Mr. GRIGGS. How long have you been in the paper business, Mr. Cowles? Mr. CowLES. I have been in the paper business for sixteen or seven teen years. Mr. GRIGGS. Did you have much money when you went into it? Mr. GRIGGS. Did you lose it in the paper business? Mr. CowLES. I lost a good deal of it; yes-all that I lost, I did. Mr. CowLES. Well, perhaps that is a little extreme. The first two or three years that I was in the paper business I think it cost me about $250,000 or $300,000. Mr. GRIGGS. You are worth more now, though, than you were when you started? Mr. CowLES. Yes; I am. Mr. GRIGGS. I am glad to hear that. Mr. COWLES. Thank you. Mr. CLARK. You are worth several million dollars more, are you not? Mr. COWLES. Well, I do not think that has any bearing on the question of the tariff. Mr. CLARK. Well, it does have a bearing on the question of profits, and what this committee is really trying to do is to get at the facts. I would not do you an injustice a bit quicker than the chairman of this committee would. Mr. COWLES. Mr. Clark, it is a very curious thing, but both before the investigating committee and before this committee there has been a wonderful curiosity as to how much the paper-making industry earns. I have never heard the question asked as to how much the newspapers earn, and I can tell you that for every dollar that the paper-making industry earns the newspapers earn $1,000. Mr. CLARK. If I were investigating the newspapers on the tariff question, if there was any tariff that affected them, I would go after them as I go after you, or as I tried to go after Mr. Hastings. I will tell you how we get to believe that there are enormous profits made in the paper business. If you print a thing often enough, people get to believe it, and one of two things is absolutely true. Either you have made enormous profits or all of these newspaper men in the United States that have been yelling around on this subject are either a lot of imbeciles or a lot of liars-one of the two. Mr. COWLES. I would not call them either thing myself [laughter]; but I would say this: The whole movement, from the time it started up to the present time, is nothing but a persistent, concerted, deliberate bear movement on the paper market. It is to put down the price of news-print paper, and for no other purpose. Mr. CLARK. I was simply telling you how people get the idea that there are these enormous profits. Mr. COWLES. If the paper trade got together in a combination as the newspapers have, and undertook to put up the price of news paper, you would hear a howl; but they can get together to ruin our properties and drive our laboring people out of employment, and they can make our villages of no utility or use, and all that sort of thing. Mr. GRIGGS. We were not appointed to investigate that, and do not want you to get that idea. We were appointed to investigate the tariff. Mr. COWLES. Yes, sir. Mr. GRIGGS. And you voluntarily came before us as a witness to offer some information that you thought we did not have. You understand that, do you not? Mr. CowLES. Yes. Mr. GRIGGS. And when we inquire for that information you ought not to get excited. Mr. CowLES. I am not excited at all. [Laughter.] Mr. GRIGGS. We are simply making straightforward, honest inquiries. Mr. CowLES. Yes. Mr. GRIGGS. If they may seem to strike too deep, of course we are sorry; but we have to know the facts, if we can get them. You are the only gentleman here to-night, at least since I came in, out of whom we have been able to extract any sort of information. I want to give you that much of a compliment. [Laughter.] The CHAIRMAN. Of course newspapers are absolutely protected. There is a wall around the United States, and you can not get any foreign papers in. It does not require any tariff to protect them. Mr. CowLES. Let me say something to you, Mr. Payne, and perhaps it will clear up that question in a way. Paper making was an industry in the United States long before paper making was ever thought of in Canada. There has never been a time to my knowledge when there has not been sufficient news paper produced in the United States to supply the entire consumption of the newspapers, excepting, perhaps, a little temporary, short, period when there might be a drought or some strange and unusual condition-a Spanish war or a Boer war, or something of that kind-and a temporary scarcity. The same thing might occur in any market-the wheat market, the sugar market, the cotton market, or any other market. There has never been a time when the productive capacity of news paper in the United States was not ample to supply all of the newspapers. Now, why do not the newspapers buy Canadian paper. To-day only a comparatively small amount of the product that is made in Canada is consumed there, and the balance is exported. They do not buy Canadian paper for the simple reason that they can buy American paper cheaper. There is no other reason. Mr. CLARK. But they have to pay that $6 tariff to get it in here. Mr. COWLES. They can get their paper to-day cheaper in America . than they can import the Canadian paper. Mr. GRIGGS. Why do you need a tariff? Mr. COWLES. I beg your pardon? Mr. GRIGGS. Why do you need the duty? Mr. COWLES. Because we do not want the Canadian paper to come in and demoralize our market. It is not a question, simply, of the duty. Anybody who is familiar with markets knows perfectly well that a small surplus of 10 or 15 per cent will knock the remaining 90 per cent or 85 per cent into a cocked hat. If the duty was off of the Canadian paper and the Canadian paper was brought into this country, Mr. Norris would get his quotation from a Canadian mill, and he would play that against the American mill. He would get a quotation from the American mill and would go back to the Canadian mill and would play the one against the other; and he would get it down to a point where both of them would be too sick to go any further, and then he would make his contract. That is the way those things work. It is not a question altogether of the amount of duty. Mr. RANDELL. That would be competition. Mr. COWLES. Yes; destructive competition. Mr. CLARK. I want to ask you one more question. I do not know how much you have studied about it; but you know they have to raise so much money out of the tariff in order to run the Government. Do you think, in the light of what you have heard and read, that the paper industry pays its fair proportion of the revenues of the Government with this $6 tariff on it? Mr. CowLES. I will answer that in this way: I think they do, because I do not see any reason, when an industry has grown up in a country and is adequate to supply the market with the material required, why it should be sacrificed to let a foreign product in for the purpose of creating an artificial revenue which does not naturally and properly belong to the Government; but if that is going to be done, why not let the newspapers pay their share? There is a grand, good opportunity for them to contribute to the prosperity of the Government. They do not pay any duty on anything. Let them go and buy some Canadian paper and bring it in. Mr. CLARK. The trouble about that is exactly what the chairman suggested. There is no man on earth that has got sense enough to get a tariff out of newspapers, because there are no newspapers imported. We get revenue out of the tariff system on what comes in and not on what is shut out. Mr. CowLES. But we do pay considerable duty. Mr. CLARK. Oh, I know you do. Mr. CowLES. I mean we buy and use articles which enter into the cost of manufacture and that are a part of the manufacture, and we pay duties to the Government. Mr. GRIGGS. But you tax that against the ultimate consumer. Mr. CowLES. Sometimes, no. Sometimes the consumers get their paper for less than it costs us to make it. Mr. GRIGGS. But you try to. Mr. COWLES. We try to; yes. STATEMENT OF 0. L. E. WEBER, OF MICHIGAN, REPRESENTING THE SULPHITE MANUFACTURING INTERESTS. SATURDAY, November 21, 1908. Mr. WEBER. Mr. Chairman and gentlemen, we occupy the peculiar position, or I do, of representing here the small mill that manufactures a high grade of Mitscherlich sulphite (so-called after the name of the inventor of the process), but that has little to do with the entire process as a whole. Our production is comparatively small, manufactured in the United States. In view of the striking statement that has been made by Mr. Norris, that the European pulp can be made so advantageously and cheaply, and that our mills are not modern, and that we should look to them for relief, I would suggest that if Mr. Norris has any information which he can give to the sulphite manufacturers of this country tending to cheapen production, by means of their processes, I think he would be doing a great service to us. Now, Mr. Chairman, in the brief that we have here, I say: We, the Michigan Sulphite Fiber Company, together with the Great Northern Paper Company, Madison, Me.; the Dexter Sulphite Pulp and Paper Company, Dexter, N. Y.; the Interlake Pulp and Paper Company, Interlake, Wis.; the Detroit Sulphite Pulp and Paper Company, Detroit, Mich.; the Fletcher Paper Company, Alpena, Mich., from the years 1884 to 1889 built 6 mills for the production of sulphite by the Mitscherlich process. To-day only 2 of these mills are making pulp for the market, the others having gone into the manufacture of paper, owing to foreign competition under the present duties. To produce the high grades made by these mills requires additional labor for strength of stock by reason of the process employed, still more labor to obtain uniformity, and almost double the labor cost of ordinary grades for cleanliness, so that the total labor cost in making the high-grade sulphites amounts to at least $11 per ton, which the European obtains at from 35 per cent to 50 per cent of this figure (see reference sheet No. 1), which gives him an advantage of from $5.50 to $7.25 per ton above the American manufacturers in labor cost alone. The best argument that it is impossible to manufacture these highgrade sulphites on this side is that practically none of it is being made here, while the Europeans have built nineteen new mills in the years 1907 and 1908, on which we have reports (see reference sheet No. 2), aggregating a yearly increase in production of 244,000 tons, to say nothing of the present mills which have largely increased their capacities. According to European authorities, such as Mr. Dorenfeldt, this rate of increase is likely to continue for some years to come, or until the American market has been absorbed. (See reference sheet No. 3.) This is shown by the fact that the imports of unbleached sulphite from Europe alone during the year 1906 were 12,922 tons and during 1907 were 50,962 tons, or an increase of nearly 400 per cent. In 1908, notwithstanding the fact that the consumers of sulphite, or the paper mills of this country, were shut down, due to lack of business, to about 45 per cent of their production, and American and Canadian sulphite mills were idle even a greater proportion of time, the imports of European sulphites showed no decrease, as is evidenced by the importation of about 28,000 tons of unbleached sulphite for the first seven months of this year at prices which American sulphite mills were unable to compete with, although many of them went down to costs in their desperate efforts to secure business without avail. In evidence of this we beg to submit letters and prices under reference sheet No. 4, in which you will note that sulphite is being offered for present delivery and 1909 delivery at from $1.80 to $2.08 per 100 pounds exdock New York for the strongest grades, which is lower than we can possibly manufacture for. We are not alone in our opinion of the seriousness of European competition. Mr. H. H. Everard, an expert in the manufacture of sulphite who has recently made a trip to Europe expressly to investigate conditions on the Continent, in a letter dated November 14, 1908 (see reference sheet No. 6), states in part: I was very much surprised to find the very best apparatus, all of the modern improvements, and latest inventions quite generally in use. I was informed also that not less than $20,000,000 in capital had been invested during the years of 1906 and 1907 in the building and equipping of new sulphite mills in Norway, Sweden, and Finland. This capital is furnished very largely by English companies. The Germans are making very large investments also in Finland. It is impossible for the mills of this country to compete with the foreign mills in the production of the higher qualities of sulphite with our present wage scale. Unless there is a liberal increase in the present tariff we will be forced to abandon all efforts to produce the high-grade, strong sulphite. I am confident that an increase of one-sixth cent per pound duty on the European sulphite will not deter the Scandinavian product reaching our market at the present delivered prices. Mr. James E. Campbell, secretary and treasurer of the Dexter Sulphite Pulp and Paper Company, in a letter under date of November 16, 1908, states: As far as our company is concerned, I wish to say that the costs not only of labor, but also of raw materials, have advanced to such an extent that we are powerless to meet the foreign competition on sulphite. For instance, two paper mills at Brownville, within 3 miles of our mill, and one paper mill at Watertown, within 7 miles of our mill, have not bought any of our sulphite for eighteen months. These two accounts used to average about $8,000 per month. We have done everything in our power to get these paper mills back on our sulphite, and they are perfectly willing to use our product in the same quantities that they have always used it, provided we will meet the price on the foreign sulphite. These mills that I speak of are buying their Mitscherlich sulphite from Germany and Norway, and we wish you to fully appreciate that fact—that the prices which they have had and are having their sulphite delivered at these points are below our cost at the mill. (See letter in full under reference sheet No. 7.) It is our belief that the mills of this country are entitled to a sufficient protection against European labor to enable them to make a reasonable profit, and while we are justly entitled to and had intended to ask for an increase in duty on the higher grades of sulphite, we find practical difficulties in differentiating grades at this time, and would, therefore, urgently request that no changes be made in the direction of lowering duties. We have endeavored to bring out only the principal reasons why American mills are unable to compete on high-grade sulphites under the present tariff. We shall be very glad to forward such additional information as we may have in our possession on any other phase of this subject as you may require. All of which is respectfully submitted by THE MICHIGAN SULPHITE FIBER COMPANY. |