We do not think the present type of price supports can be continued successfully under the general agreement, once world production becomes normal. It is of course impossible to sustain a domestic price level through the purchase of surplus products when imports are not restricted. Any attempt to do so would merely be an effort to support world prices and would draw the world surpluses to our shores.

The charter recognizes this condition and makes a gesture to remedy it. It provides in substance that imports can be restricted in connection with a government program, but only to the extent to which domestic production is restricted. We do not think this exception will be sufficient to save the present program nor do we see why the Government should support the price of such imports as must be admitted.

For example, if the domestic production of a particular commodity should be cut by 25 percent, we could exclude 25 percent of normal imports. This would still mean that under the present program the Government would have to support the price for the 75 percent of the imports which could not be excluded.

This provision of the charter would also operate to force production controls on domestic crops at an earlier stage than might otherwise be required. If a domestic product were supported at a level above world prices, the higher price would immediately attract to this country a flood of imports which would make it necessary to use domestic controls in order to be able under the charter to use import controls.

It has been suggested that at the Habana conference the United States was unwilling to give up its program for parity income to agricultural producers. We are afraid that, whether it intended to do so or not, such will be the result of the present charter if it is approved.

Not long ago a Senate committee discussed a farm program calling for a two-price system under which agricultural commodities produced for domestic consumption would sell at a higher price than those produced for export to world markets. Some of the members of the committee seemed surprised to find that the right to put such a program into effect had been bargained away in the general agreement and would be likewise precluded for all practical purposes in

the charter.

The use of such a two-price system would be considered dumping under the charter and other members of the organization affected by the exports could retaliate by imposing countervailing duties. In addition, such a system would be classed as an export subsidy and expressly outlawed under article 25 of the charter.

As indicated above price-support systems which called for export subsidies for surplus products would be forbidden under the charter. In effect, therefore, the charter may be so construed as to make it impossible to maintain a domestic price above the world price for any product a portion of which is exported. The very existence of such a price differential appears to be forbidden.

The charter is not content to forbid export subsidies, but goes on to forbid also producer subsidies or any form of income or price support which operates directly or indirectly to increase exports.

We do not think the provisions of the charter relating to intergovernmental commodity agreements provide any practical relief from the foregoing restrictions.

In view of these restrictions, we are concerned whether any practical price-support program can be maintained without running afoul of the charter. We wish most sincerely that it was not necessary to protect the parity prices of farm products; but, unless some form of protection is provided, better organized forces will, as they have in the past, beat down the farmer's return until his purchasing power is destroyed and the whole Nation is again engulfed in a great depression. There are already those who are demanding that the farmer be paid less, much less, than parity. But parity merely denotes equality of income and of purchasing power with other groups. Those who are demanding that the farmer's prices be reduced do not offer to reduce their own income by a proportionate amount, so that the equality between the two may still be preserved.

As stated above, the provisions of the charter relating to sanitary standards are also giving us concern. The charter provides in substance that import restrictions may be imposed where necessary to protect human, animal, or plant life or health. Under this provision, as we understand it, dairy products so insanitary as to endanger life or health could be excluded, but substandard products, contaminated or adulterated to a less degree, could not be.

It would surely have been fair enough to foreign nations to have provided that imports could not be required to meet higher sanitary standards than those required of domestic products.

We are unable to see any justification for going further and setting up a provision permitting imports to enter which do not meet our standards.

American dairy farmers are justly proud of the high sanitary standards they have attained. These standards were not reached without great effort or without great expense. Sanitation is not cheap.

Now, under the charter, it is proposed to force this country to admit substandard dairy products to be sold at cheaper prices in competition with milk which it has cost a great deal more to produce.

We do not know what the effect of such imports may be, but such a policy may well result in forcing down the American standards. We think this provision of the charter is particularly dangerous because the international organization set up under the charter, and in which we will have only one vote, will determine what degree of sanitation is necessary to protect life and health. Since, on the average, the standards of other nations will be lower than ours, measures which we would consider essential might not be so considered by the organization. Congress may find itself helpless in such a situation to prevent entry into this country of products which it considers dangerous to the health of the Nation.

Thank you, Mr. Chairman.

Mr. BATTLE (presiding). Mr. Garstang, if I understand the import of your testimony, you and your organization are against the United States going into any such permanent arrangements as proposed here in this ITO?

Mr. GARSTANG. We feel it needs to be developed more before we go into it on a permanent basis.

Mr. BATTLE (presiding). What do you think would be the direct effect upon the dairy business in the United States if this ITO were put into being right now, as it is proposed?

Mr. GARSTANG. Our people are very much concerned about it. We are particularly worried about butter imports. They are presently restricted, but whether those restrictions can be continued for any substantial length of time under the ITO, is very doubtful. We are afraid they cannot be. Butter tariffs have been reduced, yet the country is presently supporting butter prices. We have more than 100 million pounds of it, bought up by Commodity Credit Corporation, and if imports come in here in great amounts, I do not see how anything else could happen but that the Commodity Credit Corporation would have to buy additional amounts equal to what the imports would be. Cheese is coming in, and cheese prices are being supported. Some milk powder is coming in. That is all on a limited basis now, but other countries are just getting into production and we do not know what is coming in the next few years.

Mr. BATTLE (presiding). You indicated that the Habana charter is not very satisfactory. Do you have any suggestion for a more satisfactory charter?

Mr. GARSTANG. We think by all means that the provision on sanitation ought to be changed to require imports to meet the same standards that our domestic producers have to meet. That would be one. Certainly that would be fair enough. Secondly, we are unable to see how, under the ITO, a satisfactory form of price support can be worked out and, unless such a price-support program can be worked out, we think that Congress should consider where we are going from here. If we cannot support agricultural prices, are we going to go back to what we had after the last war and just let the bottom go out of it and take whatever comes?

Mr. BATTLE (presiding). Dr. Pfeifer, do you have any questions? Mr. PFEIFER. I believe an agreement can easily be reached through the proper authorities insofar as price control is concerned and likewise insofar as the sanitary measures are concerned. Certainly we would not lower the barriers insofar as the imports are concerned, from a sanitary standpoint, to be injurious to the health of our own people.

That can be taken care of through the various organizations now in existence.

I believe if you will consider it, you can secure full cooperation on the part of all the parties concerned. When I say "parties," I mean the countries at large who have become charter members of the ITO. I believe they can rectify those things that perhaps may be detrimental as you say to the farmer.

Mr. GARSTANG. A lot of them can be worked out, but we think that ought to be done before we go into the thing.

Mr. PFEIFER. There is no question but that there should be understanding and that it will come about through international organizations.

Mr. GARSTANG. I think the Habana charter is much better than the first draft. It has been much improved. The Tariff Commission, which

was quite a powerful commission, has been taken out of it; the investment section, while still quite weak, is much better than it started out to be; and there have been other improvements. We think it can still be improved and that it should be further improved before we are committed to it on a permanent basis.

Also, the real fundamentals of the charter are in the general agreement. We will know in another 2 or 3 years whether that general agreement is going to work all right or not, what effect it is going to have on our farm programs, and what changes will be needed in order to set up the permanent organization on a sound basis and in such a way as to avoid the difficulties that may arise.

Mr. PFEIFER. That is all, Mr. Chairman.

Mr. BATTLE (presiding). Mr. Burleson

Mr. BURLESON. Is your association affiliated with the national farm organizations?

Mr. GARSTANG. It is a national organization of dairy cooperatives. It is one of the national farm organizations, somewhat similar to the Grange and to the Farm Bureau.

Mr. BURLESON. You have no affiliations with the Farm Bureau or the Grange?

Mr. GARSTANG. No.

Mr. BURLESON. You are familiar with their attitude toward the charter, are you not?

Mr. GARSTANG. Not too well. The Bureau I think is favorable to it and the Grange I am not sure.

Mr. BURLESON. They are favorable to it also. Their witnesses did discuss the farm-price support and this matter of parity which you have raised.

I just wanted to observe that your comment on the philosophical angle of the leveling process which could take place is very interesting.

That is all, Mr. Chairman, thank you.

Mr. BATTLE (presiding). Thank you very much for your testimony. Do you have anything else to add?

Mr. GARSTANG. I would like to say one more thing. Our organization, realizing the difficulty that the present price-support program is in, is trying to work out a new program. We are in the process of drafting it now. It will provide for the farmers to finance their own support program and it will provide for price supports through the purchase of surpluses. We cannot use that program under the general agreement. We could not use it under the charter because (1) we could not exclude imports at the same time that we were purchasing surplus domestic commodities, and (2), we could not export at a price lower than the domestic price. We simply cannot use that type of program under this agreement.

Mr. BURLESON. Is that the proposal now before the Agriculture Committee? It has been called the farmers' own price-support program? In other words, a tax on the farmer to support agricultural prices?

Mr. GARSTANG. That will be part of this program, yes.

Mr BURLESON. There is a proposal now before the Agriculture Committee along that line.

Mr. GARSTANG. Ours has not yet been introduced and it is not before the committee.

Mr. BURLESON. But the principle is the same?

Mr. GARSTANG. Yes. They are self-financing.

Mr. BURLESON. You do believe, however, that if the Government supports farm prices that we should have farm production controls? Do you agree with that?

Mr. GARSTANG. Our plan calls for a reduction of production by taking marginal land out of production and by using a system of rental agreements, somewhat similar to the program operated several years ago. Acreage in the areas which were producing surplus products would be rented and left idle and that would be paid for by the farmers.

Mr. BURLESON. I did not want to get into a discussion of the farm program but I was thinking of the reference you made to what might be international controls. That is what you had in mind in your testimony, was it not? If we go into a thing of this sort, we could have international controls of production, whether it be in farms or other commodities, could we not?

Mr. GARSTANG. The principal point that we make is that the present program cannot continue to operate when other countries have surplus products which they want to throw in here, because we will at times want to support our domestic price at a level above the world. price.

Mr. BURLESON. But it relates to production wherever it is?
Mr. GARSTANG. It relates to production.

Mr. BURLESON. Thank you very much.

Mr. BATTLE (presiding). Thank you for appearing before this committee.

I believe that is all we are going to have time for this morning. A suggestion has been made by Mr. Burleson that we adjourn until 10:30 tomorrow morning but I understand that the witnesses have already been scheduled and they are supposed to appear at 10 o'clock so probably we had better resume the session at 10 o'clock in the morning. We will adjourn officially until 10 o'clock.

(Whereupon, at 12:20 p. m., the committee adjourned to reconvene at 10 a. m., Thursday, May 11, 1950.)