regions has shown no upward trend in recent years; instead their growing dependence on outside sources of pulpwood has taken the form of increased importation of sulphite and sulphate pulp and of newsprint paper, and increased purchases of pulp and paper from other domestic regions.

POSSIBLE FUTURE DEVELOPMENTS IN THE PULP AND PAPER

SITUATION

The foregoing summary brings out the fact that there is a marked difference as to the present situation, and as to the trends of recent years, between sulphate pulp, on the one hand, and sulphite and mechanical pulps on the other. The future situation with respect to United States trade in pulp and paper is related to the extent of the expansion which may occur in the Pacific Northwest, and probably in even more important degree to the question whether the abundant. Southern pine, hitherto used almost exclusively for sulphate pulp, can also be economically reduced by the other two processes, or whether methods can be devised by which bleached sulphate, suitable for use in white papers which are now made from sulphite and ground wood, can be produced at moderate cost.

The demand for wrapping and other papers and board which are made from sulphate has increased in greater proportion than that for white papers. Although there are large imports of sulphate pulp for the manufacture of wrapping paper and board, the rapid expansion of sulphate production in the South has enabled this country to take care of an increasing proportion of these growing requirements. On the other hand, although for about 10 years the domestic production of sulphite and ground wood has kept pace with the imports of these pulps as such, it has not kept pace with the requirements for the products into which they enter, and a larger part of such requirements has been supplied by imports of newsprint, the principal one of these products. The imports of all kinds of pulp and newsprint go chiefly to supply the heavy requirements of the Northeastern and North Central States.

The two movements above mentioned have during the last 10 years approximately counterbalanced each other. The result has been that the proportion of total pulpwood requirements of the United States supplied from domestic sources has remained approximately unchanged since about 1926, at about one-half. Broadly speaking, the great increase in the production of pulpwood in the South, principally Southern pine going into sulphate, combined with the smaller but still large increase in production on the Pacific coast, consisting principally of Western hemlock and white fir going largely into sulphite pulp, have substantially offset the failure of the older pulpwood regions, the Northeastern and the Lake States, with their depleted stands of spruce and balsam fir, to keep pace with their increasing demands for paper materials.

Although by adequate forest management these two Eastern regions could doubtless increase somewhat their output, there is no prospect of their supplying an appreciably larger part of their requirements than at present. Imports, whether in the form of pulp or of newsprint, will have to remain a dominant factor in the white paper supply of these areas unless there is either a great increase in the production on the Pacific coast or a large development in the South of pulp pro

duction suitable for white paper, or both. The Pacific coast may for some time continue to increase its shipments of pulp (as such or in the form of paper) to the Eastern consuming regions, but probably not at a rate sufficient to lessen greatly the dependence of these regions on imports.

On the other hand, the situation might be completely changed if the reduction of yellow pine in the South by the sulphite and ground wood processes develops on a large scale. As already stated, extensive experimentation has been carried on in that direction, and many in the industry are of the opinion that these processes will shortly be employed commercially in the South, with lower costs for wood and with no higher conversion costs than prevail in other pulp-producing regions of the country. Another possibility is the development of low-cost methods of producing bleached sulphate pulp that can be substituted more widely for sulphite.

The area of the Southern pine forests is great and the trees grow much more rapidly than the pulpwood species in the northern part of the United States, in Canada, or in the principal pulp-producing countries of Europe. The demands for Southern pine for lumber in recent years have been much less than before the depression, and even with full recovery in the building industry they may not become as great as before, by reason of the tendency to substitute other materials for wood in construction. Consequently, with proper care the annual growth in the South could keep pace with a very large annual cut for pulp use.

As already noted, pulpwood in the South, chiefly yellow pine, is far lower in price than pulpwood in the Northern States, chiefly spruce and balsam fir. In the Northeastern region pulpwood itself accounts for much more than half of the total cost of sulphite and mechanical pulp (in slush form). In the South, where practically no sulphite or ground wood is now made from yellow pine, wood accounts for less than one-third of the total cost of sulphate. If Southern pine could be used on a large scale for sulphite and ground wood, unless conversion costs were much higher than in the regions where these pulps are now produced, the total mill cost of these kinds of pulp in the South would be much lower than in the Northeastern and Lake regions, and perhaps even lower than on the Pacific coast, thus changing materially the position of domestic pulp in competition with imported pulp and newsprint paper.

As bearing on possible future regional costs of sulphite and mechanical pulp, it is of interest to compare the two main factors of cost of sulphate pulp in the Southern region with those in the Lake and Pacific coast regions (no costs are available for the Northeastern region where the output is small). During January-September 1935 the wood cost per ton of sulphate pulp in the Southern region was $6.71, in the Pacific coast region, $7.93, and in the Lake region $14.89. Moreover, the conversion cost for sulphate pulp was lower in the South than elsewhere, $14.64 per ton as compared with $15.26 on the Pacific coast and $19.31 in the Lake region. If relationships of costs at all resembling these for sulphate should become possible with respect to sulphite and ground wood, the situation as regards both interregional competition and competition with foreign pulp would be greatly changed.

As regards sulphate pulp and its products, it has been noted that there is little importation of paper or board made chiefly of this kind

of pulp, but considerable importation of the pulp itself. The imports of sulphate in 1926 accounted for about 43 percent of the apparent consumption, which at that time was 913,000 tons. In 1936 the imports accounted for about 29 percent of the consumption, which had nearly trebled, reaching 2,540,000 tons. Imports had increased but domestic production had increased much more rapidly. It is possible not merely that this difference in rate of increase may continue but even that the domestic production may so increase as to bring about an actual decline in importation. As already pointed out, the additions just now being made to sulphate mill capacity in the South are greater than the total annual imports of recent years. The actual outcome of the competition between the domestic and imported sulphate cannot, of course, be forecast with any certainty.

PART I. WOOD PULP

SECTION I.-GENERAL ASPECTS

TARIFF HISTORY

Wood pulp, both mechanically ground and chemical, was specifically and unconditionally provided for on the free list of the Tariff Act of 1913, and has been so treated in subsequent tariff acts. Under the Tariff Act of 1909, mechanically ground wood pulp was conditionally free of duty, and both mechanically ground and chemical wood pulp imported from Canada were conditionally free of duty under section 2 of the act of July 26, 1911. The latter act was passed as a part of the proposed reciprocity arrangement between the United States and Canada. The arrangement was not intended to be a formal treaty, but after the reciprocal provisions were agreed upon both countries were to enact concurrent legislation according specified tariff treatment to each other. The United States passed the legislation but Canada did not. It was judicially held, however, that section 2 of the act of 1911 was operative notwithstanding the fact that the arrangement was not put into effect by Canada. The Court of Customs Appeals further held that wood pulp produced in other foreign countries with which the United States had mostfavored-nation treaties was entitled to the same treatment accorded Canadian pulp under the act of 1911. At that time we had mostfavored-nation treaties with such pulp-supplying countries as Norway, Russia, Austria-Hungary, Germany, and Sweden. Thus, mechanically ground wood pulp has been practically free of duty since 1909. Chemical wood pulp from Canada and most-favorednation countries was free under the act of 1911, and wood pulp from all countries has been unconditionally free since the passage of the Tariff Act of 1913.

The trade agreement with Sweden, effective August 5, 1935, bound for the duration of the agreement the duty-free status of imports of sulphate wood pulp and of unbleached sulphite wood pulp. Similarly, the trade agreement with Canada, effective January 1, 1936, bound for the duration of the agreement the duty-free status of imports of mechanically ground wood pulp, soda pulp, and bleached sulphite pulp. In the trade agreement with Finland, effective November 2, 1936, imports of mechanical and chemical wood pulps, both bleached and unbleached, were bound free of duty for the life of the agreement.

Each of these agreements is in force for a period of 3 years from its effective date and thereafter until terminated by either party on 6 months' notice.

Pulpwood, the principal raw material used in the production of wood pulp, has been specially provided for on the free list in each general tariff act since 1897.

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