say whether it will support any loan proposal. Secretary Simon's letter to Chairman Foley contained a general statement on Treasury policy, recognizing that specific decisions must be made on a case-by-case analysis of individual projects. The attached list of tentative palm oil projects, drawn from the Monthly Operational Summaries of the banks is, however, an important part of Treasury's Early Warning System on upcoming IFI loans. Through this system we are alerted to possible problems in upcoming loans, and thus given an opportunity to seek restructuring before loan proposals reach the stage of Board consideration. In conclusion, I would like to emphasize the total commitment of the Treasury Department to working out an acceptable solution-within the framework of the multilateral development institutions-to this very complex international problem. The United States must take into consideration a number of differing, and often conflicting, interests in making decisions in this area. Among these are our political and economic relations with individual borrowing countries and with the developing world in general, our position and influence as one member among many in multilateral organizations, our concerns with the economic well being of U.S. industry, and our genuine interest as one of the world's richest countries in improving economic opportunities for the poorest peoples of the world. I feel we have made considerable progress thus far in developing a realistic approach, taking into consideration the many factors involved. I am confident that the guidelines, if properly and conscientiously applied, will provide a solution acceptable to all concerned. I hope that the Congress will cooperate by allowing sufficient time for the guidelines to have an effect.

PALM OIL PROJECTS PRESENTLY UNDER CONSIDERATION FOR POSSIBLE FUTURE LOANS

Source: Monthly Operational Summaries of the international development banks, Sept. 28, 1976.

Oil palm, grapefruit, and related infrastructure. Oil palm, infrastructure, town development and extension services.

Estimated

amount for

palm oil Tentative date for board (millions) consideration 1

STATEMENT OF HON. MARK ANDREWS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA

Mr. Chairman: I appreciate this opportunity to testify in favor of H. Res. 1451, legislation I have co-sponsored to study the impact of the development of the foreign palm oil industry on the domestic vegetable oil industry.

Imports of palm oil have increased substantially since 1970 from 64,000 metric tons to 436,000 in 1975. Unlike other imported oils which do not compete with domestic oil, palm oil is a direct competitor of the U.S. soybean. The USDA's Economic Research Service indicates that palm oil imports will remain strong between now and 1980 if some restrictive action is not put in place.

As you know, Mr. Chairman, in North Dakota because of our short growing season we can only grow one crop each year, and we are limited to mostly cereal grains. It would be wrong to in any way limit the ability of North Dakota farmers to grow row crops like soybeans and sunflowers which they need to maintain a balanced rotation.

U.S. farmers lost $1.5 billion in income due to palm oil imports in 1976 alone. Yet, while the United States is the only unrestricted major market for palm oil, we continue to encourage competitive production in foreign nations. It is all well and good to help developing nations, but not when it is costing the U.S. farmer this kind of money. We are using our money to create unfair and destructive competition for our own farmers.

I strongly urge this subcommittee take action to solve the problems development bank financed palm oil are causing for our domestic industry.

STATEMENT OF HON. OMAR BURLESON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. Chairman-I am pleased to have this opportunity to present my views concerning our Country's policies toward making international loans for palm oil projects. The 17th Congressional District of Texas which I represent is one of the largest peanut-growing areas in this Country and the long-range outlook that palm oil will seriously affect the sales of peanut oil concerns me. In this regard, I have cosponsored two House Resolutions, H. Res. 1451 and H. Res. 1452, and also a bill, H.R. 14921.

Since 1965, international lending institutions have extended 32 credits for palm oil development. Many of these trees planted since 1965 have just begun to produce and many more will not reach maturity until 1980. The imports reached an estimated 400,000 tons in 1975 and could triple by 1985. Interestingly, the palm oil tree produces the most prolific oilseed crop in the world. Yields of 3,000 pounds of palm oil per acre are not uncommon. By comparison, soybeans and peanuts yield from 300 to 350 pounds of oil per acre in the United States. Although not a supporter of foreign aid programs for many years, I can understand our Nation's efforts to help poorer countries abroad expand their agricultural production so they can feed themselves and raise cash for economic development. But it is now becoming rapidly apparent that this particular assistance abroad has cut into American food exports and limits the ability of our own farmers to sell their products at a profit. By any stretch of the imagination, I think we have done enough.

Even more important than exports and sales, is the fact some American food manufacturers have begun to substitute palm oil for cottonseed oil in making margarine and in the preparation of other foods such as bakery goods, potato chips, french fries and fish sticks. A proven disadvantage of palm oil is that it is highly saturated and may be less desirable than soybean oil for persons on low-cholesterol diets. Very likely, many Americans are not aware of the health disadvantages of palm oil and are, unknowingly, using products containing this oil.

Gentlemen, it is my view that we should no longer make loans for projects such as this which, in the end, compete directly with American producers and exporters. Our own cotton, soybean and peanut farmers are the ones who will be and, in fact, already are the most severely affected by the ever-increasing amount of imported palm oil. Any of you who represent farming interests in Congress know, full well, the numerous problems facing our farmers. Regrettably, most Americans have never lived on a farm and had to worry about such

things as adequate rainfall, falling prices and hailstorms. Certainly, I don't think we need to add to this list of concerns by increasing the number of palm trees being planted on some sunny isle in the South Pacific.

Thank you, Mr. Chairman.

STATEMENT OF HON. PAUL FINDLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. Chairman and colleagues, I appreciate the opportunity to testify today and express my concern with the use of American taxpayer dollars for the continued funding of palm oil projects which create palm oil for export. As early as January of this year I wrote to the Secretaries of State and Treasury asking them to review the guidelines and the policies under which U.S. Government funds, either directly or indirectly through international agencies, finance foreign production of palm oil.

At that time, through the Asian Development Bank, the United States Government had given its approval to a loan of $11.3 million to the Republic of Indonesia for a palm oil project.

I found out about the project when I read a telegram from the National Advisory Council on International Monetary and Financial Affairs which gave United States approval for the loan.

I was deeply disturbed when I read about the inadequate economic analysis by the World Bank's staff. In part, the telegram stated:

66

'. . . Indonesia is the world's third largest producer and second largest exporter of palm oil and any further increase in production will be destined for export, not to feed domestic population;

"(2) the Economic Research Service of the USDA and FAS projections indicate that in the years beyond 1980, a vegetable oil 'surplus' will occur, accentuated by sharply increased production of palm oil . . . Indonesia, as an OPEC country, has adequate resources to finance viable agricultural development projects . . ."

The telegram continued with a reprimand to the development bank staff for failing to look "more closely at current market trends which are less optimistic for the future before presenting this loan to the board." The NAC criticized the fact that the International Bank for Redevelopment used two-year old data in making its decision and concluded that the Bank should base its judgments "on the economic feasibility of a project on the latest available information on market trends." There was not one shred of support for the loan in the NAC telegram. And yet, after outlining the above reservations for not funding the project, the NAC approved the loan by stating "but you are not, repeat not, to oppose the loan."

At that time, I was assured by the Administration that a study of the longterm fats and oils situation would be undertaken and adequate guidelines would be established with respect to U.S. support for such loans.

In early March, I again wrote the Administration requesting assurance that the U.S. would stop giving its approval to loans subsidizing foreign production of palm oil. We were in a period of unfavorable soybean oil prices. Farmers were getting ready to plant their 1976 crops.

Farmers read where since 1967, palm oil imports into the United States increased 600 percent. Faced with expanded foreign production and the threat of increased importation of palm oil, farmers were apprehensive. Every time the price of soybean oil drops one cent, the price for a bushel of soybeans drops eleven cents. Before the Oilseeds and Rice Subcommittee of the Committee on Agriculture earlier this year, Mr. Bushnell of Treasury testified that palm oil imports depressed the vegetable oil market by at least four cents. Palm oil imports have then depressed the price of soybeans by 44 cents a bushel. This has deprived the farmers in my District of approximately $15,400,000 of income this past year. It has forced the soybean crushers to charge more of their cost for the purchase of soybeans against the price of soy meal. The dairy, poultry and livestock farmers and the users of soy protein products for human consumption were forced to pay higher prices for meal.

Low soybean prices, attributed in part to increasing imports of palm oil, caused the farmers to decrease their acres planted to soybeans in 1976 by ten percent. As a result of lower soybean plantings, we will have less protein meal to feed the world's hungry, protein-deficient population. Why? Because the

palm kernel produces vegetable oil only. Other edible vegetables are essentially by-products of the production of other commodities such as soybeans, cottonseed, and peanuts. These other products produce the important oilseed meal needed to meet the present and growing demand for protein in a protein short world. In response to lower prices for their products, farmers cut production of the vital meal producing oilseed crops.

It is an insult to soybean and cottonseed farmers to use their tax dollars to support palm oil production for export.

I was elated when on July 30, I read that Assistant Secretary Bell of the USDA announced opposition to international agency loans that boost palm oil exports. I was pleased that the USDA supported restrictions on funding of palm oil loans to projects intended primarily to produce oil for domestic production in a vegetable oil short country.

My pleasure was short lived. On August 10, the Secretary of the Treasury announced a clarification of the NAC position. He stated, "Loans for palm oil projects that are currently being prepared for executive board consideration and intended to produce palm oil for export (let me repeat, intended to produce palm oil for export) will be approved if the projects are viable." Six months after I questioned the wisdom for such loans and four months after I asked for assurances that loans for export would not be made, the NAC still entertains a policy of approving loans for export palm oil production. I understand that $64 million of such loans are still in the pipeline. These include loans to nations that are major exporters of palm oil. I do not understand why the NAC is still contemplating U.S. approval of palm oil loans for export. Why are American taxpayers and soybean, cottonseed, corn, rapeseed, sunflower, and peanut farmers asked to earn income so that it can be taxed to support their competition?

It is hard to explain to American farmers why they are taxed in support of their competition, why they should help subsidize palm oil projects in countries with established palm oil industries capable of obtaining commercial financing for such products. It is impossible to explain why U.S. tax dollars are used to subsidize commercially viable projects.

Mr. Chairman, let me make an observation that is as equally important as the unfairness of asking our farmers to subsidize their competition.

I strongly favor helping struggling farmers in developing countries help themselves through better education. In fact, my Famine Prevention Program that was passed earlier in this Congress was designed to help developing nations secure an adequacy of food for domestic use. It was designed to help nations obtain sufficiency in food production.

But when sufficiency is achieved, the silver-or should I say golden-cord must be cut. When maturity is reached and the increased production is for export, the nation must seek the money for expansion in the commercial realm if it wants to compete with other nations in the world marketplace.

Thus, my opposition to palm oil projects is limited to those projects that create vegetable oil for export. I do not oppose projects that help a vegetable oil short nation feed itself. I do not oppose any projects-wheat, soybeans, dairy, peanuts, etc.-that help a developing nation feed itself. I do not oppose self-help. Let me emphasize, however, I oppose U.S. support directly or indirectly through international funding of projects-be they palm, livestock, dairy, feed grain, etc. that are destined for export in competition with American products. We need not finance our competition. In the spirit in which the Famine Prevention Program was launched, I support a policy of assisting poorer countries in efforts to increase their agricultural production for their own food needs. This is the only long-term solution to feeding the world.

Financing of palm oil or any other product for export markets in competition with U.S. commodities is not within the interest of America or the developing, food short nations.

Mr. Chairman, I want assurances that the United States no longer will give its approval to loans designed to create production for export. I want our limited resources to be used for self-help and to achieve sufficiency in a developing nation-not the production of goods for export.