Mrs. STONE. Isn't it because they are more efficient?

Mr. KNUTSON. No, that isn't it. That isn't it.

Mrs. STONE. They wouldn't have surpluses if they weren't more efficient.

Mr. KNUTSON. Of course, if we can undersell the Japanese, Indian, and Chinaman, we would not need any tariffs. We would be on a free trade basis, and I would be one of the loudest proclaimers of free trade.

Mrs. STONE. I think probably a great many of the things that other people make are competitive, though, with the things

Mr. KNUTSON. I am afraid, when the war is over and they start dumping in this country, you will be rather sorry you appeared before I don't expect to see you back here asking for another extension. The American people will be crying for a tariff 3 years from now. Mrs. STONE. I hope I will be back.

us.

Mr. COOPER. We thank you for your appearance.

Mr. REED. I would like to ask permission for Mrs. Stone to insert the information I requested at this point.

(The information requested was not supplied by the witness.)

Mr. COOPER. The next witness is Mr. Fred Brenckman, Washington representative of the National Grange.

Give your name and address, and the capacity in which you appear, to the reporter.

Mr. BRENCKMAN. My name is Fred Brenckman, and I am the Washington representative of the Grange.

Mr. COOPER. About how much time will you need for your statement?

Mr. BRENCKMAN. I have a statement. Do you want me to file it?

Mr. COOPER. We have six more witnesses.

STATEMENT OF FRED BRENCKMAN, WASHINGTON REPRESENTATIVE, THE NATIONAL GRANGE

Mr. BRENCKMAN. Mr. Chairman, I will just simply make this request, that you permit me to file this statement as it is. I would like to have permission to read the last page.

Mr. COOPER. We will be delighted. Yes; go right ahead. (The statement is as follows:)

The original amendment to the Tariff Act of 1930 which authorized the negotiation of reciprocal trade agreements, approved June 12, 1934, was intended to be a temporary measure. It was passed at a time when there was a world-wide depression, and the act was made self-repealing at the end of 3 years. This act was twice extended by Congress for 3-year periods, and now, after the lapse of 9 years, it is again proposed to extend the workings of the act for another period of 3 years.

The Grange opposed the enactment of this law in 1934 on the ground that the sweeping delegation of legislative authority it contains was wholly at variance with the American concept of government, and that it violated both the letter and the spirit of the Constitution. On each occasion when the act came up for renewal we opposed it for the same reason.

In 1934, certain groups of farmers supported this measure on the theory that it would enable us to do some "Yankee trading" and help us to get rid of some of our agricultural surpluses. But while the act has now been in force for 9 long years, and while under its provisions we have negotiated agreements with about 30 different countries, the hope that an outlet might be found for the surplus products of American agriculture has proved to be vain and illusory. As the act

has been administered, so far from stimulating farm exports, it has had the opposite effect, greatly facilitating agricultural imports. Many members of Congress from the agricultural sections of the country have been well aware of this fact, but so long as the act remained in effect they were powerless to do anything but register futile protests. Under the plea that an emergency existed that could be effectively combated only by the executive department of the Government, Congress had divested itself of one of its most important prerogatives under the Constitution.

In saying this, we do not wish to be misunderstood. The Grange has always been in favor of real reciprocity. But our attitude has been that in our dealings with other nations we should take from them the things that we need and do not produce domestically. Most emphatically, we should not make it easier for other countries to send us the things that we do not need and of which, in normal times, we have a surplus. It stands to reason that there is no advantage in exchanging identical or competing commodities, nor is there any advantage in trade merely for the sake of trade.

During the first half century of our national life practically all exports from the United States consisted of cotton and the manufactures thereof, tobacco, wheat, and flour. There were small amounts of naval stores, guns, and resins together with small amounts of sawmill products, copper, and a few other items. But agriculture contributed the bulk of our national exports, which in turn, made possible the purchase of foreign goods and products.

One hundred years ago, 68 percent of all our exports were crude materials, and an additional 18 percent were crude and manufactured foodstuffs. Less than 14 percent of our exports were manufactured products. From this it will be seen that agriculture provided practically the only foreign exchange available for the purchase of imported products, including tea and coffee, sugar, spices, and other exotic materials.

Agriculture, in fact, has throughout the history of our country been in favor of proper trade with the world at large. The Grange has only contended for the protection of the American market for the products of our own farms, and we still see no advantage in encouraging or even permitting the importation of agricultural products, including manufacturers therefrom and substitutes therefor, like or similar to the products of our own farms and in direct competition with American farmers.

If the Trade Agreements Act is to be extended or renewed at this time for a new period of years, we are strongly of the opinion that the time has come to insist upon constitutional methods of procedure. The Constitution specifically provides that the Chief Executive shall have the power, by and with the advice and consent of the Senate, to make treaties, provided two-thirds of the Senators present concur. We believe that the extension resolution which is now pending before the committee should specifically provided for Senate approval of all trade agreements or treaties. Such a provision certainly could not be misunderstood by friendly foreign nations. Nor should the charge of extreme nationalism or isolationism be hurled against those who are standing up for and demanding the preservation of our democratic system of government and the application of the fundamental principles laid down in the Constitution.

If the people and their representatives in Congress are not to be trusted, and if all power is to be concentrated in the hands of one man, whether he be called president, king, emperor, or dictator, then our whole system of democracy is a farce.

It is worthy of note that in nearly all instances the trade agreements we have thus far negotiated with other nations have been subject to parliamentary approval on the part of the countries with which we have dealt.

But here in the United States, the greatest republic in the world, this rule has not been applied.

If it be contended that the provisions of the Constitution which requires a two-thirds majority of the Senate for ratification of treaties is extreme, then it is only necessary to say that during the 9 years in which we have been evading and nullifying the Constitution in this connection steps could easily have been taken to amend the fundamental law, so that only a majority vote of the Senate or of both Houses of Congress would be necessary for the ratification of treaties. This does not mean that the Grange is advocating any such amendment.

We are aware of the fact that there is a place in our foreign relations for so-called executive agreements, but heretofore it has always been understood that executive agreements have for their purpose the elaboration, interpretation, and clarification of existing treaties and international practices, together with legislation which has a bearing upon our relations with other nations.

TRADE AGREEMENTS SHOULD CONFORM TO RECOGNIZED DEFINITIONS OF RECIPROCITY

Not only should trade agreements, if entered into, be conducted according to constitutional or democratic methods, but they should conform to recognized definitions of the terms used. A reciprocal trade agreement definitely contemplates negotiations between the Government of the United States and the government of a foreign country. In other words, negotiations are bilateral in character. They are not multilateral, with all countries at the same time, nor are they unilateral-in the nature of dictated program forced upon another country by us. Furthermore, a reciprocal trade agreement contemplates equal concessions on the part of those concerned. The United States could rightfully agree to concessions in the American market in exchange for equivalent concessions in the markets of the foreign country with which negotiations were being carried on. Finally, negotiations in every case should be carried on only with the principal or most important individual foreign supplier of the commodities in question. Altogether too frequently during the last 9 years the administration has been found making concessions to foreign governments which were not the principal suppliers of the commodities involved, and then extending these concessions to all other countries without any equivalent concessions from them.

Thus far a most careful scrutiny of concessions granted by the United States and concessions which it was claimed other countries had made to us have not disclosed any equality. Almost universally the United States had made the concessions, not only to the country in question, but to all the other countries, and in turn there is no evidence of concessions made of equivalent value.

Over and over again evidence has been submitted that concessions which we claimed to have secured from foreign countries were no more than mere gestures or shadows, and foreign countries were found to immediately proceed to devise other forms of protection for themselves, thus canceling any benefit which it was pretended might otherwise have come to our people. We have yet to find any case where there has been any gain to American agriculture as a result of any concessions which any foreign country has granted. On the other hand, we of this country have suffered as the direct result of concessions made in trade agreements affecting our own commodities.

Proponents of the reciprocal trade agreements program have argued that the United States had excessively high tariffs and other restrictions, and therefore, that we should make most of not all of the concessions. They have argued that since we have become a creditor nation we must encourage imports in greater volume and, therefore, we must make concessions. At the same time, however, the act itself specifically sets forth that its purpose is to stimulate exports. The two policies are in direct contradiction.

There is a common impression that the United States has been the chief offender among the nations of the world in the erection of high tariff walls. As a matter of fact, our rates of duty have not been as high in many instances as those of other countries. A recent study of the American Tariff League disclosed that most of the important industrial nations maintain higher rates of duty on the average than does the United States. Furthermore, it is proper to call attention to the fact that the United States has the biggest free list of any country in the world. During the past 25 years approximately two-thirds of all our imports came in free of duty.

During the 9 years in which the Reciprocal Trade Agreements Act has been in effect, the United States has followed two divergent and conflicting policies. On the one hand we have been building up a program of economic nationalism with maximum hours, minimum wages, collective bargaining, social security, and Government employment or relief for all who would otherwise be unemployed. In addition, we have curtailed agricultural production and pursued a policy of scarcity in an effort to establish or preserve equitable relationships between agriculture and other groups. All this called for huge appropriations, and has added to the public debt.

On the other hand, under the Reciprocal Trade Agreements Act we have been pursuing a policy of international altruism. It is our judgment that these two conflicting policies cannot be continued at one and the same time. We believe that this is the time to take note of this conflict of policy.

LOSS OF REVENUE

It may not be out of place here to call attention to the fact that during the first half of the history of this country, up to 1860, the tariff provided_fully 90 percent of all the revenue received by the National Government. In other

words, perhaps not more than 10 percent of all Government revenue prior to 1860 came from the sale of lands and other miscellaneous sources. Again, during the following 50 years, 1860-1910, about 90 percent of the revenue came from customs duties and excise taxes, such as taxes on intoxicating beverages, tobacco, and other items. Only during the last 30 years has the National Government secured important revenue from corporation taxes and taxes on individual incomes.

As recently as 1929-30, the revenue derived from customs duties exceeded half a billion dollars annually. As a result of reductions in rates of duty in reciprocal trade agreements on about 1,000 items, national revenue from customs duties has been cut almost in half.

RECIPROCAL TRADE AGREEMENTS AND PEACE

In the early days when the reciprocal trade agreements program was under discussion (1933-34) it was argued that this program would have much to do with the preservation of peace, not only as between the United States and foreign countries but that by applying the principle of unconditional most-favored-nation treatment, the United States could preserve peace throughout the world. It is not necessary here to dwell upon the failure of this aspect of the program. Soon after the passage of the act revolutions, invasions, and outright war developed in one country after another, until presently we are in the midst of World War II. Hitler came into power in 1933, the year before the Reciprocal Trade Agreements Act was passed. Almost immediately thereafter Germany began to rearm and make preparations to conquer the world. Even if we had completely abolished our tariff system the war which now engulfs the whole world could not have been prevented.

DECLINE IN AGRICULTURAL EXPORTS

Attention has already been called to the fact that there is no known concession in any of the trade agreements thus far negotiated in which benefits have accrued to agriculture. In a few minor cases foreign countries have made gestures, but have immediately proceeded to take other steps, the result of which has been that there has been no increase in the volume of exports of agricultural products. The fact is that exports of agricultural products have continued to decrease year after year during the last 9 years. It is true that during 2 or 3 years there was a slight recovery in the volume of exports, but this was due to the paying of tremendous subsidies in an effort to unload the surplus wheat and cotton from American elevators and warehouses on foreign countries which were altogether too willing to have the benefit of these materials as stock piles for their own use in view of the approaching wars.

FARM IMPORTS REGISTER INCREASE

In contrast with the observation just made to the effect that no foreign concessions of value were secured and that exports of farm products continued to decline, it is significant that many concessions were made in reciprocal trade agreements as a result of which there has been a substantial increase in the volume of agricultural imports.

Before citing detailed illustrations, we may to advantage examine the general statistical record. The Department of Agriculture, Bureau of Agricultural Economics, reports that imports of what are called complementary agricultural products increased in value from $435,882,000 in 1934 to $668,031,000 in 1939. Thus, we have a comparison of the year before trade agreements with the last year before war conditions interfered with the normal flow of trade. The increase was almost exactly 50 percent. It may be noted here that the price level of imported manufactured foodstuffs, including beverages, was almost exactly the same for the year 1934 and the year 1939 so that the increase in value of imports cannot be ascribed to a price increase. So far as crude foodstuffs are concerned prices in 1939 were substantially lower than in 1934, so that here again the increase in dollar value of imports cannot be charged to a price increase.

We may now make comparison of dollar value of imports of what have been classified as "supplementary" agricultural products. The Department of Agriculture tables show imports in 1934 valued at $497,892,000, whereas imports of these items in 1939 were $571,413,000. This is an increase of not far from $75,000,000, or 15 percent. Incidentally, since this group of items are directly competitive and interchangeable, it may be added further that prices of all farm products in the United States were almost exactly the same in 1939 as in 1934. The change in volume of imports cannot, therefore, be ascribed to price change.

Col. Leonard Ayres, the noted economist of the Cleveland Trust Co., has recently pointed out that in the 5 years just before the war this country imported almost two and one-half times as much food as we exported. According to a chart prepared by Colonel Ayres, during the 5-year period from 1915 to 1920 our imports of food were almost 47 percent as great as our exports. From 1920 to 1925 this figure increased to 81 percent; between 1925 and 1930 it rose to 115 percent. Between 1930 and 1935 the percentage was 162, and between 1935 and 1940 our imports of food were 247 percent as great as our exports.

SOME CONCRETE ILLUSTRATIONS

One of the early trade agreements negotiated was that with the Netherlands and her dependencies. Over a long period substantial quantities of tropical starches were imported from the Dutch East Indies. These tropical starches were largely tapioca and sago, with small amounts derived from other roots. During the years 1920-24 imports averaged slightly less than 100,000,000 pounds annually. Farmers interested in the production of such crops as corn and potatoes, from which great quantities of starch are derived, made frequent requests for a tariff on these tropical starches. These requests, however, were denied on the ground that these were not competing starches, since tapioca and sago were almost entirely used as food. In other words, it was claimed that these were not substituted for domestically produced starch in the laundry, textile, and paper industries or elsewhere, such as in the manufacture of mucilage or glue.

By 1936 imports had reached 310,000,000 pounds, or three times the volume back during 1920-24. By that time it was perfectly clear that these starches were directly competitive and displacing starches produced from domestic farm products.

When the agreement with the Netherlands was pending, various agricultural groups pleaded that tapioca should not be bound on the free list, explaining that it was their intention to ask Congress to impose an excise tax on these imports to equalize competitive conditions for the benefit of domestic producers of corn and potato starch. But the effort proved unavailing, and tapioca was bound on the free list.

It is interesting to note that by 1939 imports had increased another hundred million pounds, amounting to 413,912,000 pounds in that year. Since 1939 there has been a decrease in imports, largely due, undoubtedly, to World War II. Now the United States is finding itself almost completely dependent upon the American farm to produce necessary starch of all kinds for both edible and industrial purposes. It is perfectly clear that dependence upon foreign sources and the policy adopted under the trade agreements program was unwise and contrary to the general welfare of industry and consumers in this country.

Incidentally, the tremendous importation of from three hundred to four hundred million pounds of these cheap tropical starches produced by peon, serf, or contract labor tended to hold down the price of corn, potatoes, and other farm products in the United States during the very period when Congress under Agricultural Adjustment Administration programs was striving for something approaching price parity. While we were making the United States the dumping ground of the world for these cheap starches, the Government of the Netherlands itself imposed an excise tax upon them for the protection of its own potato growers. Another illustration of equal significance may be cited regarding casein. Prior to the Tariff Acts of 1921-22 casein was on the free list, and substantial imports were received in the American market in spite of the fact that literally billions of pounds of skimmed milk returned to the farms from local creameries to be used as feed for calves and hogs or was actually "run into the sewers" because of our inability to compete with the cheap materials and labor in such countries as Argentina.

The Tariff Act of 1922 imposed a duty of 21⁄2 cents per pound on this product. It may be stated that this tariff at least prevented a substantial increase in the import movement, since imports in 1923 were 26,490,000 pounds. In 1929 the figure was 27,583,000 pounds.

In an effort to stimulate domestic production and the utilization of byproducts of skimmed milk, the tariff was raised in 1930 to 51⁄2 cents per pound in harmony with the rate of duty on butter and cheese. Between 1929 and 1938 imports of casein decreased from more than 27,000,000 pounds to less than 1,000,000 pounds. In other words, a definite domestic industry had been built up. Raw materials which were otherwise being wasted were utilized and American industry and consumers were provided with a sanitary domestic product at relatively low prices.