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first 2 years of the Wool Act operation costs more than anticipated because the world wool market for wool was in a depressed condition. Wool prices in the United States were further reduced through feeding into the market at 150 million pounds of stockpiled wool. That, Mr. Chairman, is now eliminated and there is no stockpile, which takes quite a load off the market situation, and certainly will help in the marketing in the future.
During the third year of the act, wool prices early in the season will reduce the amount of incentive payments necessary to be made under the act. In fact, it is anticipated that only about one-half of the cost of the act of the program will be necessary for payments the third year. However, removal of the word "specific" would make additional funds available in future years if depressed conditions in the wool market made further funds necessary to carry out the intent of the act. This we feel is a fair approach to making 100 percent of the specific duty available which would disrupt the program of section 32 funds. We don't want to do that. We want to protect the section 32 funds. In this connection tariff from wool, as amended, has contributed to the support of 86 other agricultural commodities for the past 20 years other than section 32 operations. And until the Wool Act became operative, 4 years ago, not 1 cent of wool tariff funds were ever used for the support of the wool industry.
I have a suggested amendment that I would like to submit to the reporter for the record, if I may, to be inserted in the record. Mr. MATTHEWS. Without objection that will be done. (The amendment is as follows:)
PROPOSED COMMITTEE AMENDMENT TO BILL FOR WOOL ACT RENEWAL
Viz, strike out all after the enacting clause and insert in lieu thereof the following:
That section 703 of the National Wool Act of 1954 is amended by striking out the second sentence thereof.
"SEC. 2. (a) The first proviso in section 704 of such Act is amended by striking out 'specific' the first time it appears therein, and by striking out '(whether or not such specific duties are parts of compound rates).'
"(b) The proviso in section 705 is amended by striking out 'specific' the first time it appears therein, and by striking out '(whether or not such specific duties are parts of compound rates)"."
Amend the title to read: "A bill to amend the National Wool Act of 1954 in order to eliminate the termination date for price supports, and for other purposes."
Mr. FISHER. I will say that I have permission, I think, from practically all of the authors of the bills now before this committee to join in support of these proposed amendments.
Mr. MATTHEWS. Thank you, Mr. Fisher.
Are there any questions?
We have a colleague, Hon. LeRoy Anderson, in the audience who is very interested in this legislation. Congressman Anderson, please come up here and join us, sit right over here.
Mr. HILL. Congressman Fisher, I want to also express my appreciation for the wonderful opportunity I have had to work with you in legislation that we have had under consideration on wool ever since I have been a member of this committee, because the work you have done has been appreciated by me.
Sometimes we have support of legislation of those who do not have the fundamentals at root of our difficulties. I am proud of the
fact that we have your cooperation and I am sure we will continue to work in unison.
I would like to ask you this question. Is this true, as it appears to me, that if the House or the Senate wish to make any changes they can offer amendments and the changes can be made anytime we are in session if there should be changes necessary. Why have a definite time to end the legislation. Then you have to start over. Am I sound in my thinking on that?
Mr. FISHER. I think the gentleman from Colorado is entirely correct. In the very nature of things this program is a long-range program.
During the debate on it when it was written and enacted the gentleman from Colorado offered an amendment, those who opposed it at the time said in perfectly good faith and probably for good reasons. I should say, "Well it has not been tried. Give us a little time. Let us put a limitation on it and then come back and take a look at it and see how it works." That has been done.
So the 4-year limitation was put on. We are back now to see how it works. I think it worked very well. I think that will be demonstrated by the witnesses who will follow me. Therefore, the objection to the removal of limitations when it was written in the act has now been met. I think it would add stability and faith and confidence in the future of the wool business in this country, the domestic business of this limitation is taken off.
It would have an automatic termination date when the 300-millionpound goal has been achieved. That after all is the objective of the act to increase the domestic production.
Mr. HILL. Then it has a limit anyway when you consider the amount of wool that you intend to produce.
Mr. FISHER. That is correct.
Mr. MATTHEWS. Congressman Dixon.
Mr. DIXON. As I understand it, as the price of wool goes up the amount of money that is needed for the incentive payment goes down. Mr. FISHER. Correct.
Mr. DIXON. The surplus has now been exhausted completely, has it not?
Mr. FISHER. That is correct.
Mr. Dixon. The chances are that the price of wool could go up.
Mr. DIXON. But still you need this amendment just as insurance in the event that the prices go down and more money is needed.
Mr. FISHER. That is correct. It will increase the income from the duty on wool. I think that is correct. Certainly, if it is not needed it will not be used. To have it available it would improve the situation, in providing insurance just in case of an unusual or extraordinary development.
Mr. DIXON. Even as the bill is drawn, with your amendment, wool would still be contributing 30 percent of its tariff of this to other agricultural commodities.
Mr. FISHER. The section 32 funds, that is correct.
Mr. DIXON. I have been trying to think, but as I recall it, for every 1 cent that the price of wool goes up, the Government pays from 2 to 3 million dollars less in incentive payments.
Mr. FISHER. That sounds like it ought to be about right. I have not checked that.
Mr. DIXON. I believe that is correct. So the likelihood of your amendment costing the Government very much money is not too strong but still the insurance would be worth a great deal to this industry which has been languishing.
Mr. FISHER. Actually, I don't think that it will cost anything but it will provide that insurance, an additional amount that can be drawn upon in case it should become necessary. I may add that I understand that we add $20 million to the fund from this incentive payment that is to be made.
Mr. DIXON. In the event it was needed?
Mr. FISHER. In the event it was needed. We are not asking for any increase in the incentive level, and it will not be used unless necessary, and, therefore, I doubt that it would be necessary. I can't believe that there would be much likelihood that it will increase the cost of the program at all. But it does provide that. That would
Mr. DIXON. Personally, I appreciate your viewpoint. While this provision is not in my bill, I support the idea. I certainly commend you for your testimony.
Mr. MATTHEWS. Thank you very much, Congressman Fisher. (The statements referred to are as follows:)
STATEMENT OF HON. E. KEITH THOMSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING
Mr. Chairman, on August 29, 1957, I joined with many of my colleagues in introducing legislation to extend the National Wool Act of 1954, the number of my bill being H. R. 9532. On that date, speaking on the floor of the House, I stated that it was essential "that legislation be enacted early in the next session to extend the act, if we are to avoid the harmful effect of uncertainty within the industry." I wish to congratulate the committee and the chairman for recognizing this need for early action by promptly requesting reports and arranging these hearings.
The testimony in these hearings previously submitted has generally very well covered the need for legislation, as well as the justification of the enactment of this particular legislation as a solution to the problem, at least for the immediate future. I will attempt to avoid burdening the record by repeating factual testimony that has not been and cannot be controverted.
The chaotic conditions of the industry existing prior to 1954 are well known. The fact that a conventional Government price-support program had only resulted in the accumulation of 150 million tons of wool in Government warehouses, stored at taxpayers' expense with a depressing effect upon the free market, is well recognized. The last of that wool has been removed from Government storage.
I think it is important that we constantly keep before ourselves the fact that wool and sugar are the only two major agricultural crops which we produce in this country that are not produced in surplus or in excess of our rate of consumption. We produce in this country only about one-third of the wool which we consume. With regard to these commodities, the problem is a tariff problem, and not one of surplus commodities. The American producer of these products, as with almost all other agricultural or industrial products, simply cannot compete with the lower living standards, the lower wages, the lower taxes, and the lower costs of production in other countries.
I think we must also constantly keep in mind that wool is certainly a basic agricultural commodity in the sense that it affects the country as a whole. Sheep and wool are produced and fed in significant quantities in almost every State in the Nation. Livestock and livestock products account for by far the greatest portion of our farm income. When wholesale reductions occur in the production of sheep, as in the postwar period prior to 1954, the effect on all other segments of the agricultural economy is significant and is bad. Lands used for this pro
duction are either diverted to the production of cattle or other agricultural products, with attendant price and supply dislocations. The fact that this decline in production of sheep has been halted has been a benefit to most other segments of agriculture.
The effect of the act or its extension is not to place a tax burden on the American people, to produce an unneeded commodity or a commodity in excess of requirements. Revenues come only from tariff on imported wool. The solution could have been by tariff increases or by import quotas, but this was determined in 1954 to be contrary to our trade policies. Wool is a strategic material which we need from domestic producers in greater quantities even than now produced. To provide for this incentive payment from the tariff revenues, rather than to provide higher tariffs or quotas, is not to give wool a preferred position over other primary agricultural products. These other agricultural products with regard to which we have price and supply problems are given far greater protection by either tariff, quotas, or absolute embargoes on imports. Even under the act, we are giving wool something less in the way of protection.
Another thing I think we should remember is that, even though this legislation was the salvation of the important wool industry faced with outright extinction, it has not solved all of the problems. The price has improved. Without speculating on the effect of the removal of the Commodity Credit stockpile, the fact is that payments in the initial year of operation were $58 million, or 44.9 percent of the market price, to maintain a 62-cent incentive level, whereas estimated payments for this year will be something in the neighborhood of $20 million, or from 15 to 20 percent of the price received on the market, to maintain the same support price of 62 cents. This shows a tendency to achieve the objective. The improvement in price has worked to the advantage of all segments of the industry and the consumer. Nevertheless, another important thing for us to remember is that the only market for American-produced wool is the American manufacturer and the American consumer.
It is alarming that mill consumption is running 17 percent below a year ago. Without speculating on what would have happened had there been no drought, it is of concern that our production in 1957 was only 226 million pounds, and far short of the 300 million-pound objective, and that imports still make up twothirds of the domestic consumption.
These problems yet remain unsolved. I bring this out because I want my colleagues to fully understand that the passage of this legislation is not in any way going to lessen my support for general legislation that will provide adequate protection and a proper share of the market for domestic producers of all products. When their production and their price is being adversely affected by unfair foreign competition due to cheap labor, lower taxes, and the taking of advantage of our successful effort to raise the standard of living for all of our people, it is in the interest of every American businessman, laboring man, and agricultural producer that this overall situation be corrected. I shall continue to work to that end after the passage of this legislation, just as I have while the 1954 law was in effect. There is no market for American wool in Japan or other cheap-labor countries. The problems of the American woolen mills and manufacturers must be solved. In the interest of the general economy, this extends to cotton and other American products. American workers must be kept employed to provide a customer for agricultural products at a fair price to the producer. The great intra-American mass market must be preserved so that our country can continue to advance and raise our standard of living for all of the people as an example and an incentive to the rest of the world. This is in the interest and to the advantage of the free world and can, in my opinion, be done without any damage, but rather advantage, to the free world. The overall effect will be to promote sound trade and not to improperly restrict trade.
In the meantime, this act that has proved itself should be extended. The extension should be for an indefinite period. Even with the passage of more general legislation it is impossible to determine how long it would take to remove the necessity for this legislation. That decision would always rest in the hands of Congress, as the inherent right of Congress to change the law as needed would not be affected. Placing it on an indefinite extension, however, would give the additional confidence in the future needed to bring about the required expansion of the industry with consequent lessening of pressure on other agricultural commodities. Because of the indefinite extension and the uncertainty of economic conditions now and for an indefinite future, the limitation of sources of revenue to specific duties should be eliminated to assure adequate financing in all events,
which would still be without any burden on general revenues and would only be a payment in lieu of tariff from present tariff income.
The extension of this act is essential in the interest of all of agriculture, in the best interest of all of America and of Americans everywhere. I urge that this be done without delay.
STATEMENT OF HON. CLAIR ENGLE OF CALIFORNIA
Mr. Chairman, I was necessarily absent from Washington at the time of your subcommittee conducted hearings on a number of measures designed to extend the National Wool Act of 1954. I would, therefore, like to submit a statement for the record of that hearing indicating the desire of the sheep producers in my district in California to have action taken by the Congress to extend the act which now expires at the end of the 1958 wool marketing season.
I should like to add my endorsement to the testimony presented at the hearing by representatives of the grower organizations, and I can tell you that the California Wool Growers Association most heartily supports such legislation.
The act has made it possible for American producers to stay in business and to continue to produce a part of our minimum requirements in case of a defense emergency without being forced to meet the price of imports and without, at the same time, excluding imports to the United States or seriously diminishing the United States market for the wool produced by our foreign suppliers.
Secondly, it is my understanding that with tariff receipts on specific duties on raw wool down from figures forecast and cost of the program somewhat higher than anticipated during the period of time the Government was disposing of its CCC stock pile, there has been some fear created that the act will not provide sufficient funds to carry out its purpose. That is because the use of funds is limited to an amount equal to 70 percent of the specific duties on wool imports. It has, therefore, been proposed to this committee for consideration that the limiting word "specific" be removed and that an amount equal to 70 percent of all wool duties be allocated for incentive payments if such funds are needed.
I should like to endorse that proposal made to your committee by Congressman Clark Fisher and approved, I understand, by the authors of other pending bills to extend the act.
STATEMENT OF HON. E. Y. BERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH DAKOTA
Mr. Chairman, I appreciate the opportunity of appearing before your committee in support of H. R. 9518, which provides for an extension of the National Wool Act of 1954.
As this committee well knows, the National Wool Act has been very effective in reviving a sick sheep and wool industry, but the job is only partly done and it is necessary for an immediate extension in order to complete the purposes for which the act of 1954 was passed.
Four years ago President Eisenhower recommended legislation for promoting development of a sound and prosperous wool industry in connection with national security, and in addition, to promote the general economic welfare of the Nation. It is well to point out at this place that we produce only about one-third of our normal peacetime wool requirements in this country and that we must depend upon imports for the balance.
Our national wool production declined about 40 percent following the beginning of World War II because of foreign purchases made by the Government. That, plus the fact that the 1948 Trade Agreements Act reduced the tariff on wool to a point where the price of wool was such that a producer could not meet the competitive foreign price. The wool producer has suffered from the same cost-price squeeze as other segments of agriculture.
The purpose of the National Wool Act was to produce an incentive for domestic wool production to increase such production to at least 300 million pounds of shorn wool. This goal can only be reached either by the extension of the National Wool Act of 1954, or by raising the tariff to a protective level which probably cannot be done because of our present foreign trade policy.