do not give him a living wage, the other fellow is not going to get his, either.

Mr. CURTIS. As long as we have 30,000,000 people who are on a different standard from the rest of the United States, we cannot expect a smooth-running economy, can we?

Mr. THATCHER. I do not see how you can expect it.

Mr. CURTIS. Do you know of any time when the price of farm products and raw materials was high that general prosperity was not experienced in the United States?

Mr. THATCHER. No, sir. We have some notable periods of that and that is what we talk about-1910-14; 1925-29. Those were periods of a good balance.

Mr. CURTIS. And that is the one place that can produce the greatest market for industrial America, is it not?

Mr. THATCHER. As I said before, I think the farmers themselves purchase about 30 percent of all manufactured and processed goods that are sold in the United States, regardless of what those goods may be.

Mr. CURTIS. How can we attain this standard of living on farms which represent some 30,000,000 people, if agricultural imports are measurably encouraged and increased?

Mr. THATCHER. I do not see how you can do it and that is the reason I am here to try and insist that this committee give that consideration. It does look to us, or does look to me, that there is a program to make these United States an industrial nation at the expense of the raw material producer, and I just do not want to see that happen, and I do not think anybody else does who will give it much time and thought.

Mr. CURTIS. As a matter of fact, of the 26 trade agreements, 16 of them were made with countries in the Western Hemisphere; is not that right?

Mr. THATCHER. I am not advised on that, sir.

Mr. CURTIS. Well, that is correct. And that means 61% percent of all trade agreements were made with nations that are nonindustrial, which produce food and raw materials. Now, those nations that expect some concessions in trade agreements with the United States, want them in the things they have to sell; do they not?

Mr. THATCHER. If I were one of those nations, that is what I would want.

So does

Mr. CURTIS. Otherwise, it would be of no value to you. it not mean, to assist them-this so-called trading in trade agreements-is trading off the farmer's profit?

Mr. THATCHER. That is exactly what we are afraid is happening, sir.

Mr. CURTIS. Now, in setting a price for a farm commodity that sells in the open market, is it necessarily the large volume of goods arriving that determines the price?

Mr. THATCHER. It is a competitive situation I think, sir, that determines the price.

Mr. CURTIS. Yes; but a small amount of additional goods or crops may make a big difference to agriculture?

Mr. THATCHER. In the case of oils and fats that come into this country, it is only a comparatively small amount, but that small

amount has a tendency to bear the whole price down-if that is what you mean.

Mr. CURTIS. That is what I mean. Do you know of any other example besides oils and fats?

Mr. THATCHER. Well, the meat men talk about meat; I hear the wheat men talk about wheat. I think most any commodity that we produce, if it is competitive with commodities of the rest of the countries that we trade with, would be the same.

Mr. CURTIS. Now, on those oils and fats-what oils did you mean? Mr. THATCHER. Well, generally, we speak-those of us in the South, of course, our principle oil comes from cottonseed, and, of course, we have peanuts, and we have soybeans; but largely it is cottonseed oil. And the competition on that has been coconut oil and nut oils from the South Pacific islands

Mr. CURTIS. And there has been a considerable amount of corn oil come in, has there not?

Mr. THATCHER. I presume so.

Mr. CURTIS. I think you will find that is true, and that that corn is produced in South America, is transported to Scotland and there made into oil, and then sent back to the eastern seaboard here.

Now, Mr. Thatcher, if the food consumed on our two coasts is in any large measure produced abroad, what effect is that going to have on the economy of the internal United States?

Mr. THATCHER. Well, it will have the effect of just whatever percent may be shipped in; it will have just that much effect on the economy of the rest of the country.

Mr. CURTIS. It will affect a lot of people besides farmers, will it not?

Mr. THATCHER. Yes, sir. I do not think anybody escapes being affected almost in direct proportion to the farmer's welfare. They do not particularly understand that, but I think it is true.

Mr. CURTIS. One of the biggest jobs of our transportation system is to haul farm produce to market; is not that right?

Mr. THATCHER. It is.

Mr. CURTIS. As I understand your resolution, you are not asking a total bar, or monopoly, or prohibition that these great consuming centers cannot buy anything but American food, but you say if they buy it your protection should be such that it is at a parity price?

Mr. THATCHER. That is exactly right. And if the other fellow can pay that protection and get it in here, then we are going to have to take the consequences, because it is his choice, then, to come in.

Mr. CURTIS. But without that protection, there is no chance of attaining a fair standard of living for agricultural people, except through the price of what they have to sell; is not that correct? Mr. THATCHER. That is the only way they can get it, sir. Mr. CURTIS. I think that is all, Mr. Chairman.

Mr. COOPER (presiding). Are there any further questions? If not, we thank you, Mr. Thatcher, for your appearance and the information you have given the committee.

Mr. THATCHER. Thank you, sir.

Mr. COOPER The next witness appearing on the calendar is Mr. Carl H. Wilken.

Give to the reporter your name, address, and the capacity in which you appear, so that the members may hear you.

STATEMENT OF CARL H. WILKEN, ECONOMIC ANALYST, RAW MATERIALS NATIONAL COUNCIL, SIOUX CITY, IOWA

Mr. WILKEN. My name is Carl H. Wilken; I am economic analyst for Raw Materials National Council, serving as economic analyst for the 48 State secretaries of agriculture. My address is Sioux City, Iowa.

Mr. COOPER. Do you have a prepared statement to submit to the members of the committee?

Mr. WILKEN. I do, sir.

Mr. COOPER. Do you prefer to make your main statement without interruption, answering questions later?

Mr. WILKEN. I would prefer that; yes, sir.

Mr. COOPER. Without objection, you may proceed.

Mr. WILKEN. Mr. Chairman, members of the Ways and Means Committee, this is either the third or fourth time I have appeared before this committee in regard to trade agreements and the effect of tariffs. My testimony in previous hearings has been based on the record of the United States in the past.

In previous testimony I have pointed out that our raw material income and especially our farm income is the governing factor in our economy. This basic fact has not changed even though conditions have.

Since my last appearance before this committee, I have carried on a detailed study of our economy and the correlation which exists between the various segments such as agriculture, employment, mining, manufacturing, transportation, trade, and so forth. The gross farm income in the United States is the foundation from which all the others ratio out, with almost mathematical precision.

The Curtis Publishing Co. of Philadelphia, after checking the analysis, the various graphs and tabulations, published an article in regard to our research work in the December issue of the Country Gentleman. The article was entitled, "The Key to Prosperity" and in it they accepted the basic laws of exchange and ratios that we found in analyzing the past record of the Nation. The ratio is quite simple, namely, that in the United States each dollar of farm income creates a dollar for factory pay rolls and $7 of national income. The United States Chamber of Commerce in their report on agricultural income in April 1944 also pointed out the quite constant ratio of $1 of farm income to $7 of national income that apparently exists. No one has been able to refute this ratio which we first presented to a subcommittee of the United States Senate in Sioux City, Iowa, at a farm hearing in 1937. The ratio has not changed since that time even with a war economy, but there are those who ask, "Well, how do you know the farm income comes first?" To a man with a practical nature the very fact that a man must eat before he can work, should be proof enough. For the benefit of the committee, I want to point out briefly why in our capital form of economy the farm income is the governing factor.

In our Nation we have roughly 9,000,000 business units of which approximately 3,000,000 are nonagricultural. The other 6,000,000 business units are our 6,000,000 farms. Each of these farms is a business unit producing and processing products for trade and commerce and the capital investment in each on the average is as large

as the average capital investment in the 3,000,000 which are nonagricultural. Therefore, it ought to be self-evident that with agriculture having two-thirds of the capital investment in productive enterprise in the United States, any rise or fall in farm income automatically creates a rise or fall in the income of the Nation as a whole. With this ratio of income in existence this committee can have a quite accurate yardstick to gage the results of any action which it may take in regard to tariffs or post-war taxes. Any legislation which tends to reduce our farm income, either through curtailment of production or lower prices to the extent of a billion dollars will automatically force the wiping out of a billion dollars of factory pay rolls and $7,000,000,000 of national income. Greater reductions pyramid according to the ratio.

The loss of such income is automatically reflected in less tax collections and a loss in employment because of the reduction in consumer buying power throughout the Nation. Our loss in foreign trade will also ratio to our loss in farm income. For example, in 1938 our imports dropped to $1,960,000,000 from a total of $3,083,000,000 in 1937. The trade agreements were in operation and the drop cannot be blamed on tariffs which in my estimation are a barrier to trade only when they are above or below the American parity price level and even then to only a limited extent.

The real barrier to trade in the United States and the rest of the world is the price of raw materials and the resulting loss of purchasing power when farm prices drop. The loss in imports was the result of a drop in farm prices. In 1938 our gross farm income dropped over $1,000,000,000 and our national income dropped over $7,000,000,000 or in ratio to the formula I have given you.

A similar happening took place from 1929 to 1932. With a drop of over $6,000,000,000 in farm income from 1929 to 1932 our national income dropped approximately $45,000,000,000. This loss in farm income caused the wiping out of almost all our domestic and foreign trade with the exception of the necessities of life such as food and clothing and transportation.

The facts which I have pointed out to you are not theory but the record of what took place.

Instead of correcting the price of agricultural products, we brought forth the trade agreements and various other measures as a cure. The only real measure of success which we had in the period from 1930-40 was to increase the national debt.

The trade agreements were brought forth to increase the exports of farm products. The facts were that no power on earth could have restored our exports of farm products because our agricultural economy has been deficient ever since 1922.

It is true that in the case of cotton and wheat we had a surplus of about $400,000,000, but in spite of this our net imports of farm products from 1934-41 ran about $600,000,000 per year. In 1941 with consumer buying power restored in the United States our net imports of farm products were over a billion dollars.

Since 1910-14 our exports of farm products using that period as a yardstick of 100 dropped progressively to 49.4 percent in 1940 while on the other hand our imports increased progressively to 209.8 percent.

This record is positive proof that our agricultural tariffs since 1922 have not been a barrier to imports of farm products.

In the period of 1910-14 up to 1940 our farm production increased 32.5 percent while our population growth was 38.9 percent. In spite of all this we passed and are asking for extension of the trade agreements to dispose of surplus farm products. Since 1940 our increase in population, on the basis of our American income level, is a greater market than all our export trade in 1940. In addition an increase of $80 per year in the wages of our 55,000,000 workers is equivalent to all exports in 1940.

The simple facts are, gentlemen, that our foreign trade depends on the production of American products and the price we maintain on them. Our foreign trade is merely a byproduct of our American

economy.

I think I can prove this to better advantage by pointing out that of the 9,000,000 business units, nonagricultural and agricultural, all of them put together exported products equal to less than 5 percent of our national income during the 1933-40 period. I would like to point out in addition that of the 3,000,000 nonagricultural units, 96 percent of them employ 19 men or less. I have pointed out that the twothirds of our capital industry, agriculture had net imports of its products. With 96 percent of the nonagricultural units employing less than 19 men and many of them domestic trade and service units, it should be quite apparent that the only group who receive any benefit from the trade agreements are the large industrial groups, sometimes called the "economic royalists." They hire the best economists and that may give the committee the reason why a large percentage of our economists are for the trade agreements.

The depression of 1929 was completely misinterpreted by our economists. It was not due to lack of foreign trade because our Nation has had more than its share of world trade. With only 6 percent of the world's population we have been having, good times and bad, about 15 percent of the world trade. We might ask ourselves just how much are we entitled to? It appears that if we reach out for a greater percentage than we now have we may get into quarrels with other nations.

We have had tariffs ever since the first session of the first Congress. During all that period of over 150 years we have outstripped all the rest of the world with both a higher living standard and a much greater increase in our own productive capacity.

This being true let us also ask ourselves the question, "Why all the effort to obtain foreign trade when we can produce everything with the exception of 5 percent in the United States?" Any attempt to increase our foreign trade will force us to reduce our own production and therefore be against our own interests and the world as a whole.

Our position in the world of tomorrow should be that of a referee and not that of a commercial power. To put us in a position of exporting manufactured goods in exchange for raw materials will be a direct repudiation of the Atlantic Charter. In the Atlantic Charter we proclaimed that we were going to make raw materials available for all the world. With only 6 percent of the world's population we have 25 percent of the available raw material supplies and we cannot live up to the Atlantic Charter and import raw materials which other nations should have.