AGRICULTURAL RELIEF

THURSDAY, APRIL 1, 1926

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in room 326, Senate Office Building, Senator George W. Norris, presiding.

Present: Senators Norris (chairman), Keyes, Harreld, Sackett, Heflin, and Ferris.

The CHAIRMAN. The committee will come to order. proceed, Doctor Stewart.

You may

STATEMENT OF DR. CHARLES L. STEWART, ASSOCIATE PROFESSOR OF ECONOMICS, UNIVERSITY OF ILLINOIS, URBANA, ILL.-(Resumed)

Mr. STEWART. Gentlemen of the committee, I take it that it will not be necessary to restate the fundamental principles of this bill. The CHAIRMAN. No. I wish you would not, Doctor, because we would like to finish these hearings so as to get whatever action we take before the Senate with as little delay as possible.

Mr. STEWART. I would say that the proposition centers largely around that of getting an export premium so as to make higher prices for farm products throughout the United States. That type of export premium is import tax exemption which has a unique legal position, and it has been designed with the idea that it would be unsinkable from the constitutional point of view.

I want now to point out the conditions relative to our agricultural exports, and then close my discussion within the time limit indicated.

This question as to the position of agricultural exports in our national economy is one which I think is most easily understood in the light of statistics published in the December 14, 1925, issue of Foreign Crops and Markets, a publication of the Bureau of Agricultural Economics. There you will find that in the year 1898 our net exports of all foodstuffs reached their highest point in the last quarter century; that from 1898 down to 1913 there was a very rapid decline in the extent to which we had agricultural exports from the United States. In fact taking as a base the five years from 1909 to 1914, agricultural exports had declined to approximately 20 per cent of what they were during a corresponding period 15 years before. That is to say, there was a rate of decline which

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is such as to indicate that within a few years, had it not been for the effect of prices and patriotism during the World War, we would have been on a basis of food dependence in the United States. But the war came, prices were high, consumption was cut down, production was stimulated, and as a result our exports of foodstuffs went back up not so high as in 1898, but nevertheless, under those combined influences, the volume of agricultural exports increased. Since the war, however, one sees the reappearance of the old downward trend, and it would not be extravagant to predict that before the end of the second Coolidge administration you will find that we are upon a net import basis in the matter of foodstuffs. When that day arrives it will mean that we will be dependent upon Canada and upon other countries for the essentials of our national welfare.

I am not wishing to overstrain that suggestion. I think it is clear to any mind that it is more important for us to keep the United States on a basis of net surplus of foodstuffs; in other words, give us a food independence-it is more important that that be accomplished and sustained than that we have chemical independence or that we have several other kinds of independence which have been made the basis of action in the name of the Congress of the United States. I make no apologies, therefore, in suggesting that a program which would maintain the exportable surpluses of the United States should be carried on under the auspices of this committee. I make no apologies for another reason. You are not the first group representing a nation that has faced this particular kind of an issue. In 1696 the members of the British Parliament faced the same issue. They seemed to be, as perhaps we are, within less than a dozen years of food dependence upon other countries. What did the British Parliament do? The British Parliament established a schedule of export bounties, of export premiums, and that remained upon the statute books of the United Kingdom from 1696 until 1815. If my arithmetic is not wrong that is approximately 118 years.

Now I wish to say that the English succeeded in staving off the period when they were dependent upon other countries for their food supplies for nearly 50 years as a result of that policy, and until 1765 these premiums were paid practically every year. From 1765 until 1792, one year after Hamilton issued his report, the English were upon a basis on which they did not know from year to year whether they were going to have net imports or net exports. In other words, it was a period of alternating trade currents so far as their commerce in agricultural products was concerned. As a result of that fact prices were high one year and low the next year, and there was a period of greater instability than that which they had when they were skidding down towards the seesaw period, a period of greater instability of price prevailed during that period than had been previously known. In other words, the English succeeded in staving off, as I would estimate, perhaps 50 years the coming of the day of their food dependence. I wish to state in this connection, that if the English were wise enough in their day to see the desirability of staving off food dependence upon other countries, perhaps it would not be unwise for us to think in similar terms under our circumstances.

To be sure, after 1792 the English were upon a net import basis with regard to their food, and the battle was finally given up. But

there at least was a large part of a century during which they kept themselves protected in a military sense and kept their farmers in a more prosperous condition as the result of this export premium.

I want to take occasion to point out that our import duties are not being operated in such a way as to give us the most revenue possible. Since I left the committee yesterday I made inquiry to ascertain, from persons in position to know, what would be the maximum amount of revenue which we might expect to get from our import duties if those duties were so set as to give us the maximum revenue. One gentleman, a former member of the Tariff Board, said that at one time it had been suggested to him that he work out schedules that would produce a billion dollars. He said that he refused to do it. I am inclined to think that his refusal was not based upon the impossibility of so doing. In other words, we have placed our import duties on most commodities at a point above that point which would give us the billion dollars, and to-day our Treasury is receiving from import duties a 50-cent dollar instead of a whole dollar. For what purpose? That there shall be protection upon the industry of this country. In other words, under the tariff act of 1922 we have the language, "To stimulate commerce in industrial products with foreign countries, to encourage industry in the United States, and for other purposes. The suggestion which we have here is that that may stand, but that in addition we shall "stimulate commerce in agricultural products and provisions with foreign countries, that we shall encourage agriculture in the United States," and accomplish the other purposes as indicated in the bill before you.

In other words, I think the formula can be established that protection costs the United States Treasury something, that revenues have to be foregone else we have no protection to industry, and we have foregone a half billion of revenue in order that we might have protection for industry primarily in this country. It is suggested that perhaps if the Treasury would forego another $100,000,000, one-fifth as much, that we might have an effective protection for agriculture. In other words, revenues scientifically foregone equal protection under a port system such as we have in this country. The question comes immediately, Is foregone Treasury revenue the same as revenue funds spent as subsidies? Here we could have a billion dollars from our import duties if we put them on a maximum revenue basis so far as industry is concerned. Instead, we take a half million dollars and let the other half have its high protective effect, but is that a subsidy? The answer is that legally it is not a subsidy. Whether you forego those revenues, as we do, by putting our import duties high, or whether you forego those revenues, as is provided in the bill that we are discussing, whereby export debentures are issued whether you forego those revenues one way or the other— legally it is not a subsidy, and legally it is not, in my humble opinion, contrary to the Constitution of the United States.

This suggestion I believe to be in order for the committee. I believe that you would have a right to consider sending a request to the Secretary of Agriculture in which you would ask how much protection could come to the producers of exportable farm products if export debentures were issued in the sum of $50,000,000. ~ I think in the same request you might properly ask how much protection could come to the producers of export agricultural products on

the basis of the issuance of $100,000,000 of export debentures.

If

you wish to make it also $150,000,000, well and good, but I am confident that the Department of Agriculture could supply you with information as to debenture rates which would bring a very substantial price advance in the case of our products which are upon a net export basis.

Now a further suggestion which I wish to make to the committee is this: Export bounty and debenture plans are before you in two forms. In one form it is suggested that there be issued the import tax exemption certificate which we have described. In another form it has been suggested that the revenues from import duties, approximately a half billion, be made a special fund from which $100,000,000 shall be used to pay cash bounties. Legally the latter is different from the former. Economically they may be essentially the same.. It seems to me that there is available in the city of Washington, in the different bureaus, in the offices of the Attorney General and elsewhere, information as to the constitutionality of such procedure, information as to the ceonomic effect and economic desirability of such a measure, which this committee could well afford to have brought together and published as a report which would help to inform the people of this country as to what this type of mechanism would be expected to accomplish in the interest of the producers of this country, and I would make it an offer of service, if I could be of any service to the committee, to spend some time in cooperating with your Senate office of legislative counsel, with your various Government bureaus, with the office of the Attorney General and with other agencies of the Government in trying to bring together this information in a reasonable space so that there would be an authoritative statement as to the possibilities of operations of this sort, and I should hope that that might be accomplished within a period of a week or possibily a little more.

I desire to insert in the record certain papers. One is an address before the farm advisers of my own State, bearing the title "Export debentures can raise farm prices.'

Another is some material which Dr. T. C. Atkeson, of the National Grange, has had incorporated in hearings before the House committee relative to an export bounty suggestion of David Lubin.

I would like to incorporate portions of Alexander Hamilton's Report on Manufactures.

I would like to incorporate a statement as to the condition of Illinois farmers, which is already available in convenient form.

I would like to incorporate three memoranda which have been made available to Senator McKinley relative to this particular plan. Now, in conclusion, I would like to emphasize two points. The first point that I would wish to emphasize is that agricultural exports do not need apology. Throughout our history they have been preeminent exports. They have made it possible for us to have a favorable balance of trade. I think that perhaps the clearest expression of the significance of our agricultural exports and their effect upon the industrial development of this country is afforded in a statement made by Congressman Fort, of New Jersey, before the House Committee on Agriculture, and I should like to have that incorporated also in the hearings before this body.

Those exports do not require apology. Furthermore, is it not true that a great deal of effort is being spent by the Congress, that a great deal of money and energy is being spent by the Government to promote exports of manufactured products? That question, I think, would have to be answered in the affirmative. We do see value in manufactured exports, and yet are we not as well equipped by climate, by all the fundamental factors in our national economy, for supplying the world with exportable surpluses of agricultural products as we are for supplying the world with surpluses of manufactured products, and yet the Government is putting a great amount of energy into the development of our manufactured exports.

It is suggested that it would be as proper for the Government to put energy into the continuance of our agricultural exports as to do the other thing, which is already being done.

After all, the situation is not unlike that which occurred when Abraham took his son Isaac up Mount Moriah, there to offer him as a sacrifice. You will remember that Isaac had to carry up the wood that was laid upon the altar, but when the hand was lifted to strike the firstborn in that ancient sacrifice that hand fortunately was stayed. An interior voice suggested that perhaps a substitute could be found. I wish to say to you that the agricultural exports of this country have occupied a position in our foreign trade which corresponds to that of the firstborn. The fatherly hand of the Government has been lifted to slay them.

There is no reason why we should continue with policies such as that of hindering the imports of this country, thereby cutting down the foreigner's power to purchase our agricultural exports, no reason why we should continue with a Federal policy of immigration restriction which raises high the costs which our farmers incur, and which puts them at a disadvantage in competing with the export crop producers of other countries, no reason why we should continue with the Federal policies which are raising high the costs which are hampering the American farmer, without doing something to neutralize the economic effect of these Federal policies so far as their depressing effect upon agriculture is concerned.

If I may change the figure, I will put it in these terms. Our Government-stimulated costs have raised the water table under our agriculture to such a point that the margins of our agriculture are threatened to be submerged because of high wage scales, and because of the high cost of those things which farmers require in their production and in their living. Those are Federal policies, gentlemen, and those Federal policies have threatened to bring about the strangulation of the industry in whose particular behalf I have the honor to speak to-day, and I would suggest, therefore, that a corrective is in order, not an unreasonable corrective, not a corrective that will be knocked out by the Supreme Court within a year or two, but a corrective that is as positive in its effect as the import duties have been in their effect in the protection of manufactures, and as positive as immigration restriction has been in its effect upon the maintenance of high wage scales. I think that there is nothing unreasonable in the request that this be considered in the light of a national policy, in the light of something which will help our Nation to go through the next quarter century without getting upon a basis of food dependence. Within two months we will celebrate the one hundred and fiftieth