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It has been cranked ever since because, in effect, what has happened is that our 90 percent program, because we have been unwilling to meet competition in world markets and we have been unwilling to sell this cotton competitively—I don't think there will be any disagreement between you and me when we get through the discussion, because from the questions you have put here I think we are going in the same direction
The CHAIRMAN. I wish to state to you and other witnesses that I am merely taking the negative on many of these issues to bring the facts out.
Mr. BROOKS. I understand that.
The CHAIRMAN. No Senator who has asked questions is to be gaged by the questions he asks. We are trying to get the facts.
Mr. BROOKS. I appreciate that you are trying to bring out the facts you would like to have.
The way our program has worked-our 90 percent program, for example, has worked—is that it was set up for the producers of this country but in effect the way it has worked out it has been a 90 percent program for the producers of the world including the cotton firms who produced from this country and went to other countries and produced.
Senator EASTLAND. Is it not true that foreign producers have had every advantage of the American program except the reduction in acreage?
Mr. BROOKS. Certainly. All they had to do was expand their production and sell their cotton a dollar a bale and they took the export market. The facts are that sitting with that type of situation and we not being competitive in the world market with our cotton, we have seen the expansion move until from 1947 up to the present time it has doubled in foreign countries, at a time we were trying to pull down.
Senator EASTLAND. There was a time when foreign countries had to come to the United States for their cotton supply. How long before how many years will it be before foreign production will equal foreign consumption if this expansion continues ?
Mr. BROOKS. Only 2 or 3 years. This situation is so desperate in cotton that if we do not change our sales policy with reference to sales into foreign countries we will have no export market in 3 years
from now, and we will be down to producing from 81/2 to 9 million bales for domestic consumption only; and that will absolutely wreck the whole cotton economy of the entire cotton South. It is the most serious thing the South has faced in history practically since certainly the depression years.
And what has happened in foreign production? They have moved up since 1947 from 842 million bales to approximately 17 million. The program is to continue to expand to where they take all the export markets and leave us none. That is the present program. It is doing it step by step and we have only 3 years in which to save any of it. Because once they get into production it is far more difficult to put them back out than it is to keep them from going in.
Senator EASTLAND. Now the export cotton market is about 1112 million bales, the international market; is that true?
Mr. BROOKS. About 12 million.
Senator EASTLAND. Twelve million bales. At what price-I think you will agree we have to build our exports up to around 5 million?
Mr. BROOKS. That is right.
Senator EASTLAND. At what price would our cotton have to move to recapture and build our exports up to 5 million bales?
Mr. Books. You have two problems with that, Senator, and it is a question of which way you want to go. At the present time foreign cotton is selling for about 5 to 6 cents per pound under American cotton because of the fact that they think that we are going to start competing; for the first time we are going to sell a million bales competitively beginning January 1. That is beginning, of course, to reflect in world markets the fact that we are going to make one step, at least a weak step but it is a step—toward moving in competitively. That is immediately having its effect.
Senator SCHOEPPEL. The same grades of cotton?
The CHAIRMAN. Five or six cents a pound less on the same grade and same staple?
Mr. BROOKS. Equal cotton. That is varying, of course, from day to day and week to week.
Senator EASTLAND. Competitive grades.
Mr. BROOKS. That is correct. Now, Senator, there is one thing that I would like to call to your attention and that is this: In the last 3 years foreign consumption of cotton has moved up 212 million bales so that if we could just do something to stop this expansion in foreign countries it would not take long until we could regain our reasonable share of the export market. But as it is working, even though there is an expansion in consumption, and as I said in the last 3 years 21/2 million bales, the foreign expansion is even faster than that.
Senator EASTLAND. The foreign acreage expansion?
Mr. BROOKS. Yes, foreign production expansion is moving up so rapidly it is eating up the increase in consumption and eating up our share, too.
Senator EASTLAND. We will export about 2 million bales this year?
Mr. BROOKS. It is estimated from 212 to 3, but 3 is an optimistic figure.
Senator EastLAND. Mr. Brooks, you are a very able cotton man, and I have a lot of confidence in what you say. What is your judgment of what those exports will run ?
Mr. BROOKS. I think maximum of two and a half.
Senator EASTLAND. Two and a half. How much of that will be given away and how much will be sold?
Mr. BROOKS. That depends on what you term giveaway.
Mr. BROOKS. If you put 480 in with that I would say that practically all of it is going to have to go under some type of program, either that or this million bales that will be sold competitively.
Senator EASTLAND). What you are saying is that we have already practically lost our export market in sales for dollars.
Mr. BROOKS. We have largely lost it.
Senator EASTLAND. In legitimate business transactions we have largely lost it.
Mr. BROOKS. So that actually what will happen is you will sell about a million bales, if we sell the million, competitively that will start selling January 1 and then the other million and a half will be in economic programs or 480. That is what you will do this year. You have to meet the competitive price or use programs or you are already out of the export market.
Senator EASTLAND. Say we reduce our price to where it is competitive with Mexican cotton or Brazilian cotton; we are going to be competitive. Will that get these markets back, a competitive price, or do we have to make terms that they cannot meet to get the market back? What is your judgment ?
Mr. Brooks. If we meet terms, if we make terms, of course, it will mean we will not have to go as low in price. If you can do it by indirection you will not put as much pressure on the world price. It would be determined by which method you use.
Actually, it is very difficult once you get into production to pull that production out, and I think it would be very difficult, for example, for us to place a price in world markets that would put out of production that that is in; but certainly we can be competitive to the extent that we stop further expansion and if we can even do that in 3 to 5 years we will be out of our export troubles.
Senator EASTLAND. I agree, but here is what I was leading to: Public Law 480 is not a weapon with which we can move a lot of cotton; we could use it as a weapon to dry up some foreign production because no country could meet that kind of competition.
Mr. Brooks. Yes, but all we are doing, we are doing two things in 450. It depends on how far we go. The governments themselves like 450 very much, but often the domestic mills in these countries don't like 480.
Senator EASTLAND. Because our cotton is not competitive? Mr. Brooks. That is right. What is happening is that our price of American is far higher and 480 is very beneficial to those governments because we let them use some of that money for economic aid in the country. But for that mill itself, who is taking money in terms of currency of his country and paying this high price for it, he is not very enthusiastic about 480.
Senator EASTLAND. I agree. Would you recommend an amendment to 480 to provide for sales of cotton or other commodities under that bill at competitive prices!
Mr. Brooks. I will have to do that or work out some way to where this domestic mill in these countries that I am speaking of is not penalized as he is at the present time. The Government is getting benefit of 480 but he is not.
Senator EASTLAND. We set up 660,000 bales, I believe, to be exported under Public Law 480 from August 1 to January 1. Actually we will export only about 150,000 bales during that period under that law; is that correct?
Mr. BROOKS. That is approximately correct. I haven't seen any figures in the last week or so, but you have tremendous resistance on the part of these mills in every country. You just have to choke it down their throats because it is a penalty to them.
Senator EASTLAND. Do you think the law ought to be amended to provide for competitive sales of cotton under the provisions of that bill?
Mr. Brooks. I think you have to do that to make it competitive.
The CHAIRMAN. Have you not heard it said that the Secretary of Agriculture has the power now under the existing law to sell this cotton at a competitive price if he chooses to do so?
Mr. BROOKS. Well-
Senator EASTLAND. I think that there is a legal power under Public Law 480 to sell competitively but if it is not being done
The CHAIRMAN. How can you force it? We can put all the laws on the books, but if the Executive will not do it, what can we do? Impeach him?
Senator EASTLAND. Under the original Public Law 480 it provided for the State Department to have the veto power on sales made under that law, and Congress last year took that provision out of the law by amendment and now the State Department has nothing to do with it. We can meet it by legislation, I think.
Mr. BROOKS. Senator, I think we must analyze it from this standpoint: That if we make the cotton competitive in price, then we are competitive actually. I mean with the mill as well as with the Government. We are competitive actually, then, with other countries. These other countries are selling cotton to the same-producing countries are selling cotton to the same consuming countries and accepting their exchange for their cotton.
Now we have one advantage and which no doubt the administration has tried to use, and that was that in the case of 480 we did take the funds and didn't bring the funds back to this country, but we did make them available to these foreign governments. From that standpoint, there is probably great justification for our trying to do as good a trade as we can because we, in effect, are giving them economic aid through 480.
On the other hand, if we are going to get actually competitive we might have to give up that viewpoint and go to the other one, which would mean that we would sell at competitive prices and accept foreign currencies.
Senator SCHOEPPEL. How different would that be in theory to the two-price system?
Mr. Brooks. Senator, I get quite confused here. I can't, you know we whip words around, but I can't see anything but what in the end that we must sell our cotton in foreign countries competitively; and if that is cheaper than the price at which we feel is fair for this country, then it must be a two-price system regardless of what you call it.
Senator SCHOEPPEL. And protect the American farmer on his domestic production?
Mr. BROOKS. Yes. That puts the American farmer somewhat in the same competitive position as labor is protected in this country and industry and many other economic units.
The CHAIRMAN. May I point out to you that a moment ago, Senator Eastland pointed out not only is it authorized in Public Law 480 but we have it in the law of 1949. Section 407 of the act of 1949 states:
"The Commodity Credit Corporation may sell any farm commodity owned or controlled by it at any price not prohibited by this section.”
The only prohibition by this section is to domestic consumption. It states that unless the price is 105 percent of the support price plus storage charges and interest, no domestic sale can be made. But the act further states that this shall not apply to sales for exports. So today you have a law on the statute books that permits the Commodity Credit Corporation to sell these surplus commodities on a competitive world market. There is no price restriction. What else do you want us to do to make them do it?
Mr. BROOKS. I understand that. The CHAIRMAN. You are familiar with that law? Mr. BROOKS. Yes. The CHAIRMAN. And you would state that the Commodity Credit Corporation has the right today to sell this cotton on the world market at competitive prices!
Mr. BROOKS. Yes; and beginning January 1 they have announced they will sell a million bales which I said may be a very small and very weak start, but at least it is a start and what I think is that we want to be certain that that is the beginning and not the end of doing this job. That we must do if we are going to meet this situation.
I have some recommendations, Senator, and I know you like to get recommendations as to what we should do.
The CHAIRMAN. I know you have the problem solved for us. Go to it.
Mr. BROOKS. I wish it were that simple and I could, but I had a situation once before and they asked me to solve the problem of cotton and I told them I was too much involved and too much in it, but if they would let me handle this potato problem I could handle that because it was up in Maine and I knew little enough about it to handle it.
But the recommendations as we have worked them out, our cotton group here, are as follows:
First, that we sell our cotton competitively in world markets in order to increase sales and to slow down foreign expansion.
The CHAIRMAN. We have the law on the statute books to do that. Mr. BROOKS. You have the law to do that.
The CHAIRMAX. How will you force it? That is the point. No matter how many more laws we pass it is now the law that they can do it; what else can the Congress do to make them do it!
Mr. BROOKS. I think
The CHAIRMAN. I suggested impeachment awhile ago, but we may not want to go that far.
Mr. Brooks. I think the Department of Agriculture is making a tremendous effort to get this done. Now what I think this committee, as an agriculture committee, ought to get in with the Department of Agriculture and help them fight the State Department to the end if it takes that to do it.
The CHAIRMAN. We have been doing that all the while. The committee has done it. As I said a while ago, as chairman of the committee I selected my good friend, Senator Éastland, to head a subcommittee to find out the facts and that was done and they recommended