provided to protect the wool grower, but if you will look at the trade-agreement rates we had in our treaty with Great Britain, you will find that protection for our workers in the wooltextile industry runs from 35 percent to 45 percent ad valorem, which as illustrated in my brief, is too low, particularly under depreciated exchange. Also, I would like to have put into the record a letter from Theodor G. Weihs to Mr. W. L. Monro, president of the American Window Glass Co., Pittsburgh, Pa. The CHAIRMAN. Without objection, that will be done. (The same is as follows:) Mr. W. L. MONRO, President, American Window Glass Co., Pittsburgh, Pa. JANUARY 3, 1939. DEAR SIR: Referring to our recent conversation in reference to the Czechoslovakian sheet-glass industry, I beg to give you in the following a general review of that conversation. For this purpose I will subdivide my report into two sections dealing: (a) The situation previous to the annexation of the Sudetenland by Germany; and (b) after this event. (a) Situation previous to the annexation of the Sudetenland by Germany: You recall that the Sudetenland, as well as the remaining part of Czechoslovakia, formed part of the Austro-Hungarian Empire until 1918. It should be noted that all five operating sheet-glass factories in Czechoslovakia, some of which are more than 100 years old, were located within the Sudeten area which was ceded to Germany. Until the end of the World War, they supplied mainly the Empire, which counted about 60,000,000 inhabitants. In all these many years, there was hardly any serious attempt made to export sheet glass, the world markets being dominated by the Belgians. Only after the World War, when those factories with their great productive capacity could no longer find sufficient outlets in the reduced area comprising Czechoslovakia, which counted only about 13,000,000 inhabitants, export was started on a large scale. At this period such a proposition seemed also most inviting, owing to the general shortage in merchandise in the whole world shortly after the war. Under such circumstances, prices could not be otherwise but satisfactory and, besides, the present tariff walls in most countries were just being built up at that time and the now prevailing self-sufficiency tendency was only at its very beginning. The Czechoslovakians could count on a further asset, having developed faster than other countries the mechanical glass-manufacturing system, and all these factors together enabled them to build up within a few years a widespread export organization. Already in about 1929 serious set-backs were felt. Various countries started an energetic drive toward self-sufficiency, and in this effort, many factories have been created artificially for domestic consumption and, had it not been for very high duties, these factories could not have continued in operation. Furthermore, the technical development in other sheet-glass producing and exporting countries, and particularly Belgium, was gradually reaching the Czechoslovakian standard, and naturally the shortage of merchandise had disappeared by then. The logical consequence was an outbreak of a steadily intensified competition in the various markets, European manufacturers fighting each other and sometimes also the domestic plants. Before long the prices dropped to cost price and even below, while on the other hand the technical progress allowed much greater production without increase in the number of working units, so that outlets for these additional quantities had to be found. Furthermore, the unemployment problem was becoming serious, and the Government would no more allow dismissal of workers. At this stage the Czechoslovakian manufacturers claimed that there existed but one solution, namely, to finance their exports by demanding a compensation in higher prices on the domestic market, which was always closely watched by the Government. The latter had to essent and from then on, since 1930, export was more and more assisted by the higher selling prices in the domestic market. At this point I wish to call your attention to the fact that over the period from 1930 to 1937, the sheet glass production averaged roughly 10,000,000 to 14,000,000 square meters per year (about 2,000,000 to 2,800,000 boxes) of which only about 2,500,000 square meters (about 500,000 boxes) could be sold on the domestic market. You will easily realize how much higher prices had to be secured for this comparatively small amount in order to make good for the growing losses on the glass exported. As a result of all these conditions, the following facts are not surprising. In 1937, for example, a total of about 2,000,000 boxes were sold. The domestic price reached a peak of about 15 to 16 Czech. kronen ($2.30-$2.74 a box) while the average net selling price of the export, heavy drawn sheet glass included, had declined to about 5.50 Czech. kronen per square meter ($0.88 per box) which is about 1 kronen per square meter (about $0.16 per box) lower than the average cost of production during this period. About one year earlier, in 1936, the price had averaged 11 to 13 Czech. kronen ($1.68 to $2 per box) while cost price has remained practically unchanged for at least 3 years in spite of variations in the value of the Czech. kronen. It might surprise you that the government continued to assent to a constant increase of prices on the domestic market, which, I believe, were at that time among the highest in the world, comprising the countries without domestic production, and allowing on the other hand to extend Dumping so far, that the prices obtained, for instance, in the Philippines, were as low as 1.30 Czech. kronen f. o. b. Czech. border ($0.21 per box). The main reason for the Government permitting such excesses was by far not so much the fear of additional unemployment, but the adverse trade balance, the shortage of coverage for the domestic currency, the ever decreasing foreign appraisal of the Czech. krone and the ensuing difficulties to import even the goods considered as prime necessities, namely, all the purchases of the material for armament purposes. It should be noted that there are still a few small hand blowing furnaces within the present boundaries of Czechoslovakia but none of these have been operated in the manufacture of window glass during the past 15 years. The window glass sold by the Czechoslovakian manufacturers through their sales corporation for export to the United States, for many years prior to the new Czechoslovakian trade agreement, was sold at approximately their cost of production. Naturally the reduction of 30 percent in the duty on window glass as provided in the Czechoslovakian reciprocal trade agreement effective April 16, 1938, materially increased the ability of the Czechoslovakian manufacturers to ship window glass into the United States. However, in 1937 they succeeded in convincing the Government after long sessions, conducted by Mr. Fritz Heller, that all these fixed prices and duty concessions had become insufficient to offset their losses on export and obtained direct subsidy for the entire glass industry, of which about 8,000,000 Czech. kronen (about $275,000) were allotted to the sheet-glass industry in form of refund of taxes. Only by such means was it possible to maintain an adequate volume of export business. After the Czechoslovakian reciprocal trade agreement with the United States went into effect, the Czechoslovakian window-glass manufacturers, through their sales organization, continued to maintain their domestic selling price at from 15 to 17 Czech. kroners per square meter ($2.30–$2.74 per box). My report on the situation after the annexation of the Sudetenland by Germany (subject b) is set forth on the subsequent pages. THEODOR G. WEIHS. (b) AFTER THE ANNEXATION OF THE SUDETENLAND The sheet-glass production in Germany amounted in 1937, if the figures I heard are correct, to about 19,000,000 square meters (about 3,800,000 boxes) of which only about 3,500,000 square meters (about 700,000 boxes) were exported. The German Government had so far never consented to price excesses but also, as we all know, the situation of the German Reichsbank is a very precarious one. Only towards the end of 1937 did the German Government start to exercise pressure on the DETAG (the leading German sheet-glass manufacturers union) in view of starting operations again at the plant of Torgau, which had been lying idle for over 6 years. The Detag, together with the Rezag, another German firm, bought up all shares (which, by the way, is also the reason why I am particularly well informed on the subject, having represented personally one of the main shareholders in these negotiations) and set up an agreement with the Government which visualized not only the well-known export premium, granted, I believe, practically to all German exporters, but also a certain adjustment of the domestic prices, with the understanding that Torgau, working exclusively for so-called supplementary export, could never hope to cover the expenses of operation. I do not know whether work has already been resumed, especially as in the meantime the Czechoslovakian glass factories have fallen into Germany's lap, which causes him, as the Reichsfuehrer of the German sheet glass industry, Mr. Otto Sceling, told me personally, much concern because he was well aware how difficult it would become to sell these goods from now on under the German flag; even more difficult than it had already previously been in Czechoslovakia. No wonder then, if ideas like the one I already communicated to you, could be born. I beg to recall to your attention some paragraphs of my letters dated October 21st and November 8th, 1938, namely: "The new authorities are fully aware, that export, for instance to the U. S. A., will show a sharp decline, owing to hostility against the purchase of German goods, thus favoring home manufacturers in the respective countries. "In trying to find a way out of this difficulty the Germans intend, as I was told, setting up such an agreement with the Czech Government concerning sheet glass that the sales office in Prague would be maintained and would go on working in the same way as it did until now. This should lead the customers to believe that they are still receiving Czechoslovakian goods and furthermore, the trademark "Made in Czechoslovakia” should also be used as formerly." "I beg to attach to the present letter a cut of the semi-official bulletin of the German manufacturers union 'Industrie' No. 41, 1938, which was issued a few days ago." The article deals with the consequences due to the annexation of the Sudeten area on the German glass trade, especially with bottle and window glass. The following is the translation of a few outstanding paragraphs: "The capacity of the plants is insufficiency utilized. About 70 percent of the production was exported. About one-third of the export went to U. S. A., onefifth to England, and the rest to France, Germany, Austria, Holland, Belgium, etc. The capacity of the plants of the old Reich (Germany before the annexation of Austria and Sudeten) is about three times as large and naturally much better utilized. ""The enormous increase which Germany requires through the Sudeten glass industry, places Germany's glass business in front of a huge task. |