STATEMENT OF HON. DON FUQUA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA

Mr. Chairman: The problem we are discussing today is not the importation of palm oil. Other nations have a right to grow the oil-palm and the American public has a right to decide whether or not they wish to purchase that product. The problem confronting us is the support the Federal Government furnishes to these foreign nations through contributions to the World Bank and other lenders. That is: the subsidizing of these foreign crops to such an extent that they are able to successfully compete with our domestic products such as peanuts and soybeans.

Let us be very realistic about the problem. A peanut farmer grows his crop and sells a portion of it to a processor to be made into peanut oil. This oil must stand on the grocery shelf alongside lower priced palm oil produced overseas and selling for less because it is subsidized by the peanut farmer's own government. This makes no sense to him and it makes no sense to me.

If this is called protection then I can think of no other segment of our economy that needs this protection more than the American farmer. He has been buffeted by inflation and recession and when things start to look a little better, his income is slashed because he cannot compete with foreign products that do not have his labor and production costs and are further subsidized by his own government.

It is conceivable that there could be a negligible increase in the price of vegetable oil if the U.S. cut off its support to foreign producers. This small rise in price could be translated, however, into enormous benefits for the farmers and hence, the entire domestic economy would benefit.

We in the Congress cannot afford to sit idly by and watch this happen. Our farmers have come to us and sought our help with this pressing problem. We should not sit on our hands and do nothing and watch the domestic oil business dissipate in the face of this unusual competition for which there is really only one solution. Vegetable oils in this country are already being produced at the lowest possible costs. We should reward these frugal efforts by giving them a chance at the market rather than punishing them further by contributing to their destruction.

I urge this subcommittee to take all steps necessary to protect our farmers and, at the same time, save some of the billions we send overseas via the World Bank and other international lending agencies.

Thank you.

STATEMENT OF HON. BO GINN, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF GEORGIA

Mr. Chairman, I would like to thank you for giving me the opportunity to submit testimony to your Subcommittee on the very important subject of palm oil development loans by the international financial institutions.

I know that you have already heard from a great many individuals on this topic, and I will not attempt to go back over the same ground. Let me say simply that I urge this distinguished Subcommittee to take immediate legislative action to mandate the opposition of the U.S. government to palm oil development loans by the World Bank and other international lending agencies.

The impact of palm oil imports on our American farmers and American agribusiness is real and it is severe. I recently completed a seven county farm tour in my District, and the subject of palm oil imports was one of the areas of interest most often brought to my attention by our farmers. The imports to date have hurt the American farmer, and continued imports will be even more destructive to the economic health of our farmers and agribusinessmen.

Let me make the point, Mr. Chairman, that our farmers are not seeking protectionist treatment. They are willing to compete in the international marketplace and let the chips fall where they may. All they ask is that our own government stop the incredible policy subsidizing foreign imports that they must contend with in international trade.

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I believe that lack of action by the Congress will seriously cripple the credibility of our government with our farmers and is likely to lead to backlash that would threaten all of our existing international development programs. My farmers ask me why the U.S. Department of Agriculture has no funds available for farm operating loans in Georgia at the same time we have hundreds of millions of dollars for agricultural development loans for palm oil. Mr. Chairman, I do not have an answer to that question, and so I appeal to you to move decisively on this issue.

STATEMENT OF HON. CHARLES E. GRASSLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA

Mr. Chairman, members of the subcommittee, I am presenting this testimony to you today not only because I am an elected representative from the third district in Iowa, but also as a person who has made a living as a small farmer far longer than he has served in Congress. A major problem is confronting farmers from all over the country today, and, unfortunately, that problem is exacerbated by actions of both the House and the Senate which have repeatedly approved monies for international lending institutions which assist the development of crops that compete with American produce in world markets. The particular problem I wish to address in this testimony is competition with American crops brought about by the importation of foreign palm oil. I am concerned about the oil's displacement of soy products in this country and abroad.

In April of this year, I testified before the Senate Committee on Foreign Relations on this subject and I thought this subcommittee would be interested in some observations I shared with that committee.

The American government, through its authorizations for the Asian Development Bank, is contributing to the subsidization of palm production in nations to which the bank makes loans. Our contributions to that bank are of special interest to me, because virtually all of the palm oil produced by nations receiving assistance from the ADB is exported. The U.S. Department of Agriculture has estimated that in 1975, a potential 43 million bushels of soybean sales to domestic edible oil users have been lost due to increases of palm oil imports. Most of these imports originate in Malaysia and Indonesia, to which the Bank has lent money in the past for the specific purpose of promoting palm production. The value of the 1975 loss is about $1.5 billion. In 1976, the Department of Agriculture has estimated that an additional 30 million bushels will be lost. The United States is by far consuming the largest portion of new palm oil imports.

First, I want to assure you that farmers are willing to take their chances when it comes to competing in a free market. What disturbs them, however, is that the massive loss of income I've just described is being "aided and abetted" by actions of the United States government, through its assistance to various international lending institutions. The Asian Development Bank, in particular, lent $218 million to Malaysia between 1968 and 1971 for the production of palms. Between 1971 and 1976, Indonesia received $20 million from the bank for the same purpose. As you may know, palm trees take about four to five years to be producing oil, so the trees we've helped plant are in the early stages of production. Palm trees have a productive life of about 30-35 years, so those trees financed in part with dollars from this country will continue producing for sometime to come. In 1975, Malaysia produced about 57,000 metric tons of oils and Indonesia about 10 thousand metric tons. Whereas 10% of 1974 Malaysian crop was imported by the U.S., nearly 28.5% was imported in the first seven months of 1975. By 1980, Malaysia will produce nearly 142,000 metric tons and Indonesia nearly 80,000 metric tons. Already, between 75% to 100% of the Indonesian crop, and nearly 100% of the Malaysian crop is being exported.

Again, I want to emphasize that farmers don't mind competing with nations that produce competitive crops on their own, or which are financed with assistance from sources outside the U.S. Nor do they mind the use of American dollars for loans which assist nations to grow crops for domestic needs. But when their government donates money for the production of a crop which, in the first place, is used primarily for export rather than domestic consumption and, secondly, will be a major competitor of American crops, farmers become confused about the intentions of their government. In addition, there are problems associated with

the importation of palm oil that I've not yet touched on. First, it is very saturated and may prove unhealthy for some. In addition, the result of increased palm oil imports could well be less production of soybeans and a major derivative for animal feed, soymeal. The result could ultimately be less production of nutritious, high-protein meat, which would mean less good meat and higher prices for the American consumer.

At the present pace of palm production, imported oil could displace about 10% of the potential soybean production in this country by 1985.

For the above reasons, I have agreed wholeheartedly to cosponsor two resolutions introduced by Representative Jenrette pertinent to this issue. One would alert the National Advisory Committee on International Monetary and Financial Policies to the House's opposition to further palm oil loans; the second would urge the adoption of voluntary import quotas for nations exporting palm oil.

I hope that each and every member of this subcommittee will support Congressman Jenrette's resolutions and, in addition, urge America's representatives to the international lending institutions in question to make every effort to oppose further loans for palm production in those nations which would use that production primarily for export.

STATEMENT OF HON. JOHN W. JENRETTE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA

Mr. Chairman, I am very pleased to have this opportunity to express my views on a subject which has occupied my concern for close to one year now. That subject is the financing of palm oil production overseas which eventually competes with American farm goods, and which will cause undue hardship to our farmers and consumers in years to come. As you know, I am the author of several resolutions dealing with the general problem of palm oil imports. At this time, I shall enumerate my concerns and my legislative actions.

In November of last year the National Advisory Council gave its endorsement to an $11.3 million loan by the Asian Development Bank to Indonesia for a new palm oil processing plant. This was just 1 of 46 similar credits that have been extended by the International Banks since 1965 for palm oil production and processing.

It is no wonder that palm oil production has increased phenomenally now that the trees have matured and begun to bear fruit. It is also no wonder that the United States has absorbed the lion's share of palm oil exports, since we are the single, major importing nation that imposes no restrictions whatsoever on this product.

From 1974 to 1975, palm oil imports have doubled-by 1980 they will triple. Or, let us look at it from another angle. The U.S. International Trade Commission recently published projections of palm oil exports in coming years, and the destination of those exports. By 1980, the report indicates, the amount of palm oil going into the world market will almost double. The United States is projected to absorb 40 percent of that increase. How much will be absorbed by the second largest importer, the United Kingdom? Only three percent.

And what will be transpiring while palm oil exports make a 100 percent increase? World soybeans oil exports will probably see a mere rise of 20 percent. Lest we get too excited about this increase, I must add that the majority of the benefits will be realized by Brazil, not by the U.S.

I choose to spell out this disparity to show how badly we stand to fare on all fronts. Not only did American producers lose an estimated $1.5 billion in farm income this year alone from palm oil imports, but will continue to lose as palm oil gluts the world market. Even now, the stocks of soybean oil in the U.S. are twice what they were last year, a situation which was described in Doane's Farm Report as "burdensome," and which the editors ascribe to increased palm production.

Mr. Chairman, the intent is a very noble one to assist developing nations produce the food they need to fight domestic malnutrition and promote economic growth. But when American taxpayers are funding an export marathon intended primarily for competition with U.S. farm products in our home market, I consider it double-duty.

Of course, the most complete and final solution to the situation would be to impose the already negotiated import duty upon palm oil for other than industrial uses. This was the thrust of legislation I introduced in April of this year,

H.R. 12952. Even though the U.S. now is, and will continue to be, the dumping ground for world palm oil exports, sentiment seemed to indicate that such a measure would be overly "protective." At the same time, a scare campaign was initiated by Earl Butz that our soybean export market would collapse should a tariff be instituted. Nothing could be farther from the truth.

Nevertheless, seeing that an import duty would probably remain a touchy issue, I introduced compainion bills, H. Res. 1399 and H. Res. 1400 to address the problem, the former of which is before you today.

In concert, my resolutions speak to the issue by: (1) discouraging future palm oil development loans, and (2) recommending that the administration negotiate voluntary restraints on imports.

The administration, by the way, has played an interesting role in this entire scenario. In his spring visit to Indoneia and Malaysia, Secretary Butz flatly stated that "The U.S. government does not want to limit imports of palm oil." Instead, Mr. Butz suggested that these countries diversify their markets, to avoid "the risk of a world-wide depression in vegetable oil prices." He later went on to encourage the Tennessee farm bureau that the U.S. should "continue heavy soybean production even if vegetable oil prices fall so low, we have to give it away."

Oddly enough, the very morning of the day the Oilseeds and Rice Subcommittee met to report these resolutions, Assistant Secretary Bell announced publicly that the Agriculture Department would oppose future loans for palm oil production. I understand that my friend from Georgia, the honorable Dawson Mathis, has recently received a letter from Treasury Secretary Simon, spelling out quite a different story. Congressman Mathis is the expert on this subject, however.

It is obvious that there is utter confusion in the administration regarding the palm oil question. I do not want to see farmers and consumers paying the price for their lack of direction, or for that matter, a lack of congressional leadership. The Senate has already passed a resolution discouraging future palm oil assistance by the International Development Banks so long as the United States is the only open major import market for palm oil. The house can do no less. I urge you to take favorable action on this matter as soon as possible, so the full house can conclude consideration before the end of the session.

STATEMENT OF HON. ED JONES, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TENNESSEE

Mr. Chairman, I would like to commend your Subcommittee for taking the time to delve into the subject of palm oil development loans by the international financial institutions.

In addition to being a Member of the House Agriculture Committee's Subcommittee on Oilseeds and Rice, I represent a predominantly agricultural district where soybeans and cotton are two of our main crops. I have seen what the imports of palm oil can do to the prices of soybeans. In fact, a major reason that soybean plantings in the U.S. were substantially lower in 1976 than in 1975 was the huge influx of palm oil that we got in 1975. The American farmers lost billions of dollars because of this. That is distressing. But to find out that much of this production came about because of subsidized international loans that the U.S. was a major party to was infuriating.

The Oilseeds and Rice Subcommittee held two hearings last spring where the views were aired and the issues examined. Many of us concluded that the first thing to be done was to stop the U.S. participation in the subsidized loans.

When Assistant Secretary of Agriculture Richard E. Bell said that "the U.S. Government no longer would support loans by international money-lending institutions to develop more palm oil production for international export trade purposes," we thought we had accomplished that objective.

We now find out that the Ford Administration has been deliberately misleading the Congress and the public on these palm oil loans and there really has not been the kind of policy shift Secretary Bell indicated. Within a month after Assistant Secretary Bell's statement, Secretary of the Treasury Simon said in a letter to the Honorable Dawson Mathis "Loans for palm oil projects that are current by being prepared for the Executive Board consideration and intended to produce palm oil for export will be approved if the projects are viable."

And although the implication was made that this was only for a few small loans, it turns out that the total amount of these loans was $72 million.

Stopping this subsidization of the palm oil production will certainly not completely solve the palm oil problem, but it would be a major step in the right direction. In fact, if we cannot get these loans stopped, we force ourselves into a situation where we may have to resort to a restrictive importation policy for palm oil, something which has all sorts of serious implications.

Again, I want to thank the Subcommittee for its concern on this subject and urge to do all you can to stop these loans which are causing such great detriment to the American farmer.

STATEMENT OF HON. JOHN Y. MCCOLLISTER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA

Mr. Chairman, I am pleased that the Subcommittee on International Development Institutions and Finance is holding these hearings today on the problems manifested by development bank-financed palm oil. This meeting provides an excellent opportunity to evaluate the amount of the American contribution to the World Bank, the Asian Development Bank and the Inter-American Development Bank in relation to the impact these investments are having on the American economy.

For the most part, the impact has been salutory. Developing foreign economies allow people to help themselves. They reduce the pressure for American handouts in the future. They boost the standard of living in foreign countries, creating new markets for our industrial products, creating employment in this country. But there is one unfortunate situation where our tax dollars are being used to subsidize and create unfair and destructive competition for American farmers-and, more to the point of our concern today, our own taxpayer!

Palm oil imports have more than doubled in the past year and are expected to triple again over the next decade. The rapid increase of palm oil imports has severely damaged our domestic soybean industry. Soybeans are our largest single farm export commodity. Soybean exports are absolutely vital to maintaining the significantly positive balance of trade necessary to offset deficits in the international trade of manufactured products. The U.S. Department of Agriculture projects that unrestricted imports of palm oil will result in displacing more than a half million acres of soybeans in this country every year— 15 million bushels annually.

The reason for the dramatic upsurge in world production of palm oil in recent years has been the opening of the American market. We have no import quotas on palm oil, unlike any other major foreign markets. Competition is one thing, but using our tax dollars to stimulate the growth of this competitive industry to the detriment of domestic producers is quite another. Since 1965, international lending institutions have built the palm oil industry through 32 industrial development loans; several of the recent loans have not yet resulted in bringing even greater production on-line. So the threat is mounting yearly. Since 1966, the U.S. has deposited $462 million in to the Asian Development Bank which has, in turn, loaned $240 million for palm oil production. All told, loans from the three international lending institutions totalled $496 million. Since our tax dollars are used to support these institutions, we are using our own tax dollars to help destroy our domestic soybean industry and with it our best chance to protect the dollar in the world money market.

The United States of course, cannot dictate the conditions of loans made by these independent institutions. I urge this committee, however, to take steps to discourage future financing of palm oil production by the World Bank, the Asian Development Bank and the Inter-American Development Bank.

STATEMENT OF HON. ALBERT H. QUIE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity to testify in support of the resolution I co-sponsored, H. Res. 1451.

This resolution expresses the sense of the House that the United States should oppose future loans for the stimulation of palm oil unless production is needed domestically and does not increase exports to the United States.