Mr. MATHIS. Mr. Weiman, for the record, at that point let me say I believe I asked the previous witnesses if they had filed a petition with the International Trade Commission under the jurisdiction they have to see if, in fact, the President should invoke some kind of countervailing duty. My question was not had they contacted USDA, but I can certainly understand your problem with them too. But, it has only been a month. You should not be too upset at this point about it. Please continue with your statement. Mr. WEIMAN. Our concerns for the American farmer and the processor are backed by overwhelmingly conclusive evidence that unless something is immediately done to check the rising tide of palm oil imports into this Nation, we will face serious disruption of domestic markets. The ultimate impact on a segment of the family farm industry could be fatal. At a time when the American producer is being asked to produce at maximum capacity, we only ask for protection. and a guarantee that we won't be forced out of business. We concur with the price implications of the USDA's Foreign Agriculture Service which the report states that the expansion of palm oil production far and beyond what the world market can absorb at reasonable prices, with the assistance of international financing, leads to the likely conclusion that, "In the future, it appears that the current vegetable oil situation can only lead to depressed price levels which would adversely affect the economies of all major producer-exporter countries." The report concludes quite accurately and properly that, "If such projections are correct, some course of action seems to be needed which would: (1) Discourage excessive future stimulation of palm oil production; (2) equitably distribute the export supply of palm oil among other developed countries and the United States; (3) increase palm oil consumption in oil deficit developing countries. The necessity for implementing these proposals is expected to become increasingly acute. Mr. Chairman, now it is time to move from assessment to action. We cannot continue to expose our farmers to erratic policies which sometimes impose a closed gate on farm exports while at other times allowing the gate to swing wide open on competitive imports. On February 17, 1956, Tony Dechant, National Farmers Union President, wrote the Secretary of Agriculture and recommended the following: There are at least four courses open to the executive branch of the federal government and the possibility that, failing any successful action, the Congress could legislate some restrictions. Of the options available to the Administration, two involve our internal policies, two involve international negotiations. In our opinion, the long-range and most satisfactory solution for producers and consumers of both developed and developing nations, would be the establishment of an international pact for orderly trade which would assure new producers a proportionate and fair share of world oil market growth. Such a course has been under study for some time in the FAO intergovernmental group on oilseeds, oils and fats and in UNCTAD. Such negotiations may not be either simple or brief, but the talks could become productive with strong U.S. initiative. This would require a turn-around from the recent U.S. stance which has been disinterested and negative. Yet, this course should not be ignored or underestimated because it will be more satisfactory eventually to cope with the problem at the international level than for nations to take unilateral actions. In the interim, however, there is no choice except to consider immediate steps which could relieve U.S. producers and processors from the severe injury they are sustaining from the tidal wave of palm oil imports. The Administration could, of course, undertake active negotiations under Section 204 of the Agricultural Act of 1956, to persuade foreign governments to reasonably limit shipments of palm oil into the U.S., in a manner similar to that under which negotiations are under way to limit 1976 meat imports to a level which will not trigger imposition of quotas under the Meat Import Act of 1964. Such voluntary restraint agreements have been used over the past three or four years. This is not the most desirable and effective course, but it does at least put a cap on unrestricted imports and probably forestalls the adoption of statutes which would establish a less flexible situation on trade. Fortunately, a better course is available and one which could be initiated in very short order-within a few minutes of the time it would take to make the decision. We recommend that an immediate decision be made to reinstate a price support loan program on 1976-crop soybeans and that the Department act immediately thereupon to invoke an action under Section 22 of the Agricultural Act of 1933, to limit palm oil imports to a level which would not materially interfere with or tend to render ineffective the price stabilization program on soybeans. As you know, under the emergency powers under Section 22, the President could place immediate limits or impose levies upon the palm oil imports, while awaiting the results of an investigation by the U.S. International Trade Commission. Still another course is open. That is to initiate an investigation under the Trade Act of 1974 to determine the extent of injury to domestic processors of vegetable oils as a result of these imports and the degree to which the exports into the U.S. market are being subsidized by governmental measures in the exporting countries. We think the most desirable action would be to establish a CCC loan program on 1976 soybeans and then use it as the basis for mounting a section 22 action. A loan program on soybeans is certainly necessary and justifiable considering the precipitous decline in soybean prices and the indication, in the 1976 planting intentions, that soybean acreage for this year may decline by as much as 3 million acres. We are aware that there are some bills before the Congress which would mandate a support program on 1976 soybeans, but this will take some time. An immediate administrative decision to establish the loan program could influence producers to rethink their apparent decision to reduce soybean acreage appreciably for this season. In regard to the implementation of quotas or duties under section 22, the Secretary of Agriculture can advise the President that the level of imports or the prospective level of imports of any product may tend to render ineffective or materially interfere with the conduct of a domestic support program-in this instance the soybean loan program. The Secretary of Agriculture can also ask the White House to impose quotas or duties or to request that an investigation by the International Trade Commission be done if the imports are of such a magnitude that they will cause a material reduction in the volume of a commodity processed by domestic producers. The study of palm oil imports, issued by the USDA Foreign Agricultural Service in January 1976, indicated that by 1985, palm oil imports would either displace the entire present domestic market for cottonseed oil, or would displace the soybean output from a cumulative total of 5 million acres of soybeans. Based on these projections, USDA has all the documentation needed to ask that import quotas be invoked under section 22 on the grounds that the level of imports, expected to reach 1.1 million tons by 1985, will reduce domestic processing of vegetable oils by a staggering amount. The likelihood that the palm oil imports will affect the conduct of the soybean loan program is also quite clear. Therefore, USDA clearly has options open under which it can act at once. By using these available tools, the Federal Government will have a solid position from which to negotiate reasonable import levels should it choose to do so under section 204 of the Agricultural Act of 1956. We urge this subcommittee and the full committee to support these recommendations and join us in urging the administration and the Department of Agriculture to act promptly. Mr. MATHIS. We appreciate your being with us. Mr. Jones do you have any questions. Mr. JONES of Tennessee. No questions, Mr. Chairman. I just want to thank Mr. Weiman for being here, and it was a good statement. Mr. MATHIS. Mr. Jenrette. Mr. JENRETTE. No questions. Mr. MATHIS. Mr. Weiman. Thank you for appearing. Mr. WEIMAN. Just one last word, Mr. Chairman, and that is we approached the committee very late in putting together this hearing and they accommodated us by putting us on and we do appreciate that. Mr. MATHIS. You are more than welcome, Mr. Weiman. This gentleman wanted to make a very short statement so we would be happy to hear from you sir, very briefly. STATEMENT OF GEORGE T. CARLIN, RETIRED SOYBEAN FARMER Mr. CARLIN. My name is George T. Carlin. I have been a member of the U.S. fats and oils industry for some 50 years, first in the capacity of research, second as general manager of one of the largest manufacturers in this country-of shortening, salad oils and margarine— now, I am a retiree and a soybean farmer in Alabama. pro I have listened to this testimony today. I wish to endorse the testimony of Mr. Shannon. His testimony is factual and accurate. And his statement that the world controls the price of oils and teins is a correct statement, regardless of what we do hear. I would like to comment on the magnitude of the business that you' are thinking of today. We do not realize it so often. In the U.S. economy, 40 to 45 percent of the caloric energy of our people comes from fats and oils. We eat, in this country, some 50 pounds per capita per year of some form of fat, margarine, butter, lard, oils, etc. Contrasted against the world economy, we are one of the highest consumers in the world. I think Norway exceeds us in consumption. The developing countries, South America and so on, consume around 30 to 35 percent of their caloric intake in fats. Fats is the richest of all the foods. It produces 4,000 calories per each pound. That includes palm oil, as well as soybean. The second richest caloric food is sugar, which contributes only 1,800 calories per pound, and getting down to common food, like bread, it is around 11 to 12,000 per pound. So we are dealing with the food which seems to make the world go. In starvation countries immediately following the war the Army used me to analyze some of the so-called liberated and conquered countries. Their need then was calories. The thing they wanted was vitamins, not vitamins, but calories-fat-produced calories. They had starches, but they had no fat. This is a very important subject. This river or ocean of fats from all over the world. American lard is a large segment. We have seen American lard attacked sometimes falsely as causing disease, and we are beginning even to believe it. I have news for you. The tide on saturated fats seems to be cresting and it is beginning to ebb. Specialists are making mistakes, and each month sees the publication about some new mistake. Palm oil has been here long before I began my career. It flows into the United States when prices are right; otherwise it flows to other parts of the world. In 1972, soybean oil sold at 8 cents a pound and in December 1972 it was 9.5 cents a pound. In 1972, the protein was $88 a ton. In 1973, the prices of some food started hiking immediately following our famous wheat sale of Russia. In 1974, the people in this country were paying 89 cents a pound in the grocery store for margarine. It was as high as butter. You know that. They were paying over $2 a bottle for a quart of salad oil. The processors of American soybeans in 1974 and 1975 produced profits double and quadruple anything they had ever seen in that industry. These high prices attracted the flow of palm oil into this country. It came into this country 8 to 10 cents a pound under the price of crude soybean oil. Obviously, it would be used where it could be used-in shortening, and to a minor degree in margarine. This flow has continued. We have seen the gap or the spread, as it is called by industry, go from 8 cents, to 6 cents, to 4 cents, to 2 cents, and today it has reversed. If you will look at your Wall Street Journal price today, you will see palm cash markets nearly 1 cent over soybeans. I predict to you that the problem already is solved. There will be very little flow of the palm fat until this so-called spread develops again. If we reach a crop failure this year as we did in 1974, we might have the cause for such a spread. The American consumer is not represented here, Mr. Chairman. That is the crux of my statement. The American consumer who buys this oil is not represented. Thank you very much. Mr. MATHIS. Thank you, Mr. Carlin. I wish that we had more time to hear from you and to question you. I am sure you heard the sound of the bells calling a recorded vote. We will stand adjourned subject to the call of the Chair. Our thanks to all the witnesses, staff, and the members of the subcommittee for their patience. The subcommittee will stand adjourned until the call of the Chair. [Whereupon, at 4:50 p.m. the subcommittee was adjourned.] [The following additional material was submitted to the subcommittee.] STATEMENT OF JOHN C. DATT, DIRECTOR, WASHINGTON OFFICE, AMERICAN FARM BUREAU FEDERATION We appreciate the opportunity to present the views of the American Farm Bureau Federation on the present palm oil import situation. For the record, Farm Bureau is the largest general farm organization in the United States with a membership of 2,505,258 families in forty-nine states and Puerto Rico. It is a voluntary, nongovernmental organization, representing farmers who produce virtually every agricultural commodity that is produced on a commercial basis in this country. The following statement, prepared by the Illinois Agricultural Association, one of our member State Farm Bureaus, describes the serious nature of the palm oil importation problem: "A recent study conducted by FAS-USDA points up the very serious situation existing in regard to the importation of palm oil. Not only have the palm oil exports from producing countries increased, but a large share of this increase has moved to the United States. This apparently has happened because other countries have tariffs or import quotas that have restricted the increase to those countries. Even though the rate of growth in new plantings of oil palm has diminished, considerable future production expansion is anticipated. Current levels of imports of palm oil have replaced a substantial amount of domestically produced soybean oil, cottonseed oil, and other oils and fats, such as lard, butterfat, and tallow. This has had a dramatic effect on the price of soybeans which has been dependent on oil values for a substantial part of the soybean price. Much more of the value must now be carried by meal, and this could raise the price of feed for livestock, dairy, and poultry producers. As soybean meal becomes more expensive in relation to corn, less meal will be fed and feeding efficiency will fall. Therefore, the increase in palm oil imports not only has hurt the soybean producer, but also can have impact on the producers of other crops and livestock as well. While consumers may seem to gain from lower oil prices, they may well pay higher prices in total if soybean, cotton, and livestock industries are forced to cut back production or become less efficient because of the competition from palm oil. "We believe strongly in the principles of mutually advantageous trade. If other areas of the world can produce products more efficiently and at lower cost, we in the United States should buy those products and concentrate our production in those areas where we have an advantage. However, the principle of mutually advantageous trade should operate on a truly competitive basis without subsidy on either side. Palm oil production has been developed with the assistance of a large infusion of donated capital and development funds. A high percentage of this capital was contributed by the United States. Some other countries are apparently limiting imports of palm oil. As production increases, an undue burden is placed upon the American market which is expected to absorb the surplus production. There are provisions under current international agreements and U.S. trade laws to help cushion the shock of trade developments such as the increased importation of palm oil. In some other commodities, a system of voluntary quotas has been established. Apparently, there is a longstanding tariff of three cents per pound of palm oil. This duty has been suspended in recent years." Farm Bureau favors the expansion of mutually advantageous trade on the basis of comparative advantage and fair competition. We firmly believe that development assistance programs can be of major importance in improving the economies of the developing nations; however, a better coordination of both bilateral and mutilateral assistance is increasingly essential. Such programs should be based on well-formulated, long-range plans of recipient nations in order to insure proper utilization of aid funds. In addition, development plans should be studied thoroughly to ensure that projects are economically sound and will have minimal adverse effects on world production. A project which greatly disrupts the balance of agricultural supply and demand will not benefit either the recipient nation or other nations in the long run. This is well illustrated by the problems that have developed as the result of the excessive use of international development funds to expand the palm oil industry. |