The reason that these foreign papers have come into this country in the volume that they have is due to the cost of production in Germany and the cost of production in this country.

On page 6 of this brief I have calculated the cost of producing this grade of goods in this country and in Germany, and you will notice that to manufacture a unit quantity of this grade, which we call a ream, which is 480 or 500 sheets of paper 20 inches by 24-to manufacture this unit quantity it costs us in this country $2.25, while in Germany they can manufacture the same thing for $1.19. The reason for that is that the paper stock that they use is slightly cheaper. Their color is slightly cheaper, and their labor very much so, and you will notice that the labor item in the American product is 49 cents as against 10 cents in the German.

These figures, as you will notice in making the comparison of cost, have been very carefully compiled. I have done the work myself, and they have covered over 5.000 individual orders that have been turned out and sold to the trade. They have been made up in percentages and simplified, of course, under four headings, as you will see on page 5, which will give you the component percentages which enter into the cost of production.

In taking my figures of German cost I have taken an extract from Carl Hoffmann's paper, the Papier Zietung, which is a recognized authority, where he asks the German manufacturers of these goods for their statements of cost; and he has printed that statement in detail, giving the labor of a single laborer on the machine, and that appears on page 7. That is an authentic statement, and it can be relied upon. In that statement he shows that the cost of manufacturing this product in Germany is $1.19, as against the cost in this country which we show, and which is the combined opinion of all the manufacturers in the trade in this line, of $2.25. This paper manufacured in Germany for $1.19 enters this country, all duties paid, for $1.81, and sells in the open markets for from $1.90 to $2 a ream, against our product manufactured at a cost of $2.25. That shows why the imports of that grade of paper have been on a steady increase, and why the manufacturers in this country have suffered a decrease in their profits.

The American manufacturers have been compelled in late years to throw into the market an imitation paper, and I have submitted a sample of the imitation on the second from the last sheet attached to the brief. To every appearance that imitation resembles the imported papers. It is of the same weight and of the same appearance and of the same character, but the pasting qualities of the paper are very different. It is made by an entirely different method. The burnishing is put on longitudinally instead of across the paper, and when that paper is used by the box makers they encounter difficulties which they do not encounter in the imported or domestic flints. This imitation paper we can manufacture in this country for $1.90 a ream, and you will find on page 8 a detailed statement of our costs. That is the best we can do, $1.90 a ream, and that imitation paper at a cost of $1.90 a ream has to compete against the foreign flint paper which it is an imitation of, sold in this country at $1.90 to $2, manufactured in Germany at $1.19.

Mr. CRUMPACKER. What is the duty?

Mr. FABER. About 62 cents.

Mr. DALZELL. You want to make it 6 cents a pound?

Mr. CRUMPACKER. What would that be ad valorem under your present rate?

Mr. FABER. I should judge it would be about 70 or 80 per cent ad valorem. It would have to be double the duty we have on now, and you will see the duty here on page 4. The ad valorem duty figures up in the neighborhood of 40 per cent.

Mr. CLARK. Of this surface-coated paper that you are talking about, you say there has been an enormous increase in the importation?

Mr. FABER. There has been.

Mr. CLARK. According to your own figures, in the year ending June 30, 1903, they imported 1,359,110.25 pounds, and in the year ending June 30, 1907, there was imported only 1,380.781.50. That is an increase of only about 20,000 pounds in five years.

. Mr. FABER. In that figure you gave me, 1,359,110.25, you will notice "Surface-coated papers not specially provided for in this act." That is the beginning of the paragraph, and then comes surfacecoated papers "if printed, or wholly or partly covered with metal or its solutions, or with gelatin, or flock." That is another branch of the industry, not the ordinary surface-coated glazed papers which are shown here, and which come under the clause," Surface-coated papers not specially provided for in this act."

Mr. CLARK. If you do not intend this table to show it, what did you print the table for?

Mr. FABER. The "others not specially provided for " are 4,037,646 as against 6,883,165. I am copying this official table and do not want to omit anything.

The CHAIRMAN. You are included in "others are not provided for "?

Mr. FABER. Yes; we are included in "others are not provided for" in this table.

The CHAIRMAN. What are the others?

Mr. FABER. Surface-coated papers.

The CHAIRMAN. Anything besides the paper you manufacture? Mr. FABER. No, sir.

The CHAIRMAN. "Others not specially provided for papers you manufacture?

covers the

Mr. FABER. That is where it appears on the import sheets. The CHAIRMAN. I know how it appears. I am trying to find out what the fact is, whether that clause "others not specifically provided for " includes those you manufacture and nothing else?

Mr. FABER. Nothing else. The reading of the paragraph as it stands now is "Surface-coated papers not specially provided for in this act."

The CHAIRMAN. I know how that reads.

Mr. CLARK. The one you are talking about is included in both or one of those classes?

Mr. FABER. Both.

The CHAIRMAN. What did you print the other for?

Mr. FABER. Because that comes under the heading.

Mr. CLARK. You do not make "surface papers," etc.?

Mr. FABER." Covered with metal or its solutions, or with gelatin or flock?"

Mr. CLARK. I do not know what it is covered with. Do you make papers included in that first specification there-surface papers, etc.? Mr. FABER. We make papers in both.

Mr. CLARK. What percentage belongs to the first class and what to the second?

Mr. FABER. Ninety-nine per cent to the second class and 1 to the first.

Mr. CRUMPACKER. If the rate of duty is increased, the box manufacturer would have to have an increase of duty?

Mr. FABER. Not when you consider that a ream of paper will cover nearly a thousand boxes, and where the ream of paper sells at $2.25 a ream you would see that the fraction of increase there would be very slight.

Mr. CRUMPACKER. I see you figure the difference in the cost of labor in this country and Germany, and state that while labor costs in Germany 10 cents, in this country it is 49 cents. That is based on the rate of wages? It is not based on the labor cost of the product, but the actual wages?

Mr. FABER. These figures are all made up from the pay roll.

Mr. CRUMPACKER. You know in a general way that that is not an accurate way to determine labor cost. In the Philippines apparent labor is also lower than it is here, yet the actual labor cost there is in effect higher than here from an economic standpoint. Is there any difference in the method of production?

Mr. FABER. No, sir; the process is the same. In fact the Germans have copied our machinery, and the hours are the same, and about the same amount of labor is put on the unit product in this country and in foreign countries.

Mr. FORDNEY. What is the difference between the efficiency of German and American labor employed in the production of that kind of paper?

Mr. FABER. As we are compelled to use mostly German labor, that is about the same.

Mr. FORDNEY. The gentleman compared Filipino labor with American labor, and I understood he tried to make the same comparison between the United States and Germany.

Mr. CRUMPACKER. I beg the gentleman's pardon. I was not making a comparison, except to illustrate a principle. That is all.

Mr. FABER. The German and American labor is of about equal efficiency, and we use about the same number per unit of quantity in this country as abroad, and we work about the same hours.

Mr. FORDNEY. There is no such comparison to be made between the labor of the United States and Germany as there is between the United States and the Philippine Islands?

Mr. FABER. I know nothing about the Philippine Islands.

Mr. FORDNEY. They pay 16 cents a day there.

The CHAIRMAN. I see the ad valorem duty on your stock is 44 per

cent, and you ask increase of the duty to 64 cents a pound.

Mr. FABER. We ask you to drop the ad valorem and increase the specific duty to 6 cents a pound.

The CHAIRMAN. That would make the duty equivalent to about 70 per cent ad valorem?

Mr. FABER. I judge so.

The CHAIRMAN. You think you would have to nearly double the duty that there is now in order to live?

Mr. FABER. You can see that, because that duty of 6 cents a pound will not permit that foreign product to sell in this country for less than the cost to the manufacturer to manufacture it.

The CHAIRMAN. How much do you produce here now?

Mr. FABER. In volume?

The CHAIRMAN. How much do all of you produce here in this country?

Mr. FABER. I would have to make a very rough guess at it. I should say a million dollars, covering all the lines.

The CHAIRMAN. Was that amount increased or not, say, from 1903 to 1907?

Mr. FABER. I believe the amount has stood about uniform in the last four or five years. I know the profits have decreased. I can answer for that.

The CHAIRMAN. The profit has decreased, especially in the last year?

Mr. FABER. I am not counting the last year.

The CHAIRMAN. We are not counting the last year.

Mr. FABER. I can possibly answer your question in another way. In 1907, right at the height of our business activity in our own factory, we had 75 flint machines for manufacturing this paper, of which 50 of them were shut down.

The CHAIRMAN. You had 75 when?

Mr. FABER. Seventy-five machines ready to work and only 25 in operation.

The CHAIRMAN. When did you put in that large number of machines?

Mr. FABER. Oh, we have been in business dating back from 1839. The CHAIRMAN. The business has grown up since that time?

Mr. FABER. Yes; grown up gradually. I can not tell when these machines were put in.

The CHAIRMAN. Does this substitute sell as well as the original goods?

Mr. FABER. No, sir; this imitation you refer to does not sell as readily. It is only by reason of the fact we sell it at lower prices that the goods ever sell at all.

The CHAIRMAN. Does that largely take the place of the original goods?

Mr. FABER. It has not largely taken the place of it. We try to make it take the place of it in competition with the foreign product. Mr. BONYNGE. What percentage of your output was the imitation style in 1907?

Mr. FABER. Sixty per cent of the imitation to 40 per cent of the flinted, or the goods we tried to imitate.

Mr. BONYNGE. You say you are able to sell this imitation flinted article in the United States because you can sell it at cheaper prices than the imported flint?

Mr. FABER. No, sir; we can not sell it at cheaper prices, but we manufacture this imitation product in order to compete against the foreigner.

Mr. BONYNGE. But you get more for the imitation, according to your figures on page 13, than they can sell theirs for?

Mr. FABER. We do, because we can not manufacture the imitation at that price. The imported sells for $1.90 and $2, whereas it costs $1.90 to manufacture the imitation.

Mr. BONYNGE. They sell the imported flint in the United States for $1.90 to $2, and you sell the imitation for $1.90 to $2.25?

Mr. FABER. Yes, sir.

Mr. BONYNGE. Why does the imitation run out the imported article?

Mr. FABER. It is not doing that. Year by year, as you can see, our imports have been increasing.

Mr. BONYNGE. What percentage of the imitation do you say is sold as compared to the entire amount consumed?

Mr. FABER. Sixty per cent of the imitation against 40 per cent of the flinted paper.

Mr. BONYNGE. That does not look as if the imported flint was running out the imitation flint, if 60 per cent is imitation.

Mr. FABER. Not 60 per cent of the total consumption. You are asking, as I understand it, what percentage of the manufactured goods is imitation and what percentage of the manufactured goods is the flinted goods. I say 60 per cent imitation and 40 per cent flinted goods. These imitation goods come in competition with the imported papers and are gradually being driven to the wall. Of course, the flinted papers are being driven more rapidly than the friction papers, and we only produce 40 per cent of those now.

Mr. BONYNGE. What has been the highest amount you have ever produced of the imitation? Was it ever more than 40 per cent ?

Mr. FABER. It was up to 90 or 100 per cent at one time. It was only by reason of the fact we could not compete against this foreign product that we were compelled to go into the manufacture of imitation goods. In the early days there were no friction goods at all; they were all flinted goods. That has arisen in the last few years by reason of competition.

Mr. FoRDNEY. The reason you only sell 40 per cent of the flinted article as compared to 60 per cent of the imitation is on account of the large cost of the flinted article?

Mr. FABER. Yes, sir; and it is used for particular work, and we have a limited market now for it.

Mr. FORDNEY. You are trying to induce the market to take the imitation instead of the real article?

Mr. FABER. If we do not do that we will be compelled to go out of the market.

Mr. GRIGGS. How long have they been making this imported article abroad?

Mr. FABER. I really could not say; over a hundred years, I know. There are over 75 factories in Germany.

Mr. GRIGGS. And you have been making your articles relatively a short time?

Mr. FABER. Yes, sir.

Mr. GRIGGS. I understood you to say you had been making it ever since 1839. Can you not make another calculation for us on that?

Mr. FABER. I can not say how long the Germans have been making it. I know it is a good deal over a hundred years.

Mr. GRIGGS. When did you begin to manufacture the imitation flint?