The raw material has been changed from one produced in the domestic market to one produced abroad, i. e., from home-grown corn to imported molasses. In the year which ended June 30, 1913 we imported 33,927,000 gallons of molasses and used 64,641,000 gallons in the manufacture of alcohol; in the year ended June 30, 1926, we imported 256,246,000 gallons of molasses and used 267,404,000 in the manufacture of alcohol. Figures for other years are roughly comparable. The figures for 1926 indicate an increasing dependence of alcohol manufacturers on foreign sources of molasses.

Molasses must be the cheapest source of raw material for alcohol, otherwise it would not be used and the corn distilleries would not have been closed, or would not have gone onto a molasses basis. In the manufacture of alcohol I understand that a bushel of corn is equivalent to from 6 to 7.5 gallons of molasses. The exact ratio is a technical matter which appropriate investigation by agents of the conmittee could readily establish precisely without much difficulty. Hence, a difference of 1 cent per gallon in the price of molasses is equivalent to from 6 to 7.5 cents in the price of a bushel of corn. Congress has it in its power to raise the price of molasses high enough so that corn is at least on a competitive basis with molasses as a raw material for the manufacture of alcohol by fixing appropriate import duty on molasses and a compensating one on alcohol. Just how much of a duty would be necessary to accomplish this is again a technical matter which could easily be determined by the Federal agency in charge. Three cents à gallon would be equivalent to from 18 to 22 cents per bushel of corn 5 cents to from 30 to 38 cents and 10 cents to from 60 to 75 cents. Certainly a rate of 1o cents a gallon would place corn on a competitive basis.

The 267,404,000 gallons of molasses used in 1926 in the manufacture of alcohol were equivalent to about 40,000,000 bushels of corn. If corn replaced all of this molasses the demands for corn in the cash market would be increased by a corresponding amount. American farmers would have this additional market. The American grain trade would increase its volume of business by this amount. The immediate effect of such an increase in demand, if it all came at one time would be to cause a sharp advance in corn prices. Forty-million bushels is more com than is handled by any primary market in the country except Chicago. The long-run effect of this increased demand would be to raise the price sufficient.v to cause an equivalent increase in production or to direct corn from other uses i. e., feeding of livestock. In my opinion the increased supply would come largely from such diversion rather than from increased production. In any event the price would be somewhat higher.

Suppose the corn in question were all diverted from livestock productive The cheapest class of meat animals at present is hogs. If 40,000,000 bushels corn were diverted from pork production, our pork production would be reduced at least 400,000,000 pounds. One hundred pounds of pork can be made by good stockmen from less than 10 bushels of corn, the figure which is used in this computation. If 8 bushels were used, the 40,000,000 bushels of corn would be equivalent to 500,000,000 pounds of hogs. Using the lower and more conservstive figure and assuming that 100 pounds of hogs will make 75 pounds of pork and lard, 40,000,000 bushels of corn would make 300,000,000 pounds of pork and lard, an amount equivalent to our entire exports of pork and to about 40 per cent of our exports of lard during 1927. Such a permanent decrease in our pork exports would certainly lead to a higher price basis for hogs. The reduction in supply of feed grains would similarly strengthen the price basis for other livestock products. Hence not only the corn producer, but also the stockman and dairyman, would benefit.

Whatever its benefit, it would be a mistake to assume that this particular measure would be adequate to bring the price of corn and hogs back to a parity with the level of the prices of the items which enter into farm and living ecets. It would tend in that direction but it alone would not be adequate.

To summarize: A rate of duty on molasses high enough to put corn upon at least a competitive basis would operate to hasten the day when our corn producers generally will enjoy the benefits of producing for the domestic market. Until that time arrives they must continue in a position of disadvantage so long as the Nation pursues policies which operate to maintain a high price level on goods produced for the domestic market and for services rendered in the domestic market.

TABLE 1.-Relative Illinois farm prices of selected products and related items

1 U. S. Department of Agriculture indexes for United States as a whole, 1921-1927. Weekly earnings of New York State factory workers.

Cornell University indexes.

99

82

102

116

106

124

124

147

124

121

126

180

136

140

144

142

159

177

167

203

TABLE 2.-Quant ties of raw materials used in the production of alcohol by licensed

BRIEF OF THE NATIONAL WHOLESALE DRUGGISTS' ASSOCIATION AND THE AMERICAN MANUFACTURER OF TOILET ARTICLES

COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C.:

On behalf of the National Wholesale Druggists' Association and the American manufacturers of toilet articles, very large handlers and consumers of industrial alcohol, I desire to register an earnest protest against the proposition to increase the duty on blackstrap molasses, not imported to be commercially used for the extraction of sugar or for human consumption.

At the present time nonedible blackstrap molasses is the chief source of industrial alcohol. The quantity of such molasses made as a by-product of cane sugar manufactured from domestic sources is negligible from the standpoint of the industry producing industrial alcohol. The imposition of such a duty as is

34120-29-VOL 5, SCHED 5-32

proposed would result in raising the price of industrial alcohol upwards of 1 cents per gallon and would be reflected to a disastrous extent in the increased cost of one of the most essential raw materials known to American industry. That your committee may appreciate the enormous development in the use of alcohol for industrial purposes in recent years, I quote from the following address of Prohibition Commissioner Doran, delivered on February 20, 192 before the department of economics, sociology, and government of Yale University:

"Industrial alcohol has assumed an importance in the scientific and industra progress of the United States that was hardly conceived of when Congress passe. the first tax-free denatured alcohol act, June 7, 1906. In the first year, abor 1,000,000 gallons of industrial alcohol were used in the arts and industrie Last year, over 90,000,000 gallons were manufactured and distributed to th sands of individual manufacturers engaged in thousands of different man facturing activities. Without a large supply of industrial alcohol at a modera: cost, a great many of our essential industries would hardly exist, let al prosper. Since the war, the United States has had a wonderful developme along chemical manufacturing lines, and to-day our industries consume industrial alcohol than do the industries of any other country.

"Industrial alcohol is a necessary solvent in the preparation of hundreds drugs and medicinal preparations. It is the solvent used in the preparation flavoring extracts, both household and manufacturing extracts. It is ployed as a solvent, as well as a component part, in the manufacture of synthetic chemical compounds used medicinally and in the arts and industr It is employed in the manufacture and purification of many of the so-cal "coal tar" medicinal compounds. It is a necessary solvent in the manufact of dyes. It is a necessary material for the manufacture of ethyl ether, bu technical and anesthetic grade. It is a necessary solvent for all manners 42 kinds of varnishes, shellacs, paints, lacquers, and miscellaneous protective cover ings. Industrial alcohol, as such, and ethyl acetate, which is manufactured fr alcohol, are widely used in the manufacture of lacquers which employ nitrate. cotton as a base. The entire automobile industry employs millions of gas of these cotton lacquers annually. It is used as a cleansing fluid, as a steril ing agent in hospitals, and is employed widely as an antifreezing agent in an mobile radiators. One of the principal grades of artificial silk requires letz quantities of alcohol and ether made from alcohol.

"These few above-mentioned necessary uses of alcohol merely illustrate s wide employment in all of our industrial operations. Its manufacture regarded by the War Department as a key industry to our national defense Doctor Doran made no attempt at a comprehensive enumeration of the of alcohol and, indeed, but barely scratched the surface. Nearly one-half the output of the alcohol distilleries of the country is now used in a complete, denatured form as an antifreeze mixture in the radiators of automobiles and is thus employed in approximately 23,000,000 cars, serving practically the entire population of the country. A large amount of alcohol is used in the prod tion of artificial leather which has largely displaced natural leather in the upholstering of automobiles and furniture. Alcohol is used in rapidly increas ing quantities in the manufacture of radio equipment. A use of alcohol increasing by leaps and bounds is in the manufacture of films for photographs including the entire output of moving pictures. Alcohol is an essential materi in the mixture used in the coating of airplane wings. It is the most essenti material in the manufacture of celluloid, pyroxylin, and plastic products. It is largely consumed in the manufacture of high-grade inks for engraving, lith graphing, etc. A very large gallonage is annually used in the manufacture smokeless powder and for this purpose it is one of the most essential materials for the national defense and in addition it is largely used in other departmerts of chemical warfare, including the manufacture of gases. The toilet-god industry of the United States with its output valued at more than $200.000.00 is based on alcohol as an absolutely essential material used in the production of perfumery, toilet waters, hair and skin lotions, tooth pastes, shaving creams liquid and transparent soaps, and various other adjuvants for the health of the people. The drug industry, including manufacturers, wholesalers, and re tailers. in purveying to the public, to the physicians, and to the hospitals, cet sumes very large quantities of alcohol, in accordance with standards fixed br the Federal Government, there being absolutely no substitute for this material in the manufacture of these essential products. Finally, throughout the entire field of the production of chemicals, alcohol is universally recognized as the

mest important and widely used raw material without which no laboratory, no matter how large or small, can successfully be operated.

Specifically, the drug and toilet-goods industries have for their foundation industrial alcohol, both pure and denatured. A vast amount of research has been devoted to reducing the amount of alcohol present in the products of these important branches of industry but the irreducible minimum has been reached and any increase in the cost of this essential material will be nothing less than a calamity both to manufacturer and consumer.

It is our earnest hope that your committee in its wisdom will unhesitatingly reject the demand for any increase in the present duty on inedible blackstrap molasses. A higher duty would impose a heavy burden upon the entire population of the country and would be of no substantial aid to the agricultural interests in whose behalf it is urged. Respectfully submitted.

W. L. CROUNSE,

For the National Wholesale Druggists' Association and the
American Manufacturers of Toilet Articles.

BRIEF OF THE NATIONAL PAINT, OIL, AND VARNISH
ASSOCIATION

To the COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C.:

Subject: Blackstrap (nonedible) molasses, industrial alcohol, paragraph 502. GENTLEMEN: As chairman of the industrial alcohol committee of the National Paint, Oil & Varnish Association I note, with not a little concern, proposals emanating from various sources that a heavy duty (representing an increase of from 2,400 to 3,000 per cent over the present rates) be placed on blackstrap molasses not imported to be commercially used for the extraction of sugar or for human consumption. That product is the principal source of industrial alcohol. It is a by-product of cane-sugar manufacture, the supply of which from domestic sources is insignificant so far as alcohol production is concerned. The proposed boost in tariff rates on blackstrap molasses would be reflected in an increase in the price of industrial alcohol of from 10 cents to 121⁄2 cents a gallon representing the greater cost of raw material alone.

It may not be amiss to state that I am a member of the industrial advisory committee of the Federal Prohibition Commissioner composed of representatives of the leading scientific societies and trade organizations concerned with the manufacture and nonbeverage uses of alcohol-pure and denatured. A list of such committee is attached hereto as Exhibit "A." I can also lay claim to being one of the few surviving members of the committee of manufacturers which cooperated with the Government in bringing about the enactment of the original denatured alcohol statutes. (Act of June 7, 1906; act of March 2, 1907; and act of October 3, 1913.) If practical experience is of any value to your honorable committee, I surely have a right to speak.

The National Paint, Oil and Varnish Association is second only to banks in point of invested capital, and its membership extends to every section of the country. Denatured alcohol is an essential raw material in our trades and enormous quantities are used therein.

As an illustration of the widespread importance of alcohol in science and industry, there are attached hereto, as Exhibits "B" and "C," respectively, a speech delivered in the House of Representatives on March 3, 1927, by Hon. Joseph W. Byrns of Tennessee, and excerpts from a governmental pamphlet setting forth innumerable articles in the manufacture of which the Treasury Department has specifically authorized one or more formulas of tax-free specially denatured alcohol. (Appendix to Regulations No. 3, revised February, 1928.)

Succinctly stated, industrial alcohol is an indispensable and irreplaceable commodity of supreme importance in modern industry. Its ramifications in all branches of productive activities, without exception, and in chemical processes especially, are unlimited. To our organic chemical industry, almost nonexistent in the United States before the World War but which now bids fair to outstrip that of any other country, industrial alcohol is essential. To the motorist industrial alcohol is as familiar as gasoline. Nearly 50,000,000 gallons of completely denatured alcohol are used annually in nonfreezing solutions for watercooled cars.

The revolutionary changes in my own field of business activity are based in their entirety on the remarkable development of chemical science both pure research and applied technique. If the chemist had not had during the past two decades cheap raw materials in working out his problems, the paint, oil, and varnish industry would to-day be following the methods of the nineteenth century. You can readily imagine what this would mean-to take only one example in the automobile trade. Not so long ago weeks were required to paint an automobile body; now we get a better job in a few days.

The nitrocellulose lacquer industry (utilizing cotton linters), which originated in the United States, is based entirely on a plentiful supply of industrial alcohol at reasonable prices. From a small beginning a few years ago it has practically doubled its output every year, and will produce some 30,000,000 gallons this year with more to come if not artificially cramped. An important use of this lacquer is in the canning of farm products, such as corn, peas, and tomatoes; it helps bring these products to the consumer in a more satisfactory condition, and any higher price would bring about an immediate increase in the costs of this important farming industry.

Similar examples could be given without number.

The progress of our industry from a craft to a science was made possible only because this Government in its wisdom over 20 years ago made available to the arts and industries an ample supply of the essential material-alcoholwholly free from the prohibitive internal-revenue tax that had theretofore attached to it. Surfacing material-whether called paint, varnish, shellac, or lacquer is basically a combination of solids and liquids, with coloring matter to meet public requirements; and denatured alcohol is here a basic raw mate rial, whether used as the ideal solvent directly or in the manufacture of essential components of our products.

This is not the first time that your honorable committee has had occasion to study the question of the value of industrial alcohol to national welfare. In the revenue revision of 1925 a tax of 1 cent a gallon on denatured alcohol was suggested. I was accorded the privilege of submitting a brief in opposition thereto, and no such tax was imposed. I quote below a few paragraphs from said brief, viz:

"The following statement, made in its official report by a joint select committee of Congress, is fully as true now as the day it was written, nearly B years ago-particularly when it is considered that in the World War the production of denatured alcohol was rated as one of the 'key' industries of the Nation: 1

"The uses of alcohol other than as a beverage are more largely and widely extended than is generally supposed. But while the use of alcohol as a beverage is purely voluntary its employment for all other purposes is legitimate, bene ficial, and necessary. No article entering into manufacture or the arts, whether of domestic or foreign production, performs more legitimate or beneficial funetions. There is scarcely a manufacturer in the country who does not use alcohol in the production of his goods to a greater or less extent.' (Rept. No. 411, 55th Cong., Dec. 17, 1897.)

66 * *

* In connection with the development of denatured alcohol in Germany, it may be interesting, at least from a historical standpoint, to note the following extract from an article written-upon his return from that countryby the late commissioner of internal revenue, John G. Capers, published in Harper's Weekly, October 3, 1908:

"Industrial alcohol is a matter of nearly as much concern to the German Empire as its army and navy; in fact, the elder Emperor inaugurated the industry for the primary purpose of having a source of light, heat, and power within the empire independent of petroleum products, of which Germany has none. That wise old Emperor, realizing that some day his empire might be forced, in time of war, to be self-dependent and resourceful within its own borders, determined to be independent of petroleum products, all of which were and still are shipped into Germany from other countries, and an elaborate paternal system was inaugurated to insure as the Government's ultimate safety source of light, heat, and power the alcohol which would be produced from the German potato, now so carefully cultivated for that purpose, as it has been for nearly 40 years.'

1 Tremendous quantities of alcohol were required in the production of smokeless powder, poison gases, and other war munitions; airplane dope, hospital supplies, etc.