Hon. FRANKLIN D. ROOSEVELT,

OFFICE OF GOVERNOR,
March 1, 1939.

The President, Washington, D. C.

MY DEAR MR. PRESIDENT: I take the liberty of calling your attention to a serious crisis which the State of Washington is facing in regard to its virgintimber supplies. As a result of the acute shortage of high-grade softwood timber of large sizes in all foreign countries, the nations of the world are drawing heavily on our log supply cut from century-old irreplaceable timber. Furthermore, through discriminatory tariffs or outright prohibition of the importation of our manufactured forest products, many foreign countries, formerly important markets for our manufactured products, have turned to the buying of our logs. The effect has been disastrous, since the export trade in wood products is the balance wheel on our industries in this region, and consequently our mills are working part time and our labor is thrown out of employment.

The Northwest has an unquestioned monopoly on high-grade Douglas fir timber, but there is no law to restrict the exportation of this raw material. Our keenest competitors, Japan, British Columbia, Germany, Italy, and Scandinavia, buy our logs and have taken our foreign markets. We are hopelessly handicapped in the development of our export trade of finished wood products. What is more serious, this log export trade is rapidly depleting our virgin-timber resources at the rate of about 100 million feet per year. Our virgin timber is the principal asset of this region.

Four identical bills have recently been introduced in the Senate and House of Representatives (S. 1108, H. R. 3579, H. R. 3659, and H. R. 3712) for the purpose of prohibiting the exportation of high-grade Douglas fir logs. I am convinced that the passing of this bill will not only restore, at least in part, the export trade in manufactured wood products which has been lost through the unrestricted exportation of the logs but it will also denote an important step toward practical timber conservation. If reforestation is to succeed in this region and our future economic life depends on this-it must be based on furnishing the raw materials for national industries, and not on providing the opportunities for our foreign competitors to develop their industries and undercutting us with their cheaply paid labor. If the logs now exported were converted into wood products in the Northwest, it would create a new annual pay roll in excess of $1,000,000. At present less than $150,000 in wages result from the cutting and transportation of these logs to seaboard.

Our export industries are naturally interested in the reciprocal trade program, but are far more concerned with the stopping of the expotation of this valuable raw material. We would be only following the example of all other countries which without exception have reserved high-grade softwood timber for their national use, to encourage the refining of the raw material within national borders.

I feel very strongly that this bill is of the utmost importance to the future of this State, and it has already received unprecedented support from our citizens, particularly from labor. It is also of great national interest because the Pacific Northwest is furnishing wood products to every State in the Union and is the most important source of supply of specialized softwood products. I am enclosing some statements giving further details in regard to this logexport matter, and I should appreciate it if the administration would give its full support to this bill.

Cordially yours,

Governor.

Senator HOLMAN. And I would like also at this time to have Mr. Culbertson make a statement.

Senator MCNARY. Yes, indeed.

STATEMENT OF WILLIAM S. CULBERTSON, CULBERTSON & LEROY, WASHINGTON, D. C.

Mr. CULBERTSON. Mr. Chairman, I would like to say a word about the place of the policy embodied in this bill, S. 1108, to the general problem of commercial policy, for I believe that it has a great deal

of relevance in determining the policy of this committee and of the American Congress with respect to this matter.

There are three systems of trade which are prevalent in the world today, and I would like to have the committee see clearly just what they are, because I believe it will bring out the significance of this

measure.

In the first place there are many countries which have a system of trade which is usually characterized as bitlateral trade dealings or state-controlled trade or sometimes state-controlled industry. That is the system of trade which characterizes primarily countries like Germany, but it has been adopted, either voluntarily or through pressure of circumstance, by a great many countries in the world. today. It is characterized by the canalization of trade; it is characterized by the direct interest of the state in determining the course of trade or diverting the course of trade into this or that channel for political or for other purposes. It has expressed itself in clearance agreements, in change controls, in quotas, and in some cases in the direct participation of the State in industry.

Now that factor has gone much further in the economic life of the world than a great many people realize at the present time, and it is one of the factors which is affecting the problem which is before this committee today. I shall return to it in a moment.

The second system of trade which characterizes our present-day world is colonial trade, trade which endeavors by means primarily of preferential tariffs, to establish economic or commercial preservation for the nationals of the mother country or of the colonies within empires. That is the type of trade which characterizes the British Empire and the French Empire, and in the case of the British Empire it is not only in the dependent colonies but it is also the trade between the dominions. The dominions, although independent from a political and from a fiscal point of view, nevertheless maintain this colonial type of trade as the dominating factor in their commercial policy.

Now the third system is the system which we call the equality-oftreatment system. It is the system which is championed by our Secretary of State, Mr. Hull. It is designed to increase the volume of trade through the extension of multilateral trade and through the removal of barriers and restrictions under the operation of the unconditional most-favored-nation principles.

Now I needn't tell many of you here that I have been a very active supporter of this third system. I have made speeches, and I have written a book on the subject, and I have done everything that I could to advance this idea of the equality of treatment in trade, and I am not here to advocate its abandonment or even its qualification. Much less am I here to advocate the adoption of either of the two systems, the first two systems of which I have spoken.

I believe that the system of State-controlled trade and Statediverted trade, a system of colonial trade, is detrimental to the prosperity of the world, and anything that is detrimental to the prosperity of the trade is detrimental to the American Nation.

But there are two reasons why I believe that the system we are endeavoring to maintain in this country, a system of equality of treatment-there are two reasons why that system at times requires countervailing measures in order to overcome the restrictions which

are established by these State-controlled systems, and colonial systems, which divert trade.

And the first reason is that the only way to make the system of equality of treatment effective is sometimes to retaliate against discriminations which tend to destroy it. I have sometimes remarked that, like the old Gresham's law of money, the law that bad money drives out good money, that by analogy we have today a sort of Gresham's law of trade, whereby bad policy drives out good policy, and therefore the Hull system, fundamentally sound as it is-sometimes it is a victim of the aggressiveness, the economic aggression, which is embodied in these other two systems.

And the second reason why I believe that countervailing measures are necessary at times, is in justice to the American interests which are at times affected by these measures which are adopted by Statecontrolled systems or by colonial governments.

Now the bill which is before this committee today is a case in point, and I want to say just a word as to how this unrestricted export of logs, which is permitted today, operates against American prosperity and American industry.

There is, of course, a tendency toward industrialization in many countries throughout the world; in fact, all countries, largely as a result of the war, and as a result of the depression conditions that followed it, found foreign trade difficult, and they began to build industries of their own.

Now we can't make any objection to that, we can't make any objection to protective duties, in order to build up an industry in a foreign country, but we certainly ought not to add aid and comfort to the building up of an industry in a foreign country which competes, and competes in a way that will destroy or tend to destroy the markets of American industry, and that is precisely what we are doing when we permit these high-grade, irreplaceable logs to be sent abroad to become the basic raw materials of industry, under a low-wage system in different countries, which are going into other markets and taking away the markets of the American industry.

Now take the case also-in the second place of our trade with the British Empire. The British Empire in various places, in Canada, South Africa, and Great Britain, is buying these high-grade logs. They process them into manufactured articles of various kinds, plywood being among them, and doors and other products of that kind. Now those manufactured articles go out from those regions of the British Empire into other parts of the British Empire and are sold there in competition with the American product, but with the advantage of the preferential tariff duties which are established, in favor of the empire goods.

So that by permitting this free export of these peeler logs, we are facilitating in that case, as in the other, what amounts to unfair competition, at least indirectly unfair competition against an established American industry.

Now it is true that the State Department has endeavored to help the plywood industry reduce tariff duties abroad. For one reason or another it has not been successful.

In the letter which has been filed and placed in the record here today, cases are cited of modification of duties on plywood in various

markets, but it may be said, I think without contradiction, that those reductions are nominal and have not at all assisted in developing the volume of trade which this industry is seeking to develop. As a matter of fact, the markets which this industry has developed abroad and to which the State Department refers have been due to the initiative and skill and organization of the Webb-Pomerene Act, which is promoting the sale of this product in foreign markets.

Now in conclusion

Senator MCNARY (interposing). You are not attempting to defend the infamous treaties made between the United States and Canada and the United States and the United Kingdom, are you, with respect to softwoods?

Mr. CULBERTSON. I feel, Mr. Chairman, that the State Department fell somewhat short of what we had hoped they might accomplish in those treaties.

Senator McNARY. Just about a thousand miles. I am familiar with that thing; I have been working on it for years, and nothing has hurt the timber industry of the Northwest like the infamous treaty with Canada and the refusal to open up the United Kingdom markets for Northwest timber-and I stand on that officially.

Mr. CULBERTSON. I am happy to find that we are in agreement on that, as we are on many other things, because I feel that of all the cases where preferences in the British Empire were a real trade barrier, one of the most important was in the case of lumber and in the case of plywood, and while I think our State Department did the very best it could in negotiations, it didn't accomplish the result which should have been accomplished.

Now why, then, if that is so, and if that is the feeling of this committee with reference to this general situation, affecting the forest industry, why not do something which is really not retaliation, but which is simply guarding our own, as the basis of an industry which is struggling to make headway against those barriers which exist in the world market today?

On the matter of conservation, I think sufficient has been said, but emphasizing again that we are speaking now of a raw material which is at least 200 years old, and in some cases 400 years old, and which cannot be replaced by human effort or human desire.

Now that fact in itself appeals to me as a fundamental reason why we should guard and protect it. We ought to operate and develop the industry upon that raw material, rather than allowing that raw material to go abroad and become the basis of industries in other countries which compete then with our products which we are struggling to produce in this country at very high wages.

Senator HOLMAN. May I interrupt? It competes not only in the foreign markets but in our own domestic markets?

Mr. CULBERTSON. It does, Senator; unfortunately that is the case. Referring back to the State Department letter, there is a reference in that letter to the fact that there is some inconsistency between arguing for he conservation of this irreplaceable raw material on the one hand and arguing that it should be used as a raw material in a domestic industry at home.

Well, all I can say to that is that if this irreplaceable raw material is to be used at all, let's use it here and let's not have it being used by our competitors abroad.

Senator MCNARY. Thank you, Mr. Culbertson, for that nice state

ment.

Senator HOLMAN. I wish to submit for the record a tabulation of endorsements of this bill.

Senator MCNARY. That may be included.

(The tabulation referred to is as follows:)

The following organizations are supporting the peeler-log bill:

All plywood manufacturers in the Northwest.

Chambers of Commerce: Tacoma, Everett, Yakima, Olympia, Hoquiam, Aberdeen, Raymond, Shelton, Longview, Leavenworth, and Vancouver, Wash.; Oregon City and Willamina, Oreg.; and several others.

Northwest Conservation League, headed by Mrs. Margaret Thompson.

Washington State Planning Council-The most important body of its kind in the Northwest appointed by the Governor and composed of leading men in the State acting as an advisory board to the Governor in matters of broad public interest.

Governor Clarence Martin, of Washington.

President Roosevelt.

The Chief Forester of the United States.

Washington State Chapter of the Daughters of American Revolution.

Pierce County Medical Association.

President's Council made up of about 9,000 presidents of women's organizations in the State of Washington.

Society of American Foresters, Columbia River Section. This is a group of professional foresters belonging to the national body of that name.

American Legion-several Legion posts in the Northwest have endorsed the

bill.

City councils in Tacoma and other cities have endorsed the bill.

Real-estate boards-Tacoma Real Estate Board, Portland Real Estate Board, and others have endorsed the bill.

Sons of Norway-Seattle and Tacoma.

Daughters of Norway, Seattle, and Tacoma.
Scandinavian Fraternity-Tacoma.

Norwegian Commercial Club of Seattle.

The enclosed extract of editorial comments in the Northwest clearly shows that the issue is of public interest.

The American Federation of Labor and the C. I. O. Both of these labor organization have unanimously supported the bill, and support is given by the national organizations of both unions.

Senator HOLMAN. I would also like to submit a few of these [indicating]. I understand I have about an apple box of these things, sent out as postcards from various people that seem to be in favor of the bill.

Senator MCNARY. The clerk will keep these in the files.

(Referring to several plieces of plywood, in the form of post cards, addressed to Senator Holman, favoring the bill, filed with the clerk of the committee.)

Senator HOLMAN. I would also like to call the attention of the committee to the mounted newspaper clippings from the Oregon section of the country, the Pacific Northwest, rather, showing the very heavy interest and support of this measure.

Out of consideration for those who wish to be heard, I will now give up the floor.

Senator MCNARY. I will have to adjourn this meeting very shortly. I mentioned Colonel Greeley again, because he told me he wanted to return home tonight. Do you have a statement, Colonel Greeley? Colonel GREELEY. Yes.

Senator MCNARY. When were you Chief Forester of the Forest Service, Colonel, what length of time?