latest figures, totaling $305 million. In 1980 it is expected that something like 1.9 billion pounds of palm oil products will be coming from these loans that have been made by these three banks. The problem is we are not seeing yet the production of those loans because USDA tells us a palm oil plantation takes about 10 to 12 years to get into production. This means that loans made last year or the year before. or the year before that aren't even hitting the market yet. Therefore we are seeing the tip of the iceberg, which is large enough, but we know what is beneath the surface-and what is beneath the surface is far worse.

Chairman Poage has done a good workup-and I will leave that testimony to him-about the safety factor of the saturated fat content of palm oil. I am sure the chairman will cover that but let me point out that palm oil competes with all vegetable oils we produce in this country: Corn oil, sunflower oil, soybeans, peanuts, cottonseeds, and so on. It competes with all of those. But as he will point out, it doesn't compete fairly as far as the health standards are concerned. And I am trying to point out it doesn't compete fairly as far as how you finance and get these people into business.

On June 29, 1976, I offered an amendment on the floor of the House-and some of you may remember it-to the foreign assistance appropriation bill. This was to halt the use of U.S. funds going to institutions to be used for palm oil production. That amendment narrowly failed by 12 votes on a recorded vote of 198 to 210. Unless this honorable subcommittee or somebody else can come up with a better solution, I intend to offer this amendment again next year and I find out from a consensus of opinion. Mr. Chairman, that we may well pass it next year. Something has to be done to stop this. Maybe this isn't the way, but something must be done. And I am looking to your leadership or somebody else's, Mr. Chairman, to find a better way. But something must be done and I am convinced of that as the result of our hearings in the Agriculture Committee by the Subcommittee on Oilseeds and Rice.

Also, as I am sure Chairman Mathis will point out, there have been a number of resolutions now introduced and referred to our subcommittee. We passed two of those and sent them to the full committee but nothing is going to be done in this Congress on those resolutions. But we did it to bring this to the attention of the Congress and to ask that a position be taken.

I believe that if you also look at the history of the situation, you will find out there are one or two pieces of legislation concerning quotas and import duties. Right now there is no import quota and no import duty on palm oil. It is completely open. Now no other major country allows that. Japan, Germany, all the maior countries of the world all have quotas or import duties on palm oil and most of them don't even raise soybeans.

So we are not even asking for that necessarily but maybe that is a solution.

I think it is awfully hard to go before the soybean farmers—and I don't have any in my district to speak of, but there are some all across the South and certainly in Louisiana and I have addressed their State convention-and answer the question: Why is it the Govern

ment is causing people to compete with us and to compete with us so unfairly? If the Government will give our soybean farmers the same loan rates as these international banks offer to foreign countries, at least that would be a step in the right direction but they don't even have that.

I submit that something has to be done to rectify the situation so that our soybean farmers are not in the position of competing with their government or competing unfairly with foreign producers of palm oil, which is a situation made possible by these international loans.

I heard the testimony earlier, and I agree that we don't control these banks but I am wondering also whether we have taken proper steps to stop these practices and exert what influence we can, Mr. Chairman, to cease these loans. I think, at least, that is in order.

Let me in conclusion simply state that the soybean situation is most important to our economy. If you look at how many acres of land are in production in soybeans and how many people are employed and what it does for our balance of trade and what it does to our overall food production, I think you will agree we must not allow the situation to continue and something must be done to rectify it, Mr. Chairman, to bring it into balance.

And with that I defer to the two gentlemen, for which I have great respect, who can probably add a great deal more than I have on these points. Certainly I will follow their leadership in the House Agriculture Committee on this matter.

Mr. GONZALEZ. Thank you very much. That was an excellent statement. We will proceed now and hear from Congressman Mathis and then we will finish with Congressman Poage and have some questions.

STATEMENT OF HON. DAWSON MATHIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA

Mr. MATHIS. Thank you, Mr. Chairman and members of the subcommittee. I appreciate very much the fact you all are conducting the hearings today. I concur with the statement made by my distinguished friend from Louisiana, who is a valued member of the Oilseeds and Rice Subcommittee.

I am sorry I missed your opening statement this morning, Mr. Chairman, but I detected in the statement you just made-well, you talked about the duplicity being engaged in by the administration in regards to palm oil and their policies. And if I might, I would like to submit my statement for the record along with a limited amount of extraneous material.

Mr. GONZALEZ. We will accept that and so ordered.

Mr. MATHIS. But I think what we need to do is document the rhetoric and the reality that the administration is engaged in. And I would like to just touch briefly on my statement and point out to the members of the subcommittee that on July 29 the USDA announced that they were not going to-well, let me quote. It states:

The U.S. Government will no longer support loans by international money lending institutions to develop more palm oil production for international export trade purposes.

That came from a press release by Richard Bell, who is the Assistant Secretary of Agriculture. It was put out on the 29th of July. Mr. Bell then went to the American Soybean Association later in August and he outlined the administration's policy, but then he added one little exception. And we have heard a lot about waffling by other candidates for public office in recent days but Mr. Bell waffled all over the ball park when he said,

There were several small palm oil projects in the pipeline and we don't intend to oppose these projects since their impact on future vegetable oil production will be minimal and a lot of work has already gone into these projects.

And then a letter to me, as chairman of the Subcommittee on Oilseeds and Rice, was sent and the Secretary of the Treasury also spoke of "several small projects in the pipeline, which would be approved." And privately I think that it can be documented-and in fact I intend to submit, Mr. Chairman, a list of these loans to document that these proposed loans are indeed not small. The loans are larger than most of the other 33 loans that have been made over the past 10 years. And with a total value of $72 million, the five loans, which we expect to be approved over the next year, are extremely large when compared with the $305 million of loans being made over a 10-year period. And Mr. Chairman, I have that list. I do think in fairness I should say in the list there are several projects involving Malaysia and Indonesia, Mr. Chairman, that privately some people in the Treasury Department have told my office that these will not be approved.

Now, we have also been told by Assistant Secretary Richard Bell that none will be approved so I think we will have to wait and see what the end result will be as far as total approval.

But there are now palm oil projects being considered for possibly approval, which amounts to $237 million. This is exactly what is in the pipeline.

Mr. Chairman, it concerns me and I think all of us, that we are being told one thing by the administration when in fact other things are going forward, which would cause these loans to be approved. And you have already heard testimony this morning, and I think every member of the subcommittee is aware of what the impact will be. We know what the impact has been. I certainly don't want to be redundant or repetitive in going over these figures again. But you know the American farmer and American agriculture is being damaged the American consumer is being damaged also. I think Chairman Poage, if he follows his normal pattern, will certainly address himself to that this morning because he makes a very compelling case. With that I would ask again my statement be submitted for the consideration of the subcommittee. I thank the Chair for allowing me to appear.

[The prepared statement with attachments of Congressman Mathis follows:

PREPARED STATEMENT OF HON. DAWSON MATHIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA

Mr. Chairman, I want to thank you for the opportunity to testify here today on the subject of palm oil development loans by the international financial institutions.

The House Agriculture Subcommittee on Oilseeds and Rice, which I chair, has dealt with this issue extensively. The Subcommittee conducted public hearings in Washington on March 18 and in Memphis, Tennessee, on May 15. We received testimony from almost fifty witnesses, including Members of Congress, Administration officials, farm organizations, industry representatives, and others. On July 29 the Subcommittee unanimously reported two resolutions urging the Administration to oppose further palm oil loans and to negotiate voluntary restraints on exports of palm oil to the United States. One of these resolutions, H. Res. 1399 is also pending in this Subcommittee. The Senate has already passed two similar resolutions.

Of all the persons who testified before the Oilseeds and Rice Subcommittee, only one felt there might be any need for the U.S. to continue subsidizing foreign palm oil production. Unfortunately, this person represented the Treasury Department, which is the agency charged with making and executing U.S. policy in this area. Despite the almost universally held view in this country that the U.S. taxpayer should not subsidize his own competition, the Administration has stubbornly refused to budge on the palm oil issue, leaving American farmers and processors to sink or swim in a flood of imported palm oil.

Furthermore, the Administration has deliberately tried to deceive the American public by opposing further loans in public pronouncements and doing just the opposite in private. For example, on July 29 the Department of Agriculture, which has endorsed 31 of 32 palm oil development loans made since 1966, announced that "the U.S. government no longer will support loans by international money-lending institutions to develop more palm oil production for international export trade purposes." In August an official of USDA affirmed the new Administration policy in a speech to the American Soybean Association, but he added one exception. He said that there were several small palm oil projects in the pipeline and that "We do not intend to oppose these projects since their impact on future vegetable oil production will be minimal and a lot of work has already gone into the projects." In a letter to me explaining the new Administration policy, the Secretary of the Treasury also spoke of several small projects in the pipeline that would be approved.

Privately, it is known that the proposed loans are not small. Individually, the loans are larger than most of the other 33 loans made over the last ten years. With a total value of $72 million, the five loans expected to be approved over the next year are extremely large when compared with the $305 million in loans made over a ten year period.

Mr. Chairman, to document the wide gap between Administration rhetoric and reality, I request that the statements of the Department of Agriculture and the Secretary of the Treasury and the list of the so-called "small pipeline loans" be made a part of the record. It should be noted that according to the Treasury Dept., the $165 million in loans to Malaysia and Indonesia, although in the pipeline, will not receive U.S. approval.

The Administration has attempted to downplay the impact of palm oil on the domestic oils and fats industry, but the fact is that palm oil is expected to capture an increasingly larger share of the domestic market and the export market. Further palm oil development loans will mean that the U.S. fats and oils industry will lose markets to foreign palm oil developers. For example, 70% of the World Bank financed production will enter international trade where it will displace U.S. products. By 1985, palm oil is expected to have almost 23% of the world market for edible oils. In my judgment, there is no reason why the U.S. taxpayer should be required to subsidize the destruction of the domestic industry.

Mr. Chairman, because the Administration has proved insensitive to the needs of American farmers and processors, I urge this Subcommittee to take legislative action to mandate the opposition of the U.S. government to palm oil development loans by the World Bank and the other international lending agencies.

[The statements of the Department of Agriculture; the Secretary of the Treasury; and the list of the so-called "small pipeline loans" referred to above by Congressman Mathis follow:]

[News release from the Department of Agriculture, July 29, 1976]

UNITED STATES TO STOP FUNDS FOR PALM OIL DEVELOPMENT

WASHINGTON, July 29.-Assistant Secretary of Agriculture Richard E. Bell said today the U.S. government no longer will support loans by international money-lending institutions to develop more palm oil production for international export trade purposes.

This firms up an interim policy position tentatively established last March. Mr. Bell believes the U.S. position will effectively dry up funding from lending institutions which the U.S. supports. This will cut the amount of palm oil that would be produced in absence of the U.S. action. No exact estimates of the cut have been made.

Palm oil imports into the U.S. are slowing, may total about a billion pounds this year. Government officials believe a tariff or direct limitations on palm oil imports would encourage palm oil producers to compete with U.S. soybean producers in the big European market. Such limitations would thereby be selfdefeating, according to such views.

THE SECRETARY OF THE TREASURY,
Washington, D.C., August 10, 1976.

Hon. DAWSON MATHIS,

U.S. House of Representatives,

Washington, D.C.

DEAR DAWSON: In view of the interest that has been expressed by the Congress concerning the position which the Executive Branch will take on future proposals by the World Bank and the other international development lending institutions with regard to financing palm oil projects, I thought you would be interested in the recent action taken by the National Advisory Council (NAC) on that matter.

The position adopted by the NAC provides that:

1. Loans for palm oil projects intended primarily to produce oil for domestic consumption in the borrowing country will be approved.

2. Loans for palm oil projects in countries with established palm oil industries capable of obtaining commercial financing will not be approved. 3. Loans for palm oil projects that are currently being prepared for Executive Board consideration and intended to produce palm oil for export will be approved if the projects are viable.

4. The US should convince the IFI managements to find alternatives to palm oil export projects when developing new projects for Executive Board consideration.

5. The NAC should review, as necessary, these guidelines for USG approval of IFI financing of palm oil projects.

These guidelines are well conceived and represent a solid interagency concensus based on extensive consideration and careful study of the world supply and demand situation in vegetable oils to 1985. They reflect a new and more cautious approach to financing palm oil projects. While we will not approve some projects, the guidelines will permit several small projects now in the pipeline in the various development banks to go forward, when these projects are finally presented to their respective Executive Boards over the next 12 to 18 months, if they are viable proposals. Implementation of these guidelines will serve to discourage additional IFI financing of palm oil projects for export and encourage these institutions to find alternatives to palm oil export projects. With best regards,

Sincerely yours,

WILLIAM E. SIMON.