PARAGRAPH 409-BOOK PAPER.

was the undoubted purpose of everybody connected with the framing of that bill to secure a greater supply of free wood from Canada for the purpose of manufacturing paper in this country, and that was the real consideration in providing free paper to Canada. It seems to me, if the Treasury Department has made any such ruling as Mr. Wheelwright suggests, that department goes directly in the face of the main purpose of the act, and thus occurs discrimination upon the American paper makers. I trust Mr. Wheelwright is mistaken and that the Treasury Department has not made such a ruling. That is all I wish to say, I believe.

TESTIMONY OF GEORGE SULLIVAN, PRESIDENT OF THE WILLIAM NIXON PAPER CO., PHILADELPHIA.

The witness was duly sworn by the chairman.

Mr. SULLIVAN. Mr. Chairman, I would like to correct the calendar. I am not here to represent the "Martin & William Nixon Paper Co., but I am here representing 39 book paper manufacturers of the United States.

The CHAIRMAN. This was your assignment, was it not?

Mr. SULLIVAN. Yes, sir.

The CHAIRMAN. What is your name?

Mr. SULLIVAN. George Sullivan, and I am president of the William Nixon Paper Co.

The CHAIRMAN. You may proceed.

Mr. SULLIVAN. Mr. Chairman and gentlemen of the committee, it is my purpose to only read the beginning and ending of my argument here, as the most of the center part of it has been given already on the Canadian reciprocity act and various features along that line.

The common practice of including the manufacturers of all kinds of paper in one general industrial group for common consideration and common treatment is responsible for no little confusion and injustice. We desire, therefore, to have it distinctly understood at the very outset that this brief is submitted solely in behalf of the manufacturers of that grade known to the trade as book paper, the production of which is a separate and distinct industry, with an invested capital of about $120,000,000, an annual product of the value approximating $70,000,000, giving employment directly in the manufacturing plants to some 15,000 people, and indirectly to as

many more.

News print and book paper differ widely both in the method of their production and the uses to which they are put. They are in no sense competitive articles of commerce. It is true that to a certain extent similar raw materials are used in their manufacture; but the same may be said of shoes and gloves, yet no one would think of treating the latter as identical.

News print is made principally from a pulp produced by the mechanical grinding of the coniferous woods; book paper from vegetable fiber obtained by the chemical treatment of various raw materials, requiring much more labor and greater skill, and affording a relatively small yield of finished product.

There is no foundation in fact for the charge so regularly and recklessly made by certain consumers, who would depress the market by

PARAGRAPH 409-BOOK PAPER.

hostile legislation, that all paper manufacturers are banded together for the purpose of maintaining extortionate prices and reaping abnormal profits. There are no less than 60 separate and independent concerns engaged in the production of book paper, and they are located in 15 different States.

In presenting our claim for consideration at the hands of the committee in its work of tariff revision, we distinctly disclaim any intention of asking or expectation of receiving special favor. We are not contending that our industry should be singled out for special paternal care on the part of the Government. We want to be accorded the same treatment extended to other American industrial interests-no better, no worse. With that we shall be entirely satisfied.

With existing conditions we are not content; believing, as we do, and as we shall undertake to demonstrate, that our tariff regulations unreasonably discriminate against us. This will readily appear to one who briefly reviews the tariff legislation affecting book paper.

The tariff act of July 4, 1789, fixed a duty of 7 per cent ad valorem on all writing or wrapping paper, which nominal rate remained practically unchanged until January 14, 1862, when the heavy expenses of the Government incident to the Civil War required a decided increase in the tariff revenues; at that time a duty of 35 per cent ad valorem was assessed. At the same time a general advance was made in all the important schedules. On June 6, 1872, the paper tariff was reduced to 90 per cent of the previous duty; and on March 3, 1883, the rate was reduced to 15 per cent ad valorem on "print paper, unsized, used for books and newspapers exclusively," which rate continued until July 24, 1897, when the Dingley law became effective, at which time some changes in the classification and description were made, but no material revision of the rate. The schedule then was made to read as follows:

Printing paper, unsized, sized or glued, suitable only for books and newspapers, valued at not above 2 cents per pound, cent per pound; valued above 2 cents and not above 2 cents per pound, cent per pound; valued above 2 cents and not above 3 cents per pound, cent per pound; valued above 3 cents and not above 4 cents per pound, cent per pound; valued above 4 cents and not above 5 cents per pound, cent per pound; valued above 5 cents per pound, 15 per cent ad valorem. With certain conditional clauses affixed.

The Dingley rate continued in existence until August 5, 1909, at which date the Payne-Aldrich law became effective. In the general revision then made, Schedule M of that bill was changed to read as follows:

Printing paper unsized, sized, or glued, suitable for the printing of books and newspapers, but not for covers or bindings, valued at not above 24 cents per pound, cent per pound; valued above 2 cents and not above 2 cents per pound, cent per pound; valued above 2 cents per pound and not above 3 cents per pound, cent per per pound; valued above 3 cents and not above 4 cents per pound, cent per pound; valued above 4 cents and not above 5 cents per pound, cent per pound; valued above 5 cents per pound, 15 per cent ad valorem.

With certain conditions attached.

What has transpired since that date affecting paper is of such recent occurrence as to be easily recalled.

By the provision of the McCall bill, by which it was sought to establish reciprocal trade relations with the Dominion of Canada, paper of

PARAGRAPH 409-BOOK PAPER.

a valuation not exceeding 4 cents per pound at the point of manufacture, if made in that country from unrestricted wood, was put on the free list, though the American manufacturer is not permitted to sell his paper in Canada without the payment of a duty. Section 2 of that measure, covering paper, was put into effect immediately following its passage and so continues, thus greatly encouraging the importation of Canadian paper into the United States by permitting the bulk of it to enter free of duty, as is clearly indicated by the following table of imports:

Importation of printing paper from Canada.

[First 10 months of the year 1912.]

The extent of the damage done to the American paper manufacturer by section 2 of the reciprocity measure can not yet be accurately measured, but its seriousness is clearly indicated.

At the time the law became operative the Canadian manufacturer was not ready to avail himself of its opportunities. Not anticipating such generous treatment on the part of the American Government, he was unprepared to supply the market thus opened, but immediately began the extension of manufacturing plants then in operation, as well as the construction of new ones. It was not, therefore, until within recent months that the product of this additional equipment began to invade the American market. Since then the increase in importations has been rapid, as shown by the foregoing table, and the near future promises an incoming tonnage greatly in excess of anything we have yet experienced.

As indicating the extent to which the Canadian manufacturer is intending and preparing to use this open channel of commerce for the displacement of American product by that of the Dominion, we quote from a recent editorial utterance of the World's Paper Trade Review of London, a reputable trade journal, which may be taken to fairly represent the Canadian view:

Should the present tariff system existing between Canada and the United States in regard to paper continue, the outlook for the Canadian export trade is very rosy. United States paper men are pointing with alarm to the fact that between January and September, inclusive, of the present year, nearly 75,000,000 pounds of paper came into the Republic from Canada free of duty; it is certain that every month of the coming year will render this condition more pronounced. If such an immense quantity can be poured over the border under present conditions, what will be the case when half a dozen new Canadian paper companies get into working order?

PARAGRAPH 409-BOOK PAPER.

This clearly indicates the certain enlargement of the Canadian manufacturing capacity, and the hopefulness with which our Dominion neighbors contemplate the occupancy of the American market.

It is true that up to this time the Canadian importations have consisted in the main of news print; for the reasons that the Canadian water power is better adapted for the grinding of wood to be used in news print manufacturing, and also because, owing to the greater expense and complication attached to the construction of book paper plants, more time is required to put them into operation.

It should not be forgotten that under existing conditions the Canadian not only has free access to our market, which lies at his very door, but is afforded a very decided advantage over the American manufacturer by our own tariff regulations; notably by reason of the amount that is necessarily paid out by the American manufacturer on account of the duties levied on the materials and supplies purchased by him, from which burden the Canadian is comparatively free.

It may be both interesting and illuminating to compare the rates of duty levied by the Canadian Government with those of our own country on some of the principal articles entering into the manufacture of book paper. These, for instance, are as follows:

A conservative estimate of this difference in rates applied to the purchases made within a period of one year by the American manufacturers of book paper discloses an advantage to the Canadian industry amounting to something like $1,500,000, which in itself is a very potent inducement for the removal of our mills to the Canadian side.

That the distinct policy of the Canadian Government and the Canadian people is to adopt such measures as will hasten such removal is further instanced by the attitude of the Canadian railroads. Notice was some time ago given of their purpose to make general advances in the freight rates on pulpwood shipped into the United States, though no increase whatever was suggested on the paper rate; the evident purpose being to increase the difficulty of sending raw material into this country, and at the same time make the shipment of the finished product as easy as possible.

On complaint being made by certain shippers, the effective date of these advances was postponed until February 4, 1913.

Mr. D'Arcy Scott, assistant chief commissioner of the board of railway commissioners of Canada, stated at the oral hearing granted at Ottawo, on August 28, 1912, that in his opinion this Canadian raw material, spruce pulpwood, should be manufactured into paper

PARAGRAPH 409-BOOK PAPER.

upon the Canadian side of the international line, and that the same opinion was widely held in Canada.

The purpose of forbidding the free entry of Canadian paper, if made from wood upon which export restrictions are laid by that Government, was of course to induce the removal of such restrictions, and thus permit the American producer to obtain pulpwood from that source. But it has failed, and Canada's unwillingness to respect the spirit of the law is demonstrated by certain official removals recently made of export restrictions from the individual timber rights of Canadian paper manufacturers, for the avowed purpose of enabling them to send their product into our market free, although they do not propose to sell a stick of their wood. The release is, therefore, a hollow pretense and mockery.

Referring to this action, we quote the language of the Quebec Chronicle, of December 31, 1912:

It remains to be seen if the astute Uncle Sam is likely to be flimflammed by any such transparent device.

It will be seen from the foregoing that the American paper maker has gradually drifted toward free trade, so far as his product is concerned. At the same time the tariff has been kept up in other directions, so that he is in the unprofitable attitude of one buying in a protected market and selling in a free-trade market.

It also appears, as above stated, that the highest rate of duty that has ever been assessed on book paper was 35 per cent ad valorem, and that at a time when other dutiable articles of commerce paid as a rule a very much greater percentage.

Since June 6, 1872, a number of changes have been made in the rates, and these have invariably been reductions, until now the tariff on book paper averages about 16 per cent on the entire book product when imported from foreign countries other than Canada, from which latter it comes in practically free.

These rates, it will be recognized, are very much below the average, and out of all proportion to the duties levied on many articles of common use. Note, for instance, the equivalent ad valorem rates on the actual importations for the year 1911 of the following

while the average rate on all dutiable commodities is estimated to be about 43 per cent.

Therefore, a revision of the tariff made in conformity with the platform of the party which will dominate the Federal Congress after March 4 next, by no means involves any sort of reduction of the existing rates on book paper. Both promises of the party, viz, to effect a revision downward and to equalize the burdens of Government, may be kept in all good faith without disturbing our tariff rates except for the purpose of removing the discrimination which exists against us.