acted", would limit the power of Congress to encourage domestic industries by the imposition of excise taxes, would it not?

Mr. KALAW. Yes, but these recommendations are submitted in consideration of what we all believed would be suggested here, the free entry of American goods into the Philippines.

Mr. WARING. What you have in mind more specifically is Philippine products rather than all foreign products, is that correct? Mr. KALAW. All Philippine products?

Mr. WARING. Yes.

SO

Mr. KALAW. No; you see, this is a brief for the coconut industry, we have not studied the aspect of the other products so much. I am not prepared to speak for other products.

Mr. WARING. One other question. On page 10 of the brief, in the last paragraph, you state that "the place formerly occupied by the coconut oil before the imposition of the excise tax was not taken by domestic oil but by competing foreign oil, which pays just as much taxes as coconut oil, like palm-kernel oil and cottonseed oil, or which enters America duty-free, like babassu oil"-that is page 10, the last paragraph. Now, if the place of coconut oil in the United States market was taken by palm-kernel oil and cottonseed oil, which pay the same tax as does Philippine coconut oil, the same change would have occurred had there been no excise tax; is not that true?

Mr. KALAW. I do not think so, if there had been no excise tax. Mr. WARING. If they both pay the same taxes, that is, if coconut oil and palm-kernel oil and cottonseed oil all pay the same taxes, and there has been a shift in the amount or in the usage of coconut oil, would not the competitive conditions have been exactly the same had there been no excise tax on any of those three oils!

Mr. KALAW. Had there been no excise tax on any of the three oils? Mr. WARING. Yes. In other words, if the conditions were exactly as they were before the excise tax had been imposed, would not the same shifts have occurred?

Mr. KALAW. If there had been no excise tax on all the three oils, that is, palm-kernel oil, Philippine oil, and cottonseed oil, I think not so far as the edible oil is concerned, because most of these competing oils, except cottonseed oil, do not go in for the edible. I want to say I am not an expert in those things: I am more or less a layman on the general proposition. As to the other point, generally we expect you see we are always harping on the theory that we protect American goods by bringing them here free-we expect a certain amount of protection for the Philippine products there as against foreign goods. That is our philosophy; that is our stand. So that we expect, as against foreign oil, a little bit of protection just because we in the Philippines also protect your goods without any distinction and without any limitation whatsoever. That is our policy.

J

Watch

hp?

Mr. WARING. That I understand, but I thought that in as much as all these oils bear the same tax

Mr. KALAW. No, because I understand that palm-kernel oil is cheaper at least, the production cost is much cheaper. In other words, conditions being equal, some of these oils are much cheaper.

Mr. WARING. My point was that the cost of production would have been cheaper whether there was an excise tax or not, and therefore the shift could scarcely be blamed on the excise tax.

Mr. KALAW. The facts are as we found them. I think that the brief on coconut oil states that the amount of decrease in the consumption of coconut oil in the United States is very apparent. I think that the figures would bear that out. Now, for instance, on page 25 of the brief of the Philippine Coconut Oil Mills,1 you will see that consumption of coconut oil, compared to vegetable oils in the United States, was 36.08 percent in 1931; in 1935 it was 24.01 percent; in 1936, 23.09 percent. And something similar has happened with respect to copra. Copra-consumption in America, compared to all oil-bearing seeds, in 1932 was 42.95 percent; in 1933, 40.45 percent; whereas in 1935 and 1936 they went down to 23.92 percent and 21.43 percent, respectively, which supports our contention that the excise tax has taken away a good deal of the place of coconut oil in the American market. These figures are our proof.

Mr. WARING. One final question. On page 12 of the brief you have the statement in the first paragraph under "The harm to copra.-The preferential tax of 3 cents, which applies to the oil content of copra sent to the United States, means no advantage to Philippine copra. It is true that we sell now more copra to America than before, but we are still obliged to sell in the world market; and we sell it in America at no price advantage over sales in the world market." That was the point which I asked Mr. Day, and I merely want to get your confirmation of it.

Mr. KALAW. Well, that is what we have said. As I said, reading from the reports of some of the brokers this year, we were forced to sell some copra to other than American markets. Those who will appear after me and who know more about the export side-I do not claim I know a lot—I believe will bear me out; I think there have been recent exports of copra to European markets.

Mr. WARING. In other words, then, the prices prevailing for copra in the Philippines are world prices?

Mr. KALAW. I think so. That is also our conviction.

Mr. YULO. When you stated here that you had campaigned among the people in order that they would accept the Tydings-McDuffie act or the Hare-Hawes-Cutting act, did you mean to say also that you

Mr. PAREDES. And you were also a member of an economic association, a kind of association, we have here in the Philippines?

Mr. KALAW. I do not remember.

Mr. PAREDES. An association of economists, a sort of association of Philippine economists.

Mr. KALAW. I do not recall. There are several here. I might have attended one of their meetings.

Mr. PAREDES. And you are a member of several business organiza

tions?

Mr. KALAW. Yes.

(Here follows printed brief submitted by the Philippine Coconut Association.1)

Chairman MACMURRAY. The next speaker is the Agusan Coconut Company to be represented by Mr. J. H. Alley, as general manager.

STATEMENT OF MR. J. H. ALLEY, REPRESENTING THE AGUSAN COCONUT COMPANY

Mr. ALLEY. I will just make the statement that we have filed our brief1 and we endorse the briefs of the Philippine Coconut Oil Mills and the Philippine Coconut Association.1 I have nothing further to add to them at the present time, but if there are any questions to be asked, I will be glad to answer them.

Chairman MACMURRAY. Are there any questions to be asked of Mr. Alley?

Mr. DORFMAN. I would like to ask some questions. Is it your feeling that the greater part of the excise tax on coconut oil has been borne by the Philippine producers of copra or by the American users of coconut oil?

Mr. ALLEY. The question is theoretical. It is very difficult to specify exactly. To my mind the excise tax is exactly equivalent to putting the Philippines outside of the American tariff wall, and I cannot see, myself, why the Philippine coconut-producers have not borne all the tax.

Mr. DORFMAN. If the Philippine producers of copra had borne all the tax, then the price of coconut oil would not have gone up in the United States at all in consequence of the tax, would it?

Mr. ALLEY. The price of oil is not dependent on the excise tax, but it is dependent entirely on the demand and supply.

Mr. DORFMAN. I say, "in consequence of the excise tax". If the burden were entirely on the Philippine producers, the price would not go up in the United States, would it?

1See vol. III; see also annex 2, post, p. 352.

82709-38-vol. 2- -23

Mr. ALLEY. That depends on the other oils and the prices of other oils in the United States.

Mr. DORFMAN. Perhaps I am not making the question clear. I am not concerned, for the moment, with the net result of all the factors which affected the price of coconut oil but merely with the effect of the excise tax on the price of the oil. Now, if we could isolate that factor, would you feel that the tax was borne by the Philippine producers or by the American consumers?

Mr. ALLEY. I do not think that it can be isolated.

Mr. DORFMAN. Is it your feeling, granting that it cannot be isolated, that the Philippine copra-producer, if there were no tax, would now be receiving the equivalent of about 3 cents more than he receives?

Mr. ALLEY. The price of oil in the United States is dependent on crop conditions, on curtailment of production, and on duties and excise taxes. Now, the price of coconut oil has been the result of all those forces. If one force is taken off, it will make a change, but how much change, I cannot say.

Mr. DORFMAN. A moment ago you referred to the excise tax as being the equivalent of a tariff duty.

Mr. ALLEY. Yes.

Mr. DORFMAN. The United States has been on a net-import basis with respect to oils and fats in recent years. So long as the United States is on a net-import basis with respect to fats and oil, would you expect the prices in the United States to be above the world prices!

Mr. ALLEY. It would be world prices plus the transportation cost to the United States; that is, the difference between that transportation cost and other transportation costs.

Mr. DORFMAN. What about the tariff duty?

Mr. ALLEY. Plus tariff duty.

Mr. DORFMAN. Does it mean that the price in consequence of the excise tax-which is the same as a tariff duty-is 3 cents above the world price?

Mr. ALLEY. As I said, the price in the United States is dependent on so many factors that to take one factor as responsible for making the 3-cent difference would be difficult.

Mr. DORFMAN. What effect has the tariff duty on the price of coconut oil which is imported into the United States?

Mr. ALLEY. I only know that, other things being equal, the price of coconut oil is today 3 cents less than it would be if there were no excise tax on Philippine coconut oil.

Mr. DORFMAN. I believe you said a moment ago that you cannot isolate the effect of the excise tax; and now you say that in the absence of the excise tax the price would be 3 cents difference.