Mr. SMITH. Do you know what the pegged price of Canadian-grown wheat to the Canadian grower is?

Mr. BURMEISTER. They have a little different system. They made advance payment of $1.40 a bushel, and then they sell wheat-they allocate to each producer a certain quota amount that he can sell, and they sell that on the world market.

Mr. SMITH. There is a free market on wheat in Canada; isn't there? Mr. BURMEISTER. I beg your pardon?

Mr. ALBERT. They have sort of a two-price system.

Mr. SMITH. I know, but this farmer up here still has a lot of wheat? Mr. BURMEISTER. Oh, yes. He has a marketing quota issued to him each year. He is told how much he can make available to the grain board to sell, and they sell on the world market. Then, at the end of the year they calculate their cost and make another return to the farmer. He would get in the neighborhood of

Mr. SMITH. But he has still a lot of wheat out on that farm that is not in the channels of trade?

Mr. BURMEISTER. That is right.

Mr. SMITH. And if some farmer comes up, some trucker comes up and says, "I want to buy 600 bushels," can he sell it?

Mr. BURMEISTER. I doubt it. I think he has to get a permit from the grain board.

Mr. SMITH. In other words, he cannot sell it anyplace; there is no free market?

Mr. BURMEISTER. He can feed it, but I do not think he can sell it. Mr. ALBERT. Now, there is another angle I think we should develop as well as we can, and that is the impact of Canadian imports on American wheat producers, seed-wheat producers.

How much did they sell before this started coming in? How much have our farmers had to cut their production of this kind of seed wheat?

Mr. BURMEISTER. Well, on the basis of some rough calculations here on acreages, we do not have estimates on seed-wheat production and use. We have the use-but, linking these series together, if you assume that back in 1951 our spring-wheat acreage was about 222 million acres, it is now down to about 12 million acres, and is treated at the rate of about a bushel to the acre; and there is a reduction in the use of spring wheat for seed of 10 million bushels. Then our figures show that imports between that time rose from 53,000 to 3 million.

You can see the double impact there, on people producing spring wheat for seed in this country.

Mr. ALBERT. So about 9 million will be all that will be available to our own producers?

Mr. BURMEISTER. As compared with around 22 million back 6 or 7 years ago.

Mr. ALBERT. Are there any questions on that?

Mr. JOHNSON. You started to give the amount of the subsidy, then you did not quite get to it.

What is the subsidy the Canadian wheatgrower is given per acre from the Government?

Mr. BURMEISTER. They do not get a subsidy; they get an advance payment of $1.40 a bushel, guaranteed, and then anything that the

wheat board makes above $1.40. The grower gets that as an additional price. He would be getting somewhere in the neighborhood, I presume, of about $1.60 a bushel for his wheat.

Mr. JOHNSON. Then he would get about 20 cents paid back to him at the end of the year; is that right?

Mr. BURMEISTER. Yes.

Mr. SMITH. Similar to our wool program?

Mr. BURMEISTER. Yes.

Mr. ALBERT. We thank you gentlemen very much, indeed, and you made a real contribution here this morning.

Mr. Beale, I see that you are here.

Do you have any further statement with reference to this matter? Mr. BEALE. Well, there are a number of questions, Mr. Chairman, that have occurred to me.

Mr. ALBERT. Would you come forward, please, and give your full name, and the names of your associates and official positions within the State Department?

STATEMENT OF W. T. M. BEALE, DEPUTY ASSISTANT SECRETARY OF STATE FOR ECONOMIC AFFAIRS; ACCOMPANIED BY JOHN J. CZYZAK, ASSISTANT TO THE LEGAL ADVISER; AND WILLIAM T. DIROLL, TRADE AGREEMENTS DIVISION

Mr. BEALE. My name is W. T. M. Beale, Deputy Assistant Secretary of State for Economic Affairs.

My colleagues are Mr. John Czyzak, assistant to the Legal Adviser; and Mr. William T. Diroll, of the Trade Agreements Division. Mr. Chairman, I was listening to Congressman Smith's question, and I was much concerned with the possible legal aspects of it and would hope that it would be possible, although I am not competent to clear it up myself, to clear it up. I am quite sure that there must be regulations that we can discover that would clarify the situation of this man in the legal sense. Because if the hypothetical situation were to be presented and left unanswered by the Government, witnesses, side witnesses, or someone might be misled into following that line of thought. So I would hope that it would be possible for the Treasury Department, the Customs part of the Treasury Department, to indicate quite clearly what the situation of that person would be, and whether it would in fact be possible to do as you suggest. This is not a critical observation, but just a helpful one.

Mr. SMITH. I think that is a very important factor in all this that we are discussing because I know enough about transportation and trucks and wheat to know how truckers operate. If they see they can make themselves a dollar, that the wheat in Canada is much cheaper than it is in the United States, someone is going up there and bring that wheat down here. And I think if you look into it you will find that is where all this wheat is coming in here, on that sort of an arrangement.

Mr. BEALE. It would be my feeling, Mr. Chairman, that the customs regulations, that it is possible that such action would violate customs regulations, and if so it would be important to establish precisely in what way. I think, Congressman Smith, that that is quite apart from the consideration of whether, in fact, the farmer

would be prepared to buy wheat without its being certified seed wheat. If he were just merely to be told that it was unfit for human consumption, assured by the owner of the elevator that it was suitable for sowing, I do not know whether he would be prepared to pay a price equivalent to seed wheat that the owner could guarantee as such. And at the point at which the owner guaranteed it to be seed wheat, he might lay himself open to the legal proposition.

Mr. SMITH. Mr. Beale, let's get down to earth here. That elevator man that I talked about at Fargo, N. Dak., runs his elevator out there, and he has helpers working around there, and his helpers probably come from some farm out there. And he says to the farmer, "Say, we have some Canadian wheat up there that was selling for $1.70 a bushel, unfit for human consumption; why don't you come and get some of it?" Now, there is nothing said about planting it, but he is saving probably 60 or 70 cents. If you think farmers are not going to do that thing, you just do not know farmers.

Mr. BEALE. He would have to be sure that it was going to be good seed wheat; would he not, sir?

Mr. SMITH. Oh, no; he does not care. That is, if it is Canadian wheat, he knows where it comes from

Mr. BEALE. And he would sell it without any assurance?

Mr. SMITH. He does not care anything about that, if it is saving 70 or 30 percent.

Mr. ALBERT. Mr. Beale, you appreciate the fact that we have two different statutes, plus a Presidential proclamation, that are not on all fours?

Mr. BEALE. Yes, sir.

Mr. ALBERT. There are sore spots, as far as our own people are concerned, with reference to the shipment into this country of Canadian seed wheat. Our farmers know that seed wheat is coming in from Canada; they know we have a Seed Wheat Act that says how seed wheat can come into this country, and yet they know they are bringing it in not as seed wheat, not as high-grade wheat under limitations, but bringing it in as wheat unfit for human consumption. And that, it seems to me, is the crux of the whole thing, and is what provoked the introduction of these bills.

Then we have the further situation that our own wheat farmers have had to reduce their production so much by reason of controls within the United States, and this additional impact means now seedwheat farmers in American areas have acreage cut down by law, and also, an additional impact of 3 million bushels coming in, all of a sudden, from Canada, which did not use to come in. These figures that the Department of Agriculture gave us are very impressive. Up until 1954 we had only a negligible amount of seed wheat coming in as wheat unfit for human consumption-practically nil. Then, all of a sudden, they discovered, when we had to bring some in, that they could get this wheat they had been paying quite a bit more for bringing in as seed wheat, brought in as wheat unfit for human consumption. It has multiplied by more than 900 times the amount of wheat that used to come in-as seed wheat unfit for human consumption. This makes our own people distrust our laws and our agreements. Don't you think so?

Mr. BEALE. Well, I would certainly agree, sir, that this very remarkable increase results, as Mr. Burmeister has pointed out, in part

from the need for wheat, and in part from the discovery that there is a price advantage to be gained by importing it as chemically treated or unfit for human consumption. I would like, sir, to suggest that your counsel might wish to look into one point that occurred to me, and that is whether, under the legislation that is proposed, the imports of seed wheat unfit for human consumption would have to come under the quota of 795,000 bushels. I do not know the answer to that, but the question occurred to me as I was listening to it, and I justMr. HEIMBURGER. May I comment on that at this point, Mr. Chairman?

Mr. Beale, I do not think they would, because we are dealing here, as the chairman pointed out, with three separate areas of law. As I understand it—I started to say that the bill under consideration here refers only to the tariff classification, but I see that, by its very wording, it does not; it refers also to the Presidential proclamation. That does complicate the thing. I, personally, do not see why there is any need for reference to the President's proclamation in this bill, and I would think that the thing might be simplified if this particular bill referred only to the tariff act and the customs classification.

Mr. BEALE. I suggest you might wish to look at it because the 2489-the proclamation-does not apply to the seed wheat.

Mr. HEIMBURGER. After taking a glance at the bill, I think that is a good suggestion.

Mr. ALBERT. We would not want-and you would object more strenuously if we set out to put a quantity limitation on the importation of wheat, wouldn't you? Would not that be true? If we said it had to come in as part of the quantitative quota?

Mr. BEALE. As you know, sir, our objection is based, in part, on our understanding of our obligations under the GATT, and the imposition of a quota would also constitute a violation.

Mr. ALBERT. Further violation?

Mr. BEALE. Yes.

Mr. ALBERT. Now, the Department of Agriculture has expressed the opinion that this would not have a serious impact on the shipment of seed wheat to this country from Canada.

Mr. BEALE. That is on the assumption that it would come in under the 2550, the Presidential proclamation, as seed wheat. But, if it did not come, and came under the 795,000 limitation, then it would not enter in equivalent large quantities, presumably.

Mr. HEIMBURGER. Let me say, Mr. Beale, that, having taken another look at this bill, which I have read many times, but apparently not read carefully enough, it seems to me there is some merit to the suggestion you just made: that this might place seed wheat under the quota limitation for wheat and Presidential Proclamation 2489, although it certainly is the assumption of the Department of Agriculture in reporting on this bill, and it has been my assumption up to this time, that it did not do so.

Mr. Burmeister, would you care to comment on that?

Mr. BURMEISTER. Our belief is that, if any seed wheat, treated or not, is applied for entry, they would ask for a permit from the Secretary of Agriculture.

Mr. HEIMBURGER. We are just thinking out loud on this matter now. If the chairman will permit us, we are going to try to settle this point Mr. Beale has raised, which is a good point.

The Presidential Proclamation 2489, although it is referred to here, was later modified by Presidential Proclamation 2550, which said that Presidential Proclamation 2489 does not apply to seed wheat, certified seed wheat. So that, apparently, our interpretation was essentially correct, although I think your point is well taken, that it will stand a little further examination, and that it should be certainly clarified in the committee report, presuming the committee reports the bill-to indicate this is not to have the effect of placing seed wheat under the wheat category of Presidential Proclamation 2489.

Mr. ALBERT. Of course, the truth of the matter here is, from the standpoint of our relations with Canada, they would still have a price advantage, because Canadian wheat sells cheaper than American wheat, but they would not have the additional duty advantage. There would be much less likelihood of section 22 being invoked if this change was made.

Mr. BEALE. I have not considered that angle, so I cannot answer that.

Mr. ALBERT. Would not that be true? Is that a sound observation or not?

Mr. BEALE. Would you mind putting it again, sir?

Mr. ALBERT. Well, the Canadian producers of this type of seed wheat will still have a price advantage over American producers because Canadian wheat, under their method of supporting prices, their wheat sells at a lower price than American wheat. In other words, it will compete at a price below the American price. It will lose the duty advantage, it will come in at 11 cents more a bushel, approximately. So it will lose that much advantage. But they still will have some price advantage, and it would seem to me that if they lost this little advantage and still were able to sell their wheat cheaper than we are able to sell our wheat, that our competitive position would be a little better, and therefore there would be less likelihood of an action under section 22 being sustained by the Tariff Commission. Do you understand my question?

Mr. BEALE. Yes, sir.

Mr. ALBERT. Is that a sound observation or not?

Mr. BEALE. Well, sir, that asks me to make a guess at what the Tariff Commission will find under section 22 investigation, and I just would not hazard a guess on that, on what the situation would be. Mr. ALBERT. Well you just follow the thing down. If you give them a much greater advantage, if we eliminate all quotas and if they could produce wheat much cheaper, you could get down to a point where you could put American producers out of business, and the closer you get to that point the more likely is a section 22 action to be sustained; is that correct?

Mr. BEALE. That is correct.

Mr. ALBERT. Would that be true?

Mr. BEALE. The closer you get to that point, certainly

Mr. ALBERT. What would you recommend we do in view of what our people are asking us to do on this matter and in view of the facts that have been brought out by the Department of Agriculture? Mr. BEALE. Well, sir, I would hesitate to recommend that you should not report legislation favorably, but I would like to ask that if it is your desire to do so that the Department be given an opportunity to