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Beginning August 1, 1956, the CCC should offer all grades and staples for sale throughout the season at these prices for unrestricted use both in domestic and foreign markets.

Let me explain how this will work. Let us assume for the purpose of argument that the basis of the loan is changed to Middling inch and that this price will be 31 cents for Middling inch. This would be 32 cents under the present loan price. Then also let us suppose that the farmers are given $10 a bale, or 2 cents a pound, for not putting their cotton into the loan. The sales price of the CCC would be 31 cents plus 5 percent which would bring it up to 32.55 cents, less 2 cents per pound making the final sales price 30.55. This sales price by the CCC would force the farmer to sell his cotton below the loan but the farmer would receive $10 a bale, so he would still be in little better position and no cotton would go into the loan. He could sell as cheap as 29 cents and still receive the equivalent of the loan price. Senator EASTLAND. All right. Then what is the Mexican price today?

Mr. DIXON. The Mexican price today is right at 29 to 30 cents.
Senator EASTLAND. 29 to 30 cents for which cotton?

Mr. DIXON. Strict Middling 1/16-inch.

Senator EASTLAND. My information was that it is selling at 28 cents.

Mr. DIXON. Not quite that cheap, sir. It did at one time this season get down very nearly that low.

Senator EASTLAND. Now, they are out of cotton now?

Mr. DIXON. Pretty nearly out of cotton.

Senator EASTLAND. But while they had cotton and while they were competitive with us, the price was 28 cents?

Mr. DIXON. Only for a very short period, Senator.

Senator EASTLAND. Go ahead.

Mr. DIXON. The National Cotton Council has estimated that a reduction of 5 cents per pound in the price of cotton would prevent the loss of 445,000 bales in the domestic consumption of cotton and make a gain of possibly 315,000 bales in domestic consumption. Together this would make 760,000 bales in the domestic market only. We would also expect to make some gains in export markets at this reduced price.

Senator EASTLAND. How much gains?

Mr. DIXON. That is a very difficult question, Senator. It may be half a million bales or something of that sort.

Senator EASTLAND. Well, I have a lot of confidence in your judg ment, Mr. Dixon, and you know the cotton business. A half million bales, then-what would our exports be? One million bales?

Mr. DIXON. Could I go on, Senator, really? It all comes in here a little later.

Senator EASTLAND. All right, sir.

Mr. DIXON. Sixth, we are opposed to all two-price systems, and we are not in favor of an export subsidy. We do not see why the United States Government should sell cotton to foreign spinners cheaper than to our own domestic mills who are our best and most valuable consumers.

Senator EASTLAND. Right there, if the mills favor it, what is your objection?

Mr. DIXON. I would again like to go on, Senator.

Senator EASTLAND. Answer my question, now. It is a fair question. Mr. DIXON. I do not think two wrongs make a right, Senator. Senator EASTLAND. I say, if the mills favor it, what is your objection?

Mr. DIXON. Because we are continually losing consumption in cotton to synthetics. Now, very little has been said here this afternoon about synthetics. Actually, imports of synthetic fibers into the United States in 1955 are estimated to be the equivalent of about 410,000 bales of cotton.

Senator EASTLAND. I certainly agree with you. I certainly agree with you there. We have got to be competitive with synthetics.

Now, the figures show that a price decline in cotton of about 31⁄2 cents a pound would make it competitive. That was the Cotton Council's study; was it not?

Mr. DIXON. I thought it was a little more than that, actually, but I have it here, if you want it.

Senator EASTLAND. What is your judgment? They said 32 cents. Mr. DIXON. I think it would take a little more than that, Senator. I thought it was 6 cents in the domestic market and a greater difference than that abroad, because synthetics are produced more cheaply abroad than they are in this country.

Senator EASTLAND. That is correct. But their study was that 312 cents would make cotton competitive with synthetics domestically. Now, when we reduce the price to that figure, and the mills, then, favor an export subsidy for cotton, what is your objection?

Mr. DIXON. Well, Senator, we have to

Senator EASTLAND. Is it just on principle?

Mr. DIXON. No, sir. We have to dispose of 8 million to 10 million bales of cotton surplus. The domestic market is the biggest market. It is roughly three times as large as the export market. Therefore, I say if we are to get rid of these surpluses, we must sell them competitively in the domestic market, and we must sell them competitively in the foreign markets as well.

Senator EASTLAND. I agree with you.

Mr. DIXON. That is the only difference between us and the other witnesses whom you have had this afternoon.

Senator EASTLAND. I did not understand their testimony, then. Mr. DIXON. That is the fundamental difference. We are worried about synthetics.

Senator EASTLAND. I agree with you.

Mr. DIXON. We are worried about synthetics in this country. Every day, every magazine you pick up talks about synthetics: Synthetic curtains; synthetic everything.

Senator EASTLAND. That is correct.

But the only question I asked you is: What amount would the price decline? I agree that the cotton has got to be highly competitive with synthetics.

Mr. DIXON. I am perfectly willing to accept the figures of the National Cotton Council. That is a wonderful study, and they are the best figures we have. I will try to find them if I can.

Senator EASTLAND. That is all right. Go on with your statement. Mr. DIXON. Yes, sir. It is right in here, Senator.

Senator EASTLAND. Yes. It is 32 cents.

Mr. DIXON. If cotton is sold cheaper abroad, it brings on many dif ficulties. We immediately run into questions of reciprocal trade and imports of textiles into this country, because the price at which the United States Government sells abroad not only establishes the price of our cotton, but it also makes the price for all foreign growths of cotton which are, of course, consumed abroad.

We do not think that two wrongs make a right. It is wrong to give cheaper cotton to foreign mills and we have always been opposed to tariffs and import quotas in all countries. However, if we persist in a two-price system, then our mills are undoubtedly entitled to protection.

But our main reason for opposing these two-price systems is that we want to compete with synthetic fibers here in our home market. Everyone knows that we are losing out to synthetics every day, and any system which maintains a high price in this country compared to synthetics obviously continues this loss.

Further, if we have to get rid of these large surplus stocks, and there is no doubt that we must dispose of them, we must sell them in competition with synthetics in the largest market in the world, which is our domestic market.

All of us know that the potential demand for United States cotton abroad may be about 3 million bales while domestic consumption is about 9 million bales.

Why should we think that we can dispose of these huge surpluses in the smaller market abroad and disregard the larger market which is right at our door? I can only think it is because it is easy to say, "Sell the stuff abroad."

Senator EASTLAND. What would you do that is very, very interesting? You would sell it cheap enough domestically to make inroads in synthetics; is that right?

Mr. DIXON. Yes, sir.

Senator EASTLAND. How much do you figure that would pick up in increased domestic consumption?

Mr. DIXON. Well, part of that pickup is the 760,000 bales which we mentioned at a 5-cent decline. That is an inroad into synthetics, you see; part of it is.

Senator EASTLAND. How long would it take us to get rid of the surplus on such a basis as that?

Mr. DIXON. I am afraid it will take us a long time to get rid of the surplus, anyway, because it took us years to accumulate it. It will take us quite a few years.

The CHAIRMAN. It did not take too many years to accumulate it, Mr. Dixon, because as I recall in 1951, I believe it was, we had less than a million bales, and we had an export ban that prohibited it.

Mr. DIXON. We had two crop failures. We had 2 crops of about 9 million bales. And the surplus did go down very rapidly. Then we ran into the Korean war. I am speaking from memory now-after all, it is 5 or 6 years ago-domestic consumption went up, and we got rid of that surplus.

But once before we had a very large cotton surplus.

The CHAIRMAN. I am talking about the present surplus. You said it took a long time to accumulate it.

Mr. DIXON. It took 5 years.

The CHAIRMAN. Less than that.

Mr. DIXON. Well, maybe 4 or 5 years.

The CHAIRMAN. We had, if you remember, Senator Eastland, a big meeting to try to get the State Department not to prevent the shipping of cotton abroad.

Senator EASTLAND. Yes.

The CHAIRMAN. As I remember we had just a little over a million bales of cotton on hand.

Senator EASTLAND. I am going to dispute the accuracy of the statement you have here. You say that the potential demand for United States cotton abroad is about 3 million bales. Why do you make that statement?

Mr. DIXON. Well, the difference between foreign consumption and foreign production this year is actually about 2 million bales.

Senator EASTLAND. Yes, but you have marginal areas there, in foreign countries.

Mr. DIXON. Yes, I am sure you do have.

Senator EASTLAND. Yes, sir; if we were selling competitively with those countries, those areas would go back to food, would they not? Mr. DIXON. They might.

Senator EASTLAND. Of course they yould. Of course, they would. You are a representative of an international shipping outfit, and you are president of a very fine organization. I do not blame your company for making investments in Latin America, but why is it now that you take the position that the American Government should not assist the American farmer in recapturing his historic export market for cotton? Is it because it would be competitive with cotton which the big houses handle in Latin America?

Mr. DIXON. Certainly not.

Senator EASTLAND. What is it?

Mr. DIXON. Certainly not. We do not take that position. If you read the objective, our second objective it is to

Senator EASTLAND. Do you not realize, if we have a healthy cotton economy in this country that we have got to be able to grow and market 14 million bales of cotton a year?

Mr. DIXON. There is a good deal of misunderstanding along those lines. The shippers are in favor of selling cotton and when I say "the shippers" I mean the American Cotton Shippers Association.

They are in favor, the members are, of selling cotton everywhere, at competitive prices. After all, Senator, as I say later on, it is our lifeblood; it is our bread and butter.

Senator EASTLAND. Of course it is. Well, yes, it is the farmer's bread and butter, too.

Mr. DIXON. May I say one other thing, sir?

Our interest, our personal interest as a firm-call us an international firm if you wish

Senator EASTLAND. Well, you are.

Mr. DIXON. We are. We entered this business in 1862.

Senator EASTLAND. I do not blame you at all. I am not criticizing. Mr. DIXON. Our interests are overwhelmingly in this countryoverwhelmingly; I repeat that statement.

Senator EASTLAND. But you are opposed-you are opposed to the United States Government taking the necessary steps to recapture an export business of 5 million bales a year.

Mr. DIXON. It isn't that we are opposed to that.
Senator EASTLAND. Are you opposed to it?

Mr. DIXON. We don't agree with some of the methods proposed. We don't think the correct method is the two-price system. We would love to have exports of 5 million bales and we would like to have dometsic consumption of 12 million bales.

Senator EASTLAND. Of course.

You know that foreign countries who are competitors of ours use different kinds of currency manipulation?

Mr. DIXON. Yes, sir.

Senator EASTLAND. And other programs to move their cotton, do they not?

Mr. DIXON. Yes, sir.

Senator EASTLAND. That, in fact, is a subsidy, is it not?

Mr. DIXON. Yes, sir.

Senator EASTLAND. Why is it then that the United States Government should not meet those trade practices with its subsidy, where we would sell competitively, rather than to expect the farmer individually to compete with the operations of the treasury of the foreign country?

Mr. DIXON. Senator, we think that with the 1-price system you will ultimately sell more cotton for the American farmer than you will sell with the 2-price system.

Senator EASTLAND. I agree with that. But how are you going to keep the farmer in business now? You are going to cut the price

Mr. DIXON. That is why we recommended a payment to the farmer. Senator EASTLAND. That gets it down to 29 cents, but that is not going to do the job.

Mr. DIXON. It isn't going to do the job, possibly, right away, but I say later on in this report what we want for the cotton. Shall I go on?

The CHAIRMAN. Yes, repeat it if it is in your report, if you have

it in there.

Mr. DIXON. Why should we think that we can dispose of these huge surpluses in the smaller market abroad and disregard the larger market which is right at our door?

I can only think because it is easier to say, "Why sell the cotton abroad?"

But you know if we do that we shall be accused of dumping and many other disagreeable practices by foreign countries whose cooperation we must have.

Senator EASTLAND. But they practice some of them against us, as you have just said.

Mr. DIXON. They?

subsidies.

I don't think any of them have export

The CHAIRMAN. Proceed. Senator EASTLAND. What is the difference? I want him to answer my question, Mr. Chairman. What is the difference between currency manipulation and an export subsidy? It is all a subsidy.

Mr. DIXON. In Brazil there are different rates of exchange. Some of these currency manipulations which you mentioned, Senator, come from entirely different countries. They are a question of swapping one currency for another in different currencies and do not actually

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