STATEMENT OF HON. EZRA TAFT BENSON, SECRETARY OF AGRICULTURE, ACCOMPANIED BY R. E. SHORT, DIRECTOR, FOREIGN AGRICULTURAL SERVICE; KARL D. LOOS, SOLICITOR; DON PAARLBERG AND WHITNEY GILLILLAND, ASSISTANTS TO THE SECRETARY; AND ORIS V. WELLS, CHIEF, BUREAU OF AGRICULTURAL ECONOMICS

Secretary BENSON. Thank you very much, Chairman Reed.

I have a brief statement. If I may, I will read that first.
The CHAIRMAN. Certainly.

Secretary BENSON. Mr. Chairman and members of the Committee on Ways and Means, this is my first formal appearance before the committee since we took office. It is, therefore, a significant occasion for me. However, my associates and I have counseled repeatedly with Members of Congress and have profited greatly from your advice. We expect to continue to work closely with this committee and other committees of the Congress.

I welcome this opportunity to appear before this committee to discuss the renewal of the Reciprocal Trade Agreements Extension Act of 1951.

In his message of April 7 to the Congress, President Eisenhower recommended the renewal for 1 year of the present trade agreements legislation. This renewal was asked for as an interim measure to permit temporary continuation of the present program, pending the completion of a thorough and comprehensive reexamination of the entire economic foreign policy of the United States.

The Department of Agriculture supports the President's recommendation. We hope that there can be a straight 1-year renewal. During these nearly 20 years that the act has been in effect, it has proved its advantages. It has had strong bipartisan support in its present form. An extension will give the Congress and the administration an opportunity to study our foreign trade policies carefully and thoroughly, in the light of our changing times. The act contains a number of provisions that should not be allowed to lapse without other legislation to take their place.

An important part of the market for American agriculture lies abroad. In recent years, we have exported the production of from 50 to 60 million acres of farmland. Our farm exports in the last 5 years have averaged $3 billion in value each year. Last year we exported some 40 percent of our cotton, wheat, and rice and about a fourth of our lard and tobacco. We exported significant parts of our production of many other items and these exports made a necessary contribution to the prices and incomes of American farm producers. Attached to my prepared testimony is a statistical supplement which gives detail regarding foreign trade in farm products. You may find it a useful reference.

(The document referred to is filed with the committee.)

Secretary BENSON. Foreign purchasers must buy our exports with dollars. They obtain these dollars primarily in selling to us the goods and services which they can produce most effectively in exchange for our goods and services. For our foreign trade as a whole we have been buying a smaller amount of goods and services than we have

been exporting. We have made up the difference by lending or giving away our dollars.

The excess of our total exports of goods and services over our total imports began sometime in the last century. In those days we were a debtor country. We were paying dollars to foreign countries as interest and principal on our debts, and our export balance helped service our debt.

Since World War I, however, we have been a creditor nation, and an excess of exports over imports is no longer to be considered advantageous. We are told by the Assistant Secretary of Commerce, Samuel W. Anderson, that from 1914 to 1952 the excess of United States exports over imports has totaled some $120 billion. More than 70 percent of this excess has been accounted for through Government loans or through so-called giveaway measures at direct cost to American taxpayers. To send our goods abroad and attach a check for payment to the bill of lading-this is hardly to be considered as good business practice. In its place must be some means of making the trade-sheet balance. Imports to match our exports is the practical answer. The trade-agreements machinery can be used to help accomplish this objective. In the use of trade agreements, negotiations should be broadened to consider regulatory devices other than tariffs, such as quotas and manipulated exchange rates. Other nations have employed these devices to our disadvantage, offsetting seeming gains obtained through tariff modifications. The authority might also be used to negotiate a regulation of foreign trade in some agricultural products similar to regulations authorized by marketing greements and orders.

I recently recommended to the Senate and the House Agricultural Committees that the Reciprocal Trade Agreements Act be extended. At the same time I indicated that import controls should be provided for those United States agricultural products which were under price support, and recommended that section 22 of the Agricultural Adjustment Act of 1933 be strengthened so as to make this possible. Let me review for you the conditions that made these recommendations advisable.

We, in Agriculture have in operation, as a consequence of congressional action, various price-support programs. Many of the commodities included in these price-support and marketing-order programs are subject to substantial import competition. In many cases the price-support level is substantially above the world market price, even after allowance for the customs duties assessed against imports. When that happens, imports are attracted to this country from all over the world, including areas whose products would normally be exported in whole or in part to other countries where they may be badly needed. But the price-support level in this country acts like a powerful magnet to draw these commodities out of their normal flow in international trade. When we seek to limit the effect of this influence, we are simply seeking to diminish or avoid the distortion of trade by the stimulus of an artificial influence, such as a pricesupport program.

I am sure the Congress would not enact a statute making mandatory the support of the world price of agricultural commodities at 90 percent of American parity. Yet that is what the present mandatory

supports mean if we do not have a readily available and effective method of controlling imports of those commodities or products whose prices are maintained here above world levels by price-support or marketing-order programs. Our price-support activities, already costly, would become much more expensive.

In recognition of the fact that a stimulation of imports can impose an intolerable burden on a price-support program, the Congress enacted section 22 of the Agricultural Adjustment Act. This section provides for the imposition of import quotas or import fees whenever imports of any agricultural commodity or product thereof render or tend to render ineffective or materially interfere with any pricesupport or marketing order (or certain other) program. This is permanent legislation.

Although section 22 originally enacted in 1935, it was very little used. It calls for investigation by the Tariff Commission after recommendation by the Secretary of Agriculture. Only 5 such investigations have been instituted in the past 17 years. Experience has shown that these investigations are usually long drawn out and this procedure has proved to be wholly ineffective to meet the problem. This is indicated by our experience with wool. Wool price support is mandatory at such relation to parity between 60 and 90 percent as determined necessary to encourage an annual production of approximately 360 million pounds of shorn wool. Current production is considerably below this goal and wool is currently being supported at 90 percent of parity. Upon the recommendation of the Secretary of Agriculture that imports of wool were interfering with the wool price-support program, the President directed an investigation under section 22 which was instituted by the Tariff Commission and hearings were held commencing September 29, 1952.

Up to this date no report has been made by the Tariff Commission. Imports of foreign wool have been received in large quantities and the marketing of domestically produced wool has been materially retarded. Commodity Credit Corporation presently holds under loan about 100 million pounds of 1951 and 1952 crop wool, representing almost half of the 1952 production. In the 12 months ending December 31, 1952, imports of wool have been 300 million pounds (actual weight basis, dutiable wool). We are simply immobilizing our domestically produced wool and it is being replaced by imports. Because of the failure of the executive branch to use section 22 in such a manner as to achieve the objectives of its enactment, Congress enacted section 104 of the Defense Production Act. This section applies only to certain fats and oils, butter, cheese, and other dairy products, peanuts and rice and rice products.

It requires that imports of such commodities shall be limited to such quantities as the Secretary of Agriculture finds will not (1) impair or reduce domestic production below current levels or such higher levels as deemed desirable; (2) interfere with orderly domestic storing and marketing; or (3) result in an unnecessary burden or expenditure under a price-support program.

The control of imports under section 104 is prompt and effective. But it has been subjected to severe criticism on the ground that the procedure is arbitrary in character, and it has been the source of much friction in international relations. It requires the imposition of more

drastic import restrictions than would be required simply to protect our price-support programs.

We feel strongly that Congress intended section 22 to be used, and used effectively whenever necessary to protect price-support and other programs. The statutory history clearly so indicates. Section 22 can be made an effective instrument by improved administrative procedures and by supplementing it with authority, in an emergency, to impose the quotas or import fees within the limits specified by the section, on an interim basis pending decision by the Tariff Commission and action by the President. So strengthened, section 22 would assure the protection of the Department's price-support and other programs against interference or nullification by the distortions in international trade which such programs are likely to create.

Furthermore, under this procedure the import restrictions which are necessary to protect our price-suport progams would be subject to deliberations in which all parties could be heard rather than being imposed arbitrarily as is now the case. This would be in harmony with the policies embodied in the reciprocal trade agreements.

The Tariff Commission, at the request of the President, began hearings on Monday of this week in an effort to expedite action on agricultural commodities now under price support.

With the strengthening of section 22 there will be no need for an extension of section 104. The strengthening of section 22 can be accomplished by expedited administrative action and by a separate legislative action. I point this out merely to clarify the fact that extension of the trade agreements for a year, pursuant to the President's request, need not impair our price-support operations nor our protection of them.

I wish to emphasize that the limitation of imports for commodities under price support is made necessary by our price-support laws. Such recommended restrictions are not inconsistent with my recommendation for a continuation of reciprocal trade.

There are many problems that await solutions. Not all the answers have yet been given. Our foreign aid program, America's prospective role in her trade relations with other nations, the question of international commodity agreements-these and other unsolved problems confront us. The legislative and executive branches of government have a grave responsibility in finding solutions to these important problems. Perhaps it is an act of prudence to proceed with deliberation rather than with haste.

I wish to stress that the Department will wholeheartedly cooperate with the study of our economic foreign policy that the President has ordered to be undertaken. The interrelations between our foreign trade policies and our agricultural policies will be a part of this study. We hope the study will result in widely agreed proposals for a comprehensive and constructive effort toward building a strong economic system within the free world, such as envisaged by the President in his message on April 7 to the Congress of the United States.

In the meantime, we trust the Congress, in its wisdom, will see fit to grant the renewal, for 1 year, of the present trade agreements legislation as requested by the President.

May I conclude by saying that in the days ahead I shall continue to seek your counsel and direction, as I have that of the President.

The services of the Department will always be available to you. You will, no doubt, on many occasions have reason to question my judgment, but I trust you will never have occasion to doubt my sincerity or my deep interest in the problems of the farmer.

That concludes my formal statement, Mr. Chairman.

The CHAIRMAN. Mr. Secretary, I wish to congratulate you, sir, upon a very clear presentation of the subject as you see it. We are very glad to have you here today.

Secretary BENSON. Thank you very much.

The CHAIRMAN. Are there any questions?
Mr. Simpson will inquire.

Mr. SIMPSON. Mr. Secretary, if I followed correctly, you recommend the discontinuance of section 104 now in the law, whatever law it is the Defense Production Act.

Secretary BENSON. The Defense Production Act.

Mr. SIMPSON. You have recommended that that be eliminated, and you suggest that section 22 can accomplish its intended purpose by expediting administrative action within by separate legislative action. Are you recommending legislative action now? I do not mean today, but in connection with these hearings.

Secretary BENSON. We feel, Congressman, that there is a possibility of meeting the need through effective administration action in connection with the legislation already embodied in section 22. However, if that proves not to be sufficient, then it is my feeling that it should be strengthened through amendment.

Mr. SIMPSON. Under those circumstances, you would recommend amendments to section 22 to make it workable?

Secretary BENSON. I think it must be workable. We must have some type of protection against imports, particularly while we are operating a support program with high, rigid supports.

Mr. SIMPSON. If section 22 as it exists presently will not accomplish that purpose, then you would like an amendment added to it now? Secretary BENSON. Yes; if through administrative effort it cannot be accomplished, then I would think that an amendment to strengthen it is desirable.

Mr. SIMPSON. When you make that recommendation you have in mind agricultural interests?

Secretary BENSON. Yes, primarily; that is right.

Mr. SIMPSON. The whole purpose of these hearings and of my interest in this particular legislation and the reason I introduced the bill was because I had in mind the interests of agriculture, yes; pottery manufacturers, yes; bicycle manufacturers, textile workers, coal miners, lead miners, and a dozen others.

How would you suggest that we might justify affirmative action to protect the farm group in this area by amending section 22 and yet suggest that we delay any action pending the study of the Commission which you recommend?

Secretary BENSON. I feel, Congressman, that the whole field needs very careful study, including section 22. Personally, I have made up my own mind that section 22 can be made effective so far as agriculture is concerned. There may be other legislation that could be used and made effective in the case of these other commodities. I am not familiar with that field, particularly.