Dr. FITZGERALD. That is correct.

Mr. ANDRESEN. Against providing credit to purchase outside cotton, because we have a surplus of cotton in the United States.

Dr. FITZGERALD. Let me say further, Congressman Andresen, that the present legislation limits or prohibits ECA from authorizing the purchase of cotton outside of the United States with grant funds. As a matter of fact, as an administrative policy we have extended that to include loan as well as grant funds.

Mr. ANDRESEN. Does that also apply to cotton textiles produced in other countries?

Dr. FITZGERALD. I am quite sure that it does, sir, although I do not happen to handle the textiles. It is handled in the other side of our shop. I can verify that statement, if you would like.

Mr. ANDRESEN. I would like to have it for the record.

(The information is as follows:)

Before all programs for Indonesia were discontinued because of the action of the Netherlands Government against the republicans, a procurement authorization for about $29,000,000 was issued for the purchase by Indonesia of cotton textiles in Japan. The dollars thus accruing to Japan resulted in a corresponding decrease in the dollars which would have been required from the United States taxpayers to obtain the same rehabilitation of the Japanese economy.

On March 18, a small authorization for $120,000 was issued covering Japanese textiles for the Netherlands.

Mr. PACE. Doctor, while you have been interrupted, let me say that I have heard one or two complaints by the American cotton shippers in the administration of the program, to this extent: That, as I understand it, if a participating country wants to buy some cotton, your practice is to pass to them a credit for a sum of money and they themselves then go to the market and buy it?

Dr. FITZGERALD. Yes, sir.

Mr. PACE. The American cotton shippers' complaint that I have received is that they are practically frozen out of the picture and are not permitted to participate as they have ordinarily in the export of cotton from the United States. As I recall, there is a provision in the law which directs Mr. Hoffman to use regular business channels to the extent practicable.

Have any complaints of that character come to you by the American cotton shippers?

Dr. FITZGERALD. Yes; I think they have, Congressman Pace. We have had complaints from individual shippers that they have not been able to make a sale to one or another importing country.

Mr. PACE. In fact, the question was put to me to give consideration to going back under the old system, letting the Commodity Credit Corporation buy the cotton that was necessary under this program.

Dr. FITZGERALD. I have heard that that has been proposed, Congressman Pace. I believe it is proper to say that all shippers in the United States have an equal opportunity to sell cotton under the ECA program.

Now, I think it must be admitted, sir-and I admit it very frankly-that we do, and we feel it necessary to establish for the protection of the use of public funds some rather detailed provisions under which the cotton shall be purchased and shipped, and it is quite obvious that a small shipper may have more difficulty in understanding and arranging to buy and sell under those regulations than a larger shipper. I think we must face that fact.

Mr. PACE. I think that is the source of the complaint right there. Dr. FITZGERALD. I think that it is; yes, sir.

Mr. PACE. That the small shippers feel that they are under restriction.

Dr. FITZGERALD. I think that is correct.

Mr. ANDRESEN. Will the gentleman yield?
Mr. PACE. Yes. Go ahead.

Mr. ANDRESEN. I am referring to the findings of a certain special committee in the House, wherein it is stated that the Anderson, Clayton Co. handled 70 percent of that business. Is that correct? Dr. FITZGERALD. That is not a correct statement.

Mr. ANDRESEN. We recognize, of course, that they are a large exporting company. Can you give the committee some idea as to the volume of the ECA cotton business handled by the Anderson, Clayton Co.?

Dr. FITZGERALD. We can furnish it. We put out a list every month of the contracts that have been audited and paid. Back early in the program there was one month and I think this created the question that you mentioned-in which it just happened that most of the contracts that were approved during that month were Anderson, Clayton shipments. They were largely to China, as it happened. However, I was looking over the list for a later month just the night before last, and out of idle curiosity I skimmed down the cotton contracts and there was not a single Anderson, Clayton contract at all that month.

If you would like to have it, Mr. Chairman, we can furnish you the total volume by each shipper that we have so far audited and paid. Mr. PACE. If it is not too burdensome, we would like for you to file it with the committee.

(The information is as follows:)

Cotton payments under ECA program, Apr. 3-Dec. 31, 1948

Cotton payments under ECA program, Apr. 3-Dec. 31, 1948-Continued

Mr. ANDRESEN. Does ECA have anything to do with the selection of the cotton and the acceptance of it for shipment?

Dr. FITZGERALD. No, sir.

Mr. ANDRESEN. What you do is to provide the credit?

Dr. FITZGERALD. We provide the credit, Congressman Andresen, and we include certain provisions with respect to the sale-as to the way in which the cotton is to be purchased, how the price is to be fixed-and we do require, Congressman Andresen, a minimum per

centage of the lower grades and staples of cotton. We feel that it is proper to ask the participating countries as a group to take about the same range of qualities as the American crop is this particular year. So our lower-grade requirements run from 12 to around 25 percent of the total purchase, depending upon the destination.

Mr. ANDRESEN. Do you know if any of the cotton purchased with ECA funds is eligible for a subsidy, an export subsidy?

Dr. FITZGERALD. The export subsidy in cotton now, I believe, Congressman Andresen, is one-fiftieth of a cent a pound.

Mr. PACE. I do not think there is any.

Dr. FITZGERALD. I think it is one-fiftieth of a cent, sir. Ten cents a bale.

Mr. ABERNETHY. Ten cents a bale; that is right.

Dr. FITZGERALD. I believe that ECA cotton is eligible for that subsidy, but my understanding is that the subsidy is so small that practically no shipper is applying for it these days.

Mr. ANDRESEN. Is it the ECA that gets the subsidy, or is it the exporter?

Dr. FITZGERALD. The subsidy is paid to the exporter. Presumably he quotes a competitive price to the buyer that reflects that subsidy. It is so small right now, Congressman Andresen, that I am sure it is of no consideration. It is only 10 cents a bale, and they cannot make out the papers, hardly, for that much.

Mr. ANDRESEN. Are you familiar with the exports under lendlease and under the other relief measures that were provided before the ECA went into operation?

Dr. FITZGERALD. I am not, sir.

Mr. ANDRESEN. Well, I might say for the benefit of the record, since I will bring this up at some future time in the committee, that when 4-cents-a-pound subsidy was paid, and cotton was given away under lend-lease or under other relief provisions, there were approximately 100 exporters, and that at least 100 of them collected several hundred thousand dollars on an export subsidy by substituting reginned cotton that was not eligible for a subsidy. Do you know anything about that?

Dr. FITZGERALD. I do not, sir.

Mr. ANDRESEN. I have also heard, but I cannot prove it as yet, that in some instances our exporters substituted Mexican cotton.

These people who collected $300,000 on an illegal subsidy for reginned cotton, by substituting it, have since repaid to the Federal Government the subsidy that they collected; but, of course, a fraud was perpetrated on the Government in those cases.

As I said, I expect to bring that before this committee at a later date. Mr. PACE. Mr. Hope?

Mr. HOPE. We are speaking about this very low subsidy, but, as a matter of fact, it is just a token subsidy, is it not, for the purpose of meeting the provisions of section 22?

Dr. FITZGERALD. That is my understanding, Congressman Hope. Mr. HOPE. It is not for the purpose of stimulating exports in a competitive market?

Dr. FITZGERALD. That is my understanding.

Mr. PACE. The fact about the matter is that Mr. White testified last Friday that the world price of cotton today is higher than the American price.

Dr. FITZGERALD. That is correct.

Mr. PACE. There would be no justification for a subsidy to meet a competitive situation under those circumstances.

Dr. FITZGERALD. No, sir.

Mr. ANDRESEN. Of course, there would not be any necessity for a subsidy, since the United States pays the bill for the cotton anyway. Mr. PACE. I should not think so.

You may proceed, Doctor.

Dr. FITZGERALD. The third major producing area which we need to look at, in trying to evaluate what the prospects are for American cotton in the next 5 to 10 years, of course, is Egypt.

During the war, as I think the committee probably knows, the Egyptians reduced their cotton production very sharply, I think by 50 percent or more, and replaced it with grains for their feeding

program.

With the world grain supply position now a good deal easier than it has been for the last 5 or 6 years, the Egyptian cotton acreage is gradually coming back. I would expect myself that the Egyptian cotton acreage would return to prewar levels in the course of the next few years.

A good deal of that cotton, of course, is extra long satple cotton, as you know, sir, but all cottons are competitive to a degree depending upon the relative prices. If extra long staple cotton is cheap enough it can be substituted and will be substituted for the American short staples.

I would assume, therefore, that there will be more Egyptian cotton available in the next 5 to 10 years than there has been in the last 2 or 3.

Another consideration which has to be evaluated is the availability and cost of competitive fibers, particularly synthetic fibers.

This year our estimates are that the production of synthetic fibers in western Europe will approach the prewar level and the possibilities are that in the course of the next few years there will be some further increase in the production of rayons, particularly in western Europe. The question of the extent to which that synthetic fiber production will increase depends to an appreciable extent, upon the ability of western Europe to get on a sound economic basis in which they can have a free choice as to whether they are going to use rayons or imported natural fibers, particularly imported American cotton.

As long as western Europe is short of dollars it seems to me obvious that the pressure is going to be on them to get along with as little dollar expenditure as they can and to substitute fibers that do not cost dollars, and one of the kinds of fibers that does not cost dollars is domestically produced fiber, just like one of the fibers that does not. cost dollars is Egyptian cotton.

Mr. HOEVEN. Mr. Chairman.

Mr. PACE. Mr. Hoeven.

Mr. HOEVEN. I would like to clear up the difference between your statement and Dr. White's statement who testified that the use of synthetic fiber in Europe was diminishing rather than increasing.

Dr. FITZGERALD. It diminished very greatly just following the war. Mr. HOEVEN. My impression was that he was giving us an up-todate report and that the use of synthetic fiber was decreasing in very large proportion.