ever, beef and veal prices have now declined to the point where the disparity is not so great, and we may confidently expect that, as long as this situation continues to exist, dairy farmers will cull their herds less severely and veal fewer of their calves.

3. Consumption trends.-Table 2 in appendix A shows the percapita civilian consumption of the major dairy products since 1935. Butter production has shown a very marked decrease-from an average of 16.7 pounds per capita on the average during the period 1935 through 1939 to an estimated 8.7 pounds per capita in 1952. All other dairy commodities in the table show increases. Cheese, with average per capita consumption of 5.5 pounds during the 5-year period, 1935-39, was above 7 pounds per capita in 1952. Evaporated and condensed milk per capita consumption shows a slight increase. Per capita consumption of dry whole milk is about double the 1935-39 average at 0.27 pound per capita in 1952. Nonfat dry milk solids consumption almost doubled during the period, and was about 4.2 pounds per capita in 1952. Per capita consumption of fluid milk and cream, which averaged 340 pounds during the 1935-39 period, was about 400 pounds in 1952.

I will not attempt to forecast the future course of per capita consumption of the several dairy products, since such consumption is governed to a large part by economic conditions of consumers, increases in population growth, and the like. As far as population is concerned, the opinion seems to be that it will continue to increase at a rate of about 2 percent per year. Normally, this could be expected to cause an increase in fluid milk and cream consumption, and perhaps some of the other dairy products, but worsened economic conditions of consumers could offset this factor. As far as butter is concerned, it is impossible to deter mine whether there will be reversal in the downward trend in per capita consumption, inasmuch as we do not know whether the full effect of the competition from yellow oleo has been fully reflected as yet in butter consumption.

III. INTERNATIONAL TRADE IN DAIRY PRODUCTS

The interest of the American dairy farmer in import control, and his desire fo positive controls, can best be understood after considering the status of inter national trade in dairy products as indicative of the scope of the problem.

1. Production of major dairy products in principal producing countries.—The large volume of dairy products produced in major producing countries in the world is shown in table 3, appendix A. In 1951, butter production in the majo producing countries outside the Iron Curtain was 4.6 billion pounds, cheese pro duction was 3,8 billion pounds, canned milk production was 5 billion pounds, and dry milk production was 1.1 billion pounds.

We are not aware of the existence of any factor which would cause a reduction in world production of the principal dairy commodities, although, of course, bac weather conditions might cause some reductions from time to time. On the whole, it is probable that we should expect a continued upward trend in world production.

2. Exports and imports of major dairy commodities.—Major butter exporting countries and the volume exported in 1951 were as follows:

Major cheese exporting countries in 1951 were as follows:

It is to be noted that the United States is not normally a large exporter of cheese. Although large volumes were exported during and for several years following the war, these large exports were either a part of the war program to furnish needed foods to our allies, or a part of the postwar program of aid to our allies conducted by this Government. In 1952, exports were quite smallonly around 3.5 million pounds. (For details as to the exports of other dairy commodities from the major producing countries, see table 4, appendix A.)

Major importing countries for butter are the United Kingdom, which imports by far the greater portion of the butter moving in international trade, France,

Western Germany, and Italy. With regards to cheese, the United Kingdom imports most of the cheese moving in international commerce (see table 4, appendix A, for details).

The foreign trade of the United States in dairy products and the conditions affecting such foreign trade are so closely related to the needs for controlling imports of dairy products into the United States that no further data regarding such trade will be given in this section, but will be given in the next section dealing with the need for import control.

IV. THE NECESSITY FOR CONTROLLING IMPORTS OF DAIRY PRODUCTS INTO THE UNITED STATES

There are several very good reasons as to the necessity for exercising control over imports of dairy products into this country, and for this committee to incorporate into any bill it may propose to the Congress adequate safeguards for the American dairy farmer. Perhaps the paramount reason is that price levels for dairy products in this country are much higher than price levels in other important producing areas, and therefore, any program designed to maintain and to enhance returns to dairy farmers in this country would immediately run afoul of large-scale imports unless such imports were controlled.

1. United States domestic farm programs designed to maintain income of dairy farmers would be imperiled by unlimited imports.-For many years, this country has had a farm policy designed to maintain the income of farmers, including dairy farmers. At present, the major legislation under which such action is undertaken is the Agricultural Act of 1949. This act, among other things, directs the Secretary of Agriculture to support the price of designated nonbasic commodities, among which milk and butterfat are numbered, at prices from 75 to 50 percent of the parity price. With regard to basic commodities (corn, cotton, wheat, tobacco, rice, and peanuts) the Secretary is authorized to support the price of such commodities by loans and purchase at from 75 to 90 percent of parity, depending upon supply and demand conditions. Under legislation enated during the last session of the Congress, the Secretary is required to support the prices of the basic commodities at not less than 90 percent of parity through the 1954 growing season.

Programs designed to improve the economic position of farmers have existed for many years. During the war, the Government pledged itself to support the prices of commodities which were needed in the war effort, and which the Government wished produced in much larger than normal volumes, for some years after the end of the war. This was deemed advisable so as to avoid the situation that obtained following World War I. During that conflict, American agriculture expanded production to a marked degree, and at the close of the war was so overexpanded relative to peacetime needs that a very serious farm depression ensued, and lasted for many years. As a matter of fact, during the twenties, when the other segments of the American economy were enjoying prosperity, the American farmer was in a very depressed condition indeed. His prices were low, and the price he had to pay for the commodities he used in farin production and farm family living remained at high levels, putting him in a disastrous economic squeeze, a squeeze which many economists and observers believe was one of the fundamental causes of the depression of the 1930's.

It seems to us that any bill reported by this committee should take cognizance of our domestic farm policy, and should endeavor to correlate foreign trade policy goals with existing domestic farm policy goals.

2. Conflict in domestic farm policy goals and foreign trade policy goals of the Government of the United States.-During the last two decades while the farm policy described very briefly in the preceding paragraph (1) was being developed and applied, the Government was endeavoring to expand the foreign trade of this country through the development of reciprocal-trade agreements designed to lower tariffs and remove other barriers to international commerce. During all this period, there has been a hiatus between the foreign trade policy goals and the domestic farm policy goals. On the one hand, efforts were being made to expand imports of commodities from other lands, and on the other hand, efforts on the domestic front designed to increase agricultural prices were pushed with some vigor. This led to conflict between the two programs, and this conflict continues to this day. As far as the dairy farmer is concerned, perhaps the most pressing problem insofar as Government activity in his behalf is involved is that of finally coming to grips with this conflict of foreign trade goals and domestic farm policy goals, and resolving it.

This committee has the opportunity to make proposals which would go far toward resolving this conflict.

3. Unlimited imports of dairy commodities would wreck the dairy price-support program.-There can be no question that unlimited imports of dairy products would wreck the farm price-support program for American dairy farmers. It appears to us that the Congress and the administration have no other recourse than to limit imports of farm commodities that are being supported in price as a part of the domestic farm program. To permit unlimited imports under such circumstances would result in the farm price-support program designed for the benefit of the American dairy farmer being converted to a program for the support of prices to farmers throughout the world. We are very firm in our belief that such a program could not long endure. In the following paragraphs we will set forth the facts and considerations on which we base this judgment. (a) World dairy prices are low relative to prices in the United States. At the present time, and for the foreseeable future, dairy product prices in the prin cipal exporting countries outside the Iron Curtain are, and will remain, materially below the prices prevailing for such commodities in the United States. Prewar, the tariff structure of this country was sufficient to preclude the entry of large volumes of imported dairy products. It is to be remembered, however, that during that period currencies were rather stable, and rather freely convertible. Since the war, this situation has changed to a very marked degree. At present, we find the following:

(1) Currencies of many countries have been drastically devalued. This means, in terms of United States money, that prices were markedly reduced. For example, in September 1949, currencies were devalued around 30 percent by such major exporting countries as Australia, New Zealand, Netherlands, Denmark, and Norway. Prices, in terms of United States money, dropped immediately and severely.

(2) Currency devaluation has made our tariffs largely ineffective.

(3) Many foreign countries are anxious to secure dollars, and therefore they will extend themselves to export commodities to this country, irrespective of whether such commodities normally constitute an export item to the United States.

(b) Support prices in the United States are high relative to foreign dairy product prices. The previous paragraph pointed out that foreign dairy prices are low relative to domestic prices. At present, prices of milk and butterfat used in manufactured dairy products are supported at levels designed to return to the American dairy farmer 90 percent of the parity price. It is to be remembered that aiding American farmers to secure parity pries has been the goal of domestic farm policy for many years.

Before the war, efforts were made to improve returns to producers of milk and butterfat by purchases of dairy commodities, and the distribution of such commodities to persons on relief. Since the war, starting in 1949, prices have been supported by the purchase of such dairy commodities as butter, cheese, and nonfat dry milk solids. For the marketing year ending March 31, 1954, Secretary of Agriculture Benson has announced that the Department of Agriculture will support the price of milk and butterfat at 90 percent of parity. To achieve this result, the Department will purchase butter at 65.75 cents per pound basis Chicago, cheese at 37.00 cents per pound, and nonfat dry milk solids at 16.00 cents per pound. (For details, see table 5, appendix A.)

At the present time, the Department of Agriculture is purchasing butter at a rate of some 1 million pounds per day, and has over 132 million pounds on hand. The question is, what would the purchase situation be if unlimited imports were to be permitted?

The answer is quite obvious. Most of the butter moving in international commerce, as was pointed out heretofore, goes to the United Kingdom. The United Kingdom has entered contracts with the Government of Australia, New Zealand, and Denmark, to purchase most of the exportable surplus of these countries at fixed contract prices. The prices payable under these contracts are set forth in table 6, appendix A. For the current contract year, prices of the best grades of Australia and New Zealand butter are set at 39.2 cents per pound, and Danish butter prices are set at 42.2 cents per pound.

The tariff on butter imported into the United States is 7 cents per pound on the first 60 million pounds, and for additional quantities is 14 cents per pound. Taking the tariff and adding thereto about 4 cents per pound for costs of ship ping the butter to this country. it is seen that butter could be laid down at United States ports for around 50.5 to 53.2 cents per pound. This would be

about 16 cents per pound below the support price prevailing at major United States ports. Under such circumstances, it is quite obvious that, unless imports were controlled on a quantitative basis, huge imports would be made. This would wreck our price support program.

4. The disposal problem.-Unlimited imports of dairy products would contribute very greatly to the already quite difficult problem of disposal of dairy products purchased under the price-support program. The question is, bluntly, this: How do we dispose of the commodities purchased under the price-support program? Heretofore, it has been possible to dispose of these commodities through the school-lunch program, through resale back to the regular butter trade, to foreign governments under reduced prices, and to programs for giving aid to people outside this country. (For details regarding disposition of dairy products purchased under this program since the war, see table 7, appendix A.) However, if this Congress decides to permit import controls to lapse, so that, under the price-support programs, this country would buy up the world exportable surplus of butter, what do we do with the butter? If the volume of butter that we must dispose of under the price-support program is greatly increased by unlimited importation, with resultant purchases far greater than they would have been under a program calling for the proper control of imports, then we no doubt Would add very materially to the disposal problem. It would appear that, under the circumstances outlined, we would be purchasing the world surplus of butter, and then we would turn around and dispose of a great portion of it at low prices to countries that would have purchased it if we had not permitted it to be imported into this country at high prices, compared to the price prevailing for the major volume of butter entering international trade.

There have been many adverse comments in the public press as to the dairy product price-support program. I would like to point out that, since the war, the Commodity Credit Corporation has sustained losses of $132 million in a purchase program costing about $300 million. Losses on butter during the period were only $48 million, as compared to cost of about $150 million. Inasmuch as the total value of dairy products sold from farms was about $4.3 billion in 1951, it will be seen that the costs are very small relative to the total farm income from dairying. (See table 7, appendix A.) I will venture to say that, dollar for dollar, the dairy price-support program has cost very much less, relative to the size of the industry, than the program for any other major commodity. V. ARGUMENTS AGAINST QUANTITATIVE CONTROL OF IMPORTS AS PERMITTED BY SECTION 104 AND SECTION 22 ARE FALLACIOUS

It is the view of the National Creameries Association that positive import controls, with the smallest possible degree of discretion in their application, are necessary to the protection of the programs designed for the benefit of the American dairy farmer.

Since the passage of section 104, the positive import controls issued thereunder have been the subject of continuous attack by importers, foreign governments, our own Department of State, and those sections of the public press that desire a closer approach to free foreign trade policy.

In this section of this statement, I wish to summarize these attacks, and to show that they are unfounded and unwarranted.

1. The free-trade argument against import controls.-Opponents of quantitative import controls, such as are exemplified in section 104, or that would be involved in quota restrictions under section 8, argue we should have free trade as a means of reducing friction between the nations and a higher standard of living for all. The free-trade argument has been advanced for many years. However, while it might be conceded that, under certain conditions, free trade would be the proper thing, nevertheless an examination of the preconceptions on which the free-trade theories are founded indicates that, in the current state of world affairs, such a goal is impossible to achieve. Free trade is possible only where (1) currencies are not artificially rigged and manipulated, (2) international cartelization of business does not exist, (3) government interference and manipulation of trade through exchange regulations, government-to-government agreements, and the like, are nonexistent, and, in the final analysis, (4) a free movement of capital and labor between countries is permitted. The free-trade argument, while sounding fine, is therefore seen upon examination to be imposible unless drastic measures are taken to bring about the conditions under which free trade is possible-a situation not to be expected in the foreseeable future.

2. The fallacious argument that dairying is an export industry.—Opponents of a system of positive import controls argue that the export market for our dairy products is large, and that, therefore, we should permit unlimited imports so that other countries will have the dollars to buy our dairy products. This is an odd argument when competitive dairy products are considered, and all imports are competitive to a greater or lesser degree-most of them directly and positively with the same commodity produced in this country.

The only times that the United States has been a large exporter of dairy products has been during periods of war, or periods of reconstruction following a major war. Table 8, appendix A, shows exports and imports of dairy commodities for the United States during the period 1939 through 1952. Table 9, appendix A, shows imports of dairy products, by kind, 1947–52.

The figures given in table 8, while showing very heavy exports during the period of World War II and for several years thereafter, must be interpreted in terms of a war economy and trade movements under such economy, rather than by interpreting them as being accomplished in the course of normal trade. Our opponents very frequently forget this most important qualification regarding these figures. During the last war, this country had to expand its dairy industry very markedly in order to (1) feed our own Armed Forces and heavy civilian demands, and (2) furnish our allies with dairy commodities which they had theretofore secured from European countries which fell under the Nazi assault. Following the war, our exports were heavy due to the fact that we had to export large quantities of food to feed the liberated countries until the damage inflicted upon their dairy industry and other agricultural industries by the war could be repaired. By far the greater portion of this business was financed by lend-lease during the war, and by Marshall-plan aid and other grants following the war. These huge volumes of exports are not to be considered as normal exports by any stretch of the imagination. We paid for them ourselves.

3. The argument that we should permit large dairy imports in order for other countries to be able to purchase our export commodities.—It is argued that we should permit large imports of dairy products in order that other countries should have the dollars available to buy the commodities which we normally export, such as cotton, wheat, tobacco, and some others. This is sort of like robbing Peter to pay Paul. This Nation would gain nothing by ruining the dairy industry in order to have a prosperous market for cotton, wheat, tobacco, some of the most soil-depleting crops we grow.

Our major agricultural exports are wheat, cotton, tobacco, and fats and oilsmainly lard. These commodities, on the average, account for about 75 percent of all agricultural exports. We submit, however, that to ruin the dairy industry to enhance exports of these commodities would be very poor judgment, indeed. They probably will be exported in any event-at least, they have been for many years without it being necessary to wreck the dairy industry in order to provide them an export market.

4. The argument that our entire foreign trade in agricultural products would be markedly improved by permitting unlimited imports of dairy commodities.— It seems appropriate at this time to take a quick look at our foreign trade in agricultural products, particularly in view of the fact that so many people argue that we should extend foreign trade in such commodities by all methods available, including permitting large-scale dairy-product imports.

Now, it is to be noted that there are two general categories of commodities which are imported. The Office of Foreign Agricultural Relations designates certain commodities as falling in a class called complementary imports. The other class of imported commodities are designated supplementary imports. Complementary imports include commodities which are not competitive with domestic agricultural commodities, while supplementary imports compete directly with domestic products. Complementary commodities include coffee, cocoa or cacao beans, sisal, henequen abaca, crude rubber, bananas, tea, pepper, carpet wool, and the like. Supplementary imports include such commodities as cattle. canned beef, dairy products, hides, cotton, grains, sugar, molasses, oilseeds, vegetable oils and fats, and tobacco.

Table 10, appendix A shows the course of United States foreign trade, average 1935-39, and by fiscal years, 1947-48 through 1951-52. During the prewar period, supplementary imports were larger than complementary imports. Since the war, they have been about the same, except that there has been a tendency for complementary imports to exceed supplementary imports, and they were much larger in fiscal 1951-52. Unfortunately, we have no information as to how much of our exports, both agricultural and nonagricultural, were financed in one way or