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use of any foreign currency for market development in dollar market countries. Fortunately, this committee rejected the proposal.
In the budget which the Bureau sent to Congress for fiscal 1961-62, it went even further in its efforts to thwart the intent of Congress in the use of foreign currency for foreign market development. On this occasion, the Bureau apparently chose to forget that there was such a law as Public Law 480 and that market development programs had been carried out under its provisions for several years. It entirely ignored the law and set up an item calling for an appropriation in dollars for market development activities abroad" under title IV of the Agricultural Act of 1954. This title concerns agricultural attachés and its principal purpose is to transfer them to the Department of Agriculture. It has no connection whatsoever with market development under Public Law 480. In fact it does not deal specifically with market development at all. The object of the Bureau in using this subterfuge was apparently to get away from the plain language of Public Law 480 as well as its legislative history which pointed out specifically that foreign currencies were to be set aside and used for market development purposes. This committee, however, did not accept the viewpoint of the Bureau, and the appropriation was made in accordance with the provisions of Public Law 480.
In the meantime, the provision that 5 percent of the foreign currency derived from the sales under title I be set aside for market development purposes had become ineffective, mainly because the currencies of most of the countries which were then purchasing under title I were not convertible and could be used only in the countries of their origin. Thus they were not available for market development activities in countries where we hoped to develop and expand dollar markets.
1961 AMENDMENT TO PUBLIC LAW 480
To meet this situation and to make sure that funds derived from foreign currency would be available, the Congress in extending Public Law 480 in 1961 amended it by providing as follows:
Provision shall be made in sale and loan agreements for the convertibility of such amount of the proceeds thereof (not less than 2 per centum) as the Secretary of Agriculture determines to be needed to carry out the purpose of this subsection in those countries which are or offer reasonable potential of becoming dollar markets for United States agricultural commodities. Such sums shall be converted into the types and kinds of foreign currencies as the Secretary deems necessary to carry out the provisions of this subsection and such sums shall be deposited to a special Treasury account and shall not be made available or expended except for carrying out the provisions of this subsection.
The action of Congress in specifically directing that 5 percent of the foreign currency received from title I sales be set aside for foreign market development and the later amendment providing for the conversion of not less than 2 percent of the proceeds not only indicates the deep interest of Congress in this subject but also goes to show that the Congress desired that a full and extensive market development program be carried out.
Mr. Chairman, those for whom I am speaking today would like to see a more aggressive and imaginative market development program than has been permitted so far with the broader opportunity available for experimentation in order to take advantage of every market opportunity. We think that there is no subject of more importance to agriculture than developing and expanding foreign markets. We know of no issue which has stronger support in the country. Why should we be timid in maximizing the use of the tools made available by the Congress?
We realize that there has been some criticism. That was bound to be the case. This has been a new field both for the Government and the cooperators. As might be expected, there have been misunderstandings and some mistakes. Our attention has been called to a study now underway by the General Accounting Office on market development activities in Japan. A subcommittee of the House Committee on Government Operations has conducted an investigation but has made no report as yet. I am sure I speak for all of the cooperators who are here today in saying we welcome these studies and investigations because we believe they will bring about a better understanding of the program, its objectives and problems, and the need for their strengthening and continuation.
VOLUNTARY CONTRIBUTIONS AND OTHER ACTIVITIES BY COOPERATORS
I am sure that the function of the cooperator and its importance is not fully understood even in some Government circles. There seem to be differences of opinion as to the extent to which foreign currency should be used by cooperators. This goes also to the monetary contributions by cooperators to the program. We believe that most of these questions can be resolved by going straight to the law itself.
It contains no matching provisions. However, in the programs so far, cooperators have voluntarily contributed a great deal in dollars and other expenditures under project agreements with Foreign Agricultural Service and further amounts in backstopping the program in this country, as I shall point out a little later.
I am sure this committee understands the very important part which the cooperators play in the program. The Department of Agriculture as a Government agency is not in a position to engage in actual market development activities such as the establishment of trade relations and understandings between marketing agencies and organizations in this country and foreign traders and businessmen. Consequently, in the very beginning it wisely invited the cooperation of nonprofit trade organizations and promoted the establishment of such organizations in fields where none existed.
It should be kept in mind that the trade associations which are serving as cooperator organizations do not profit from the programs. Their sole objective is to develop and expand markets, thereby benefiting domestic producers as well as the national economy.
Cooperator organizations vary widely in their size, financial resources, and methods of operation. No two are exactly alike. Most of them receive financial support from only a small part of the industry which they represent. For instance, new and expanded markets for U.S. agricultural products benefit our entire economy, including producers, dealers, processors, exporters, railroads, trucking companies, ocean shippers, and financial institutions. There is no cooperator which represents all of such groups and most of them represent only a fraction of one or two such groups.
Yet everyone cerned benefits directly or indirectly to some extent.
Actually, the greatest direct beneficiary is the U.S. Government because of the contribution which increased dollar exports make to our critical balance-of-payments problem. The Government benefits in another way as the owner, through the Commodity Credit Corporation, of large stocks of agricultural commodities which can only be disposed of by increased exports.
Furthermore, at least one-half of any market development activity on the part of cooperators must be done in this country and with their own dollars. In the case of cooperators organized solely for the purpose of market development-and that is so in almost every instance every dollar which they spend is for a market development activity. For instance, in the case of wheat, with which I am most familiar. projects like reductions in rail rates, revision of grain standards to provide a more competitive product, development of better varieties, carrying out economic studies, and maintaining contracts with the grain trade have been only a few of the projects which have been financed out of cooperators' funds.
Another field in which cooperators have made a significant contribution has been in that of public relations, particularly from the standpoint of making the Nation as a whole more export-minded. Until recently, this was one of our greatest impediments to an expansion of exports in every field. It is still an area in which more work needs to be done
It would be idle to say that there are no differences of opinion between cooperators-speaking for individual cooperators, maybe not all of them and Foreign Agricultural Service. There are. But they can be resolved. After all, we're all working for the same objective which is big enough and important enough to require the best efforts of evervone concerned. We think that at this time much might be accomplished by a review of the departmental procedures and regulations on market development.
POSSIBLE NEED FOR EXPANSION OF PROGRAMS
Also, in view of the expressions by Congress on the use of foreign currency for market development, consideration should be given to the question of whether our present programs are on an adequate scale and whether they should not be expanded. Certainly the program thus far is less extensive than Congress considered necessary when it authorized setting aside and converting foreign currencies for this purpose.
Mr. CHAIRMAN. I hope that the information which we have submitted in this presentation will be helpful to the committee in its consideration of this proposed appropriation. We also hope that any statements which may appear to be in the nature of criticism will be considered as being constructive. They have been made only because of our intense interest in the program and our desire that it be carried out in a way which will meet the expectations and hopes of this committee and of the Congress in enacting and extending the legislation which made it possible.
On behalf of all of the cooperators represented, I desire to thank the subcommittee for hearing us at this time and for the consideration which it has always given market development activities.
Senator HOLLAND. Thank you, Mr. Hope, and all the representatives and cooperators who are here and those who were not able to appear.
EXPENDITURES FOR MARKET DEVELOPMENT
I wanted to ask you about the statement at the middle of page 10 in which you say:
Certainly the program thus far is less extensive than Congress considered necessary when it authorized setting aside and converting foreign currencies for this purpose.
Are they spending less than the 5 percent that we dedicated to this purpose?
Mr. HOPE. Yes; very much less. As a matter of fact, we are spending less than 1 percent.
Senator HOLLAND. We had 5 percent and then we had a little different provision for 2 percent and now you say we are spending less than 1 percent, less than one-fifth of what was originally contemplated.
Mr. Hope. Yes. Now, as a matter of fact, very possibly the program has itself and the sales made under it for foreign currency which has expanded to a greater extent than Congress had in mind at the time that 5 percent was put in there.
As a matter of fact, I understand that $260 million has been set aside limited to the 5-percent provision.
FISCAL YEAR 1966 BUDGET REFERENCE
Senator HOLLAND. The staff of the committee has called my attention to page 194 of the budget. Do you have a copy of the budget?
Well, I will read these figures. They show that foreign agriculture service obligations from the beginning of the operation under the Public Law 480 through June 30 of last year was $79 million. That is $80 million for foreign agriculture service obligations under contributions.
U.S.cooperators, you folks all represent U.S. cooperators as I understand, $23,906,000; foreign cooperators or others, $14.5 million. Those are the two sets of contributions making the total activity of FAS in there at the time; FAS obligations, $118,145 million.
The breakdown from at the bottom of that page shows the source of the total of $89 million which is the foreign service obligations and those sources were $33 million-plus expenses, $13 million plus nearly $44 million special foreign currency program.
The total from the two sections of 104(f) and 104(m), small amounts $109,000 and $1,825,000 in the other.
It also shows the total program agreements on page 195 which is the opposite page there and which is stated in terms of thousands of bushels of wheat and appropriate units of measurement for the other commodities as shown in export market value in millions totaling $8.866,700 and the ocean transportation came to $1,079,000. It is quite a big operation.
You feel very happy about participating in it. I am sure that all of us who had any part in setting this up originally and you were here originally, and one of the ones who cooperated at that time, Mr. Hope, you were a different kind of cooperator at that time. I think we can say that the program has accomplished a great deal. Whether it has
accomplished as much as we hoped for or as much as we can is the question.
Your feeling is that more money should be spent in market development, is that right?
CURRENT DEPARTMENTAL ATTITUDE ON MARKET DEVELOPMENT
Mr. HOPE. It would seem to us from now on I am on my own, the cooperators who are here have gone over to the other statement, they concur in it. They may or may not concur in what I say now bút they are here.
Senator HOLLAND. If they have any great differences with what you want to say now, they can be heard.
Mr. HOPE. Yes.
I feel, and I think most of us do, that we are on kind of a dead center, that the program in the last 3 or 4 years has not expanded very much. We think there are opportunities to do it but it has not been done. In view of the fact that Congress evidently intended for this to be a growing program and a greater program than it is now when they had in mind-we said set aside 5 percent, 2 percent, we feel that the intent of Congress has really not been carried out in our efforts to expand the programing.
CONTRIBUTIONS FROM COOPERATORS
Now at that point I would like to point out, because this is another question, has come up, not in this hearing perhaps but the contention has been made by the General Accounting Office and also by the House committee which is investigating this program, that there have been inferences at least that the cooperators should have contributed more than they are. It will be noted here in this statement from which you have just read that the total contribuion of the U.S. cooperators and foreign cooperators who would all work together have totaled $118,145,006 as compared with the $79,768,000 which came from foreign currency. So I don't believe it is a valid criticism to say that the cooperators have not been carrying their share of this load.
Senator HOLLAND. I think that the $118 million total represents all obligations coming from the various commodities into this operation.
The total contributions of the cooperators, as I read it there is about $38 million.
Mr. HOPE. Yes; that is right. I am mistaken. Yes, it has been about 23 and 14about 38, that is correct; total amount of 118.
Senator HOLLAND. That is right. And that would show that the total contributions of contributors of some $38 million is substantially half of the total of Government markets.
Mr. HOPE. That is correct.
REVIEW OF PROGRAMS RECOMMENDED
Senator HOLLAND. Well, now, what specific suggestions do you have that you would like to recommend that this subcommittee do?
Mr. HOPE. Well, I don't know that we have any specific recommendations to the committee just now except we recommend, of course, that the full amount which is in the budget be allowed. Our suggestions that we have made here and some which are in the nature of