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I think it would
The other gentleman will remain, will you not. be well if you did.
STATEMENT OF C. W. NICHOLS, DEPUTY DIRECTOR, OFFICE OF INTERNATIONAL RESOURCES, ACCOMPANIED BY T. C. M. ROBINSON, ASSISTANT CHIEF, COMMODITY DIVISION, DEPARTMENT OF STATE
Mr. NICHOLS. I am C. W. Nichols, with the Department of State, and my associate Mr. Tom Robinson is also with the Department.
I realize that your time is becoming short.
We were told that the committee would be interested in the following things, the policies or the attitudes of the Department concerning exports of rice, the problems in relation to other countries that might be generated by special export programs, and the dangers and the difficulties in these special programs, particularly Public Law 480 from the point of view of the Department of State.
These are somewhat general. And in view of the limited time, if I may, I would like to just comment very briefly and very generally, and then we could, perhaps, move to something more specific.
The Department's interest in the matter, of course, is a derived interest. In trying to carry out international relations in a way that will serve broad objectives we do become involved in trade problems and in trade problems of particular commodities, but the Department does not have any policies of its own as to any one commodity. We try to arrange trade opportunities, in particular commodity situations in such a way that the derived benefits for the United States ininimize foreign friction, but it is not our original objective to discriminate in any way as between commodities.
Let us say, basically, the Department's attitude toward international trade is one of encouraging so far as possible trade on a private basis, multilateral trade with a minimum of discrimination between countries, or governmental regulations.
For many years there have been severe limitations on the extent to which trade can be conducted in that form. These remain in varying degrees.
We are working on some emergency assistance programs, some charitable donations, the mutual security program, and in particular the Department is taking an active part in the administration of Public Law 480 in the development of the negotiated proposals and in the conduct of the negotiations with other governments, later in this scheduling sometimes of the commodities and the use of the funds.
We recognize that the primary purpose of Public Law 480 has been to dispose of surpluses already generated, but we have, also, recognized an opportunity here to supplement levels with consumption to add something to the trade which would have occurred wholly commercially. We have attempted within the terms of the law to assure that these concessional types of programs on noncommercial trade do not damage or do only minimuin damage to the basic possibilities of expanding trade on commercial terms.
We have felt that there are some dangers in certain parts of the world of countries becoming too dependent upon such a large fraction of their food supplies coming to them without commercial payment,
and so become somewhat undependable forces in the sense that it is not known that they could rely continuously when supplied in this way.
On the whole, however, that has been up to this point a worry having to do with a somewhat later time, and we are convinced on balance that the Public Law 480 program has a net of pluses and advantages in the foreign relations side, without forgetting for a moment the need to continue to administer it very carefully, so that it does not harm the dollar export trade of the United States or the commercial trade on which some of our allies are very dependent.
Those policies that I referred to so briefly and inadequately apply equally to all of these commodities, and also, apply to rice.
There are some special circumstances in rice which gives them a particular context, in particular the bulk of the world import market for rice is in Asia. That is where rice has been imported and where it will be imported in any substantial volume or greatly increased volume in the near future.
So all of those problems that particularly relate to Asian affairs have a greater application in the international trade of rice than they would have with some other commodities which are primarily imported in other parts of the world.
As you gentlemen know, the bulk of the world production of rice is consumed in countries where it is produced, and only a small part of the world production actually enters into international trade. This part tends to be rather erratic. It is the marginal part, so to speak, and we have seen rather rapid and extreme change from conditions of surplus in international trade or shortage with rather marked fluctuations in prices.
One of the characteristics of this rice trade, with which the Department is quite conscious is the special position of Burma and Thailand, as the principal exporters of the undeveloped but friendly countries which have only a few other products on which to earn foreign exchange they require.
It has been our earnest hope in the Department that special export programs of the United States would not be detrimental to the reasonable commercial exporting interests of these countries which are comparatively small, but quite strategically located and with which the United States as a matter of general foreign policy is quite anxious to cooperate.
We work very closely, as was indicated by Mr. Miller, with the Department of Agriculture, and on occasion with other departments that have an interest in these matters.
Probably, I should not take more of your short time with the general statement. We appreciate the chance to be with you. And if
you more specific questions on which we could be helpful, we would like to try to answer them.
Mr. THOMPSON. Do you know any cases where there has been an effort on the part of the Department to sell wheat rather than rice? Where a nation wanted rice and we said, "Let us give them wheat?"
Mr. NICHOLS. I do not recall a particular incident, but I would like to comment in this way: The development of some of our 480 programs is an evolutionary affair. It does not occur exactly along the
I am glad to express my opinions and beliefs, but I cannot hope to answer questions as to the detailed facts or give statistical data, as I have not had an opportunity, nor time, to prepare such material.
While I am president of the Rice Industry Association, a national rice promotion association that was formed recently, I do not speak for that group or any other group, but express only my own personal views and opinions.
I want to say at this point that in my dealings with the Department of Agriculture, I have found all of the officials and employees patient, considerate, cooperative, and helpful always.
I believe that some of the present practices and policies in dealing with rice could be improved." I am convinced that the world market can and will absorb all United States rice if rice produced in this country is offered for export at prices competitive with other sellers in the world market.
I believe if we could dispose of all rice surpluses and all future surpluses could be avoided
Mr. GATHINGS. Would you suffer an interruption now, Mr. Miller?
That is the very point I have been trying to get at this morning. I just wondered if you could give us a little light on the subject as to just where that level would be, and what is that competitive price on a particular type of rice that is used in the rice-consuming nations of the world.
Mr. MILLER. Congressman, I have in mind in the body of the little statement that I roughed out this morning, to suggest some of these changes that would meet this situation.
Mr. GATHINGS. I don't want to jump the gun.
Mr. MILLER. If I may, when I have finished, I will be happy toI have some world prices here in my brief case that I have recently received from Japan and other places, and I will be happy to go into those to any extent that you wish.
Mr. GATHINGS. I know that you have visited in the Orient in recent months, and that you do know that situation full well.
Mr. MILLER. I went over there. I don't know how much I know about it. I tried to learn something.
Mr. McLain. A pretty big place, isn't it?
As I was saying, I think that all future surpluses could be avoided if certain improvements were made in the management of rice. It may be that existing laws compel the policies. If so, perhaps the law should be changed.
In other words, I am not suggesting why it is true. I am just sug. gesting that these are policies and practices which we respectfully submit could stand some improvement.
Unless some changes are made, serious consequences may befall rice millers. Some rice mills have closed in recent years, victims of the conditions that have made it impossible for them to continue to operate unless some relief is forthcoming soon.
It seems probable that other rice millers may be forced into bankruptcy also. Under the present circumstances that exist, it is difficult for even the most efficient rice mills to continue operating. Mills are expensive and cannot be easily and quickly replaced. If present mills are forced to close, it may be a long time before investors are found to build new rice mills.
During World War II there was need for rapid expansion of rice milling facilities. During and after the war, United States rice farmers and millers were called upon to meet unprecedented demands to feed our Armed Forces and send rice to allies and the other countries that depend upon rice, but whose crops had been destroyed by war activities.
Mr. McLain brought that point out in his earlier testimony.
United States rice millers met the demand, investing large sums in plants and equipment. Independent millers invested their own private funds to build these expensive mills. During the Korean war again, rice millers were called upon to meet increased demands and again they made further investments.
Since the end of the Korean war, the imposing of acreage controls has cut down the amount of rice to be milled, and the high support paid United States farmers has priced United States rice right out of the world markets.
Rice millers have been patriotic and have made big investments of funds, but they have found themselves in great difficulty. Some mills have had to close, others may be forced to suspend operation soon unless relief is found.
If another emergency should arise, the fine milling facilities that were once available, and which would be so urgently needed again, may go.
Replacement cannot be made quickly nor easily. Recently, I read that the Government is spending 42 percent of a $3 billion rehabilitation campaign to keep American shipping adequate to meet demands that could arise during an emergency.
We read that there is stockpiling of various types of strategic materials that may be needed in time of emergency. All this requires huge expenditures of public funds. If it is wise to spend billions of dollars to build ships and stockpile materials for possible future emergencies, it seems unwise to adopt practices and policies that are slowly destroying a vital food processing industry that is needed now and would be indispensable in an emergency.
I am convinced that rice millers do not want, nor need, subsidy nor Government help. I believe that if rice millers and rice farmers were permitted to carry on their business under the basic principles of free enterprise, they could grow and prosper and be ready to do their part promptly and well whenever the Nation needed them in peace and
Specifically, some of the ways that present policies and practices could be improved, in my own personal opinion, are:
First, present rice surpluses held by CCC could be offered for milling and export at prices competitive with the world market. Under RRDL 500, which Mr. Dean mentioned a few moments ago, or similar announcements, if option were granted for 30-day periods on stated lots of rice at realistic prices to individual rice millers, I believe the surpluses would soon disappear. These options are desirable since it is difficult to try to make sales unless one knows the cost of goods to be sold.
Let me stop and digress for a moment to explain what I mean. For instance, the Government of Greece at the present time has tenders out asking for submission of bids to sell rice to them.
The Government of the United States has rice offered, but it is offered on a basis of the bidder bidding the highest price to get that
rice. Now, a miller, cannot sell the rice until he owns it; he can't buy the rice unless he sells it. When you are dealing with cargoes of rice, 10,000 metric tons at a time, just a small deviation in price can be a catastrophe.
Now, if there was a basis on which we could go to our Government and say, "We would like to have an option to buy a cargo of rice from you, a certain kind--you have got it in stock-you want to sell it and we would like to have that option at a certain price”—if necessary they could charge us for the option and if necessary we could be required to give a bond of performance as a matter of good faithwe want no favors—we just want a chance to know what the price of admission is.
Then, if we had an option, we could go to the Government of Greece. or the government of any other country and say, "We will mill and sell you this rice on this kind of a basis." We would be in a position to trade.
But under the present circumstances, although we are grateful for DL-500 program, it is wonderful, it is a vast improvement, it is the best thing we have ever had to date, it is still just a little bit like a bridge that almost gets to the other side. You can just almost cross the chasm, but you can't quite make it, because there is just a little bit more space than you can run and jump over.
Now, I am not suggesting that this option arrangement is the only method. There are probably others, but under the present circumstances, trying to work this thing from a practical standpoint, it certainly would be helpful if there were some way we could know what the price at which we can buy the rice at the time that we are trying to sell it is.
Unless we can get either the selling price fixed to us, or the buying price fixed to us at one end or the other, we cannot trade.
So, that little gap left there, which we cannot get over, is quite 3 gap as far as we are concerned.
Now, second, if acreage controls could be eased as rapidly as practical and ultimately abolished, I am convinced that United States rice farmers and processors are sufficiently efficient to increase their production and meet world prices without the need for price supports or other governmental help.
Third, in managing the present surplus, so long as price supports preclude American rice from moving freely in world trade, as much consideration should be given to the protection of the American rice industry as to political considerations abroad and to other factors.
In a managed economy, one group can be severely penalized by the artificial creation of a set of circumstances that may inadvertently cause that penalty.
In the spring of 1956, one decision caused rice millers to suffer great hardships.
In the spring of 1957, another such decision caused even greater hardships and financial losses to rice millers.
While neither decision was intended to cause these hardships, nevertheless great financial losses to rice millers resulted.
Millers have been or may have been responsible to some extent for their own troubles, but circumstances beyond the millers' control also were greatly responsible for those troubles, in my opinion.