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PARAGRAPHS 216-219-CANE SUGAR, ETC.
ing to our present consumption, and reduce the price 1 cent per pound. If our internalrevenue tax corresponded to that of Germany of 14 cents per pound, we would collect $113,000,000 revenue, and our price be less than now. If the tariff is to be defended only on the ground of revenue, we advocate "the excise tax on incomes of individuals," passed by the House as a substitute, in order that the consumer will be the main beneficiary.
BRUSSELS CONVENTION "FEARS."
While on page 3 the report pictures the widespread disaster that would follow under free sugar from the inroads of Russian bounty-fed sugars, on page 4 it warns us that "the foreign countries, adhering to the Brussels convention, if we take the duties off sugar, would only have to declare the United States conventional territory to enable them to control our supply of sugar and fix the price we should pay for it." In one place the danger of that form of competition is graphically described and in the other the manner in which it will be averted. Which horn of that dilemma is the committee disposed to choose--this form of competitionor the prevention of it? They do not express a choice. Mr. Jacobson, the statistician of the Agricultural Department, testified before the committee that in any event Russia would be limited to the exportation of 200,000 tons in any one year to "western territory," which included England, her largest customer, and the United States, until 1918. As England now absorbs all of these exports and is clamoring for a modification of the terms of the protocol in order to secure more, the United States should have little to fear from this source. Since we are almost wholly dependent upon Porto Rico, Hawaii, Cuba, and the Philippines for our "foreign supplies," by what process of reasoning did the committee arrive at the conclusion that by any action of the Brussels convention foreign countries could control our supply and fix the price? Surely they did not think that the Brussels convention could regulate Porto Rico, Hawaii, and the Philippines, our possessions, or influence the attitude of Cuba. With these natural sugar sources to depend upon, how could foreign countries ever "control our supply or price'? Would our colonies enter into a conspiracy with European powers against us? If they did, what would then become of their product? But if the committee is sincere in its apprehensions about the bounty-fed sugars of Russia, they could easily insert a countervailng clause to the extent of the bounties paid, so all fears would be allayed. Is not the mention of this prospect more to distract than to convince? Do not the domestic interests fear the effect from Cuba and the Philippines, rather than competition from real foreign sources? Are not the "foreign countries'' at our door their apprehension rather than Russia?
EFFECT OF TARIFF UPON THE PRICE OF SUGAR.
Doubt seems to be expressed that a reduction of the tariff would have any effect upon the price of sugar. We call attention to the fact that the reduction between 1891 and 1894 lowered the price over 2 cents per pound, and the reason why the consumer did not receive the benefit of the full reduction on raw sugars was that a duty of 0.5 of a cent per pound was retained on refined, of which the refiners took advantage. On this phase of the question Wallace P. Willett, the leading American authority on sugar statistics, after several practical demonstrations, by means of figures, before the Hardwick committee, stated as a conclusion: "I would like to have the committee satisfied that any reduction of duty goes to the consumer and any addition of duty is paid by the consumer in any year under any duty which differs from any other duty, making necessary allowances for market fluctuations affected by supply and demand." (Hardwick hearings, page 3554, testimony of Wallace P. Willett.) Similar testimony was advanced by Mr. Atkins and Mr. C. A. Spreckels before the Hardwick committee. Taking the record of the Department of Commerce and Labor, Bureau of Statistics, No. 240, page 517, it shows that the average cost per pound, free on board in foreign countries, of the raw sugar imported, 1905–1911, inclusive, was 2.378 cents per pound. To this we must add the freight to get the average cost laid down at United States ports, 0.14 cent, making the inbond price delivered at United States ports 2.518 cents. During the seven years in question the margin between the price paid by refiners for their raw material and the selling price on refined was 0.859 cent per pound. If refiners did not have to pay any duty and added this margin to the inbond price of the raw material, 2.518 cents per pound, it would have made their average selling price for the seven years in question 3.377 cents per pound. Willett & Gray show that the average New York refiners' price for these years was 4.98 cents, or an increase by the tariff of 1.603 cents per pound, which, based on last year's consumption, would mean an increase of $120,360,000.
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No matter in what form our sugar is consumed, the price and profit are exacted through the instrumentality of the tariff, and the highly protected interests are the beneficiaries. So it is idle for the committee to present special tables satisfactory to and prepared by beet-sugar statisticians, to divert attention from their methods and throw sand in the eyes of the public. Those statistics may be satisfactory to the interested parties, but present no argument to excuse their methods of extortion by means of the tariff. Their profits are governed by the amount and not the form of the consumption, whether by individuals or the trade. If reduction of the tariff will have no effect on the price, why do the domestic cane and beet sugar interests so strenuously oppose it as disinterested patriots who desire to protect the Government, or as business men desirous of maintaining a high price for their product? It is obvious that the last is the answer.
Owing to recent exposures in the coffee situation the committee's comparison of sugar price regulation with that of coffee is wholly inapplicable. It develops that the price of Brazil coffee is regulated and the output controlled by a valorization plan. This has become possible on account of the limited supply, the limited area of its production, and the comparatively limited amount of money required to control ultimate sales. None of these conditions apply to sugar. Its production extends to all parts of the civilized and uncivilized world; the supply is too vast to be monopolized, and it would require billions of dollars to control the market in the same manner that the output of Brazilian coffee has been regulated.
The committee's comparative prices on page 3 are unfair and misleading. Foreign prices are taken for July, 1911, to be compared with our average price from 1890 to 1907, which includes the four-year period of free sugar. Why did the committee not take our price for July, 1911, or the average European price for the last 17 years, and then make a comparison? It is well known that the period between 1907 and 1911 raised the average. Even upon such a comparison our price is 5.7 cents, against a German price of 5.4 cents, which takes into account their duty and internal revenue tax of 1.51 cents per pound, a total of 2.03 cents, 4.4 cents in Geneva, 5.4 cents in Brussels, 5 cents in Copenhagen, and 4 cents in London. Considering all of the taxes that are paid to the Government and contribute to the price abroad, little comfort is to be taken from this comparison, now that the average of our retail price is above 6 cents per pound.
The United States, because of its proximity to Cuba and its insular possessions, Porto Rico, Hawaii, and the Philippines, as well as from the fact that beet sugar can be produced in our Western States at a very low cost, should have cheaper sugar than any nation in the world. From these sources, with their natural advantages, we are assured not only of an ample supply of sugar, but this supply can be obtained at a minimum cost if it were not for the high duty which enhances the price.
The question is: Are the people to receive the benefit of our natural advantages, or are they to be exploited for the benefit of the promoters of our domestic beet and cane sugar industry? The present high tariff means the latter.
On page 4 of the report prepared by Senator Lodge which accompanies the Finance Committee's recommendation a most misleading table is presented, which purports to compare the rates of duty in the United States with the rates in the European countries. In presenting this half truth a subterfuge is resorted to, unworthy of the senior Senator from Massachusetts. As we have previously stated, the various countries of Europe, in addition to the import taxes, have, as a revenue feature, a "consumption tax, the latter being levied on all sugars, whether of foreign or domestic origin. Instead of using the table furnished the committee by Senator Broussard, separating these taxes and showing that the import tax in these countries is 0.48 cent on raw and 0.53 cent on refined sugar, as compared with our rate of 1.685 cents on raw sugar and 1.90 cents on refined, the committee presents a table in which it lumps the two taxes and classifies the rates as "import duties," making it appear that the industry abroad is protected at a higher rate than in this country. This is not a fact, except in the cases of Italy, Spain, and Russia.
Nor is the attempt to magnify the amount of our production and consumption by expressing it in short rather than in long tons to be commended. Willett & Gray place our total consumption at 3,351,391 tons for the year 1911, of which 506,000 were of domestic beet-sugar manufacture, whereas the figures compiled for the committee speak of a consumption of 3,912,862 tons, of which 606,033 are credited to domestic beet. This leads the uninitiated to believe there has been a total increase of about
PARAGRAPHS 216-219-CANE SUGAR, ETC.
600,000 tons in consumption in one year, 100,000 tons of which was domestic beet sugar. It would, therefore, be much more correct and less misleading to express sugar conditions in long tons, as is the universal custom in the trade.
ALLIANCE BETWEEN TRUST AND BEET SUGAR INTERESTS.
We observe that it was insinuated by witnesses interested in the beet sugar industry who testified before your committee that the cane refining interests of the Atlantic seaboard were clamorous for a reduction of duty, with the purpose of annihilating the beet sugar industry so as to give the former a monopoly of the sugar market and the regulation of prices. What these witnesses were careful not to divulge was the close alliance between the beet sugar industry and the American Sugar Refining Co. While the latter controls over 62 per cent of the cane refining, it also controls companies that produce 64 per cent of the beet sugar. It controls the Michigan Sugar Co., with six factories in Michigan, of which company F. R. Hathaway is secretary and "Washington representative"; the Great Western Sugar Co., with nine factories in Colorado and one each in Montana and Nebraska; the Utah-Idaho Amalgamated and Lewiston, or "Mormon group," with all of the 11 factories of Utah and Idaho; the Spreckels and Alameda factories in California; the Continental Sugar Co., with factories at Fremont, Ohio, and Blissfield, Mich.; the Waverly Sugar Co., of Waverly, Iowa; and the Carver County Sugar Co., of Chaska, Minn. With cane refineries at New York, Jersey City, Boston, Philadelphia, New Orleans, and San Francisco, they dominate the seaboard. By their control of these beet sugar companies they also regulate prices in the interior. Prior to 1907 they also controlled the American Beet Sugar Co., but around that time disposed of $7,500,000 worth of that stock. This was in retaliation to the action of Henry T. Oxnard (whom, perhaps, the committee may remember) in repudiating a contract to allow the trust to act as the agent of his company in disposing of their product at a quarter of a cent per pound commission until 1913. Havemeyer shifted this investment into the Great Western Sugar Co., which now competes with Oxnard's American Beet Sugar Co. at Missouri River points and keeps it in constant check. The trust owns over $23,000,000 worth of beet sugar stock. By its control of both industries it has an unfair advantage over independent cane refiners. It can compete with them from both directions. On this account it is indifferent to action upon the tariff, because its losses in one direction will be more than offset in another, while a continuance of the present tariff will continue to embarrass and stunt the growth of its cane-refining competitors. Before the Hardwick committee its acting president, Mr. Atkins, decined to express an opinion on the tariff, though evinced a willingness were he invited to a tariff hearing on the subject. Mr. Atkins resides in Boston. Neither he nor any other representative of the company (except the beet sugar propagandists) testified at these hearings. It is then to be taken for granted that they are eminently satisfied with the present provisions or opposed to any change through beet sugar allies. A little less than $49,000,000 of the $90,000,000 worth of stock is owned by 12,240 residents of Massachusetts, out of a total list of 19,400 stockholders. Does this throw any light upon the partial attitude of the senior Senator from Massachusetts?
THE COST OF PRODUCING BEET SUGAR.
We are impressed with the fact that, notwithstanding the Republican Party's assertion in their last platform, that duties should be based on "the difference in cost of production between this country and abroad," it makes no attempt to justify the present duty on sugar on this basis. The report makes no reference to cost of production either in this country or abroad. Their reason for doing this is obvious. Testimony both before the Hardwick committee and the Finance Committee showed that where beet factories were properly located there was no legitimate reason for the cost of production being materially greater than anywhere else in the world. "Difference between cost of production here and abroad" has an attractive sound, but, when analyzed, what does it mean? It has been shown that refined beet sugar has been produced at 2.70 cents per pound, while Louisiana tells us that it costs them 3.75 cents to make raw sugar of 96 test, and it would certainly cost them 0.60 cent to refine and pack this, making the cost of producing refined sugar 4.35 cents per pound. What is the cost of producing refined sugar in the United States?
In 1898, Henry T. Öxnard, who now appears to advocate retention of the present duties, as a representative of the American Beet Sugar Co., issued a circular, over his own signature, to induce investment in the beet sugar stocks of companies he was promoting, to the effect that beet sugar could be manufactured at a cost of $2.80 per
PARAGRAPHS 216-219-CANE SUGAR, ETC.
hundred pounds. At that time the sugar content of the American beets was no more than 8 to 9 per cent and the yield per acre no more than 7 or 8 tons. At the hearings before the Ways and Means Committee of the House in 1909, Mr. Oxnard declared that when we attain the German average of sugar content and yield per acre, "we" could stand against the world without any further assistance from the tariff. It developed before the Hardwick committee that this country had equaled, if not surpassed, the German average, the content of our beets having reached above 15 per cent and the yield per acre 14 tons, while in favorable localities of California, Colorado, Utah, and Michigan as high as 22 per cent content and 20 tons yield per acre. When reminded of his former testimony, Mr. Oxnard declared he did not have in mind America alone when he made this declaration, but the "Sugar beet industry of the world," when he said "we" as against the "cane sugar industry." The committee may accept this explanation for what it is worth in the light of his latest attempt to compete with his own beet sugar interests through the experiment at Adeline, La. If he was right about the cost to produce in 1898, how much more cheaply should his company be able to produce now under these improved conditions? Quite in corroboration and confirmation of these figures the Spreckels Beet Sugar Co. of California returned a cost of $2.70 per hundred pounds in the report to the trust (which owns a half interest) of its earnings for 1910. Several Utah companies have reported cost of production ranging from $2.78 to less than $3 per hundred, while Mr. Coombs of Colorado presented detailed figures before the Hardwick committee to prove an average cost of production among six factories of the Great Western Beet Sugar Co. of Colorado of $2.59 per hundred pounds. The Hardwick committee, in a unanimous report, placed the average maximum cost of all factories, good, bad, and indifferent, at $3.54 per hundred pounds, which now Mr. Truman G. Palmer, "the $10,000-a-year" "Washington correspondent" of the United States Beet Sugar Association, attempts to stretch into $3.75, and Mr. F. R. Hathaway, secretary of the Michigan, and Mr. Mendelsohn, of the Billings, into $3.82. At an average selling price of over 5 cents per pound, just contemplate the margin of profit and then reflect upon the need of tariff protection. This enormous margin between the cost and selling price permits of a capitalization of over $130,000,000, over 60 per cent of which is watered stock, where the actual investment is less than $53,000,000, based upon an average daily slicing capacity of 53,000 tons at $1,000 per ton, according to the authority of Henry T. Oxnard. This to produce 500,000 tons of beet sugar per year, while the American Sugar Refining Co. last year produced 1,376,466 tons of cane sugar and has a capitalization of $90,000,000, twenty-five million of which was issued in 1902 for investment in beet sugar companies. Last year the American Beet Sugar Co. earned $9,000,000 gross upon a total capitalization of $20,000,000, $5,000,000 of which is preferred and $15,000,000 common. After paying 6 per cent upon the preferred, they had over $2,000,000 (or more than 13 per cent) available for dividends upon common, as compared with 10 per cent the previous year. They charged off $750,000 to depreciation. (Note the preferred stock was originally only $5,000,000.) Since the hearings before the Hardwick committee, the price of this common stock has advanced from 48 to 74. The American Beet Sugar Co.'s statement shows that their gross earnings for the year ending March 31, 1912, were $9,005, 194.49. The object of calling attention to this is to show that a company capitalized at $20,000,000 which has gross earnings of only $9,000,000 and a production of about one and one-half million bags of sugar, clearly expected to make a very large profit per bag because the value of their sugar is enhanced by the tariff. The Federal Sugar Refining Co., a cane refinery, with a capitalization of $10,000,000, does a gross annual business of between twenty-four to thirty million dollars. The Michigan Sugar Co. paid a stock dividend in 1910 of 35 per cent in addition to regular dividends of 13 per cent upon both preferred and common and transferred $1,025,000 to surplus. The Great Western of Colorado had a surplus of $5,500,000 in 1910, after paying 7 per cent upon $15,000,000 preferred and 5 per cent upon $10,000,000 common. It has lately been testified by Chester Morey, president of the latter company, in the suit brought by the Government to dissolve the American Sugar Refining Co., that he and H. O. Havemeyer "cut melons" at the rate of $52.25 per share, on a par valuation, in some of the Colorado companies before they were consolidated with the Great Western, and that when these companies were eventually combined their capital was doubled. Their prosperity, fostered by the tariff at the expense of the American consumer, enables unscrupulous promoters to carry on such high-finance exploitations. Should the United States Senate be in favor of a tariff that will serve to continue this form of imposition upon and extortion from the American public? We believe not.
PARAGRAPHS 216-219-CANE SUGAR, ETC.
In conclusion, we can not agree with the observations in the report on page 4 that "the full significance of results from free sugar to our home production was not clearly understood by our people," but incline to the opinion that they did not understand the "full significance" of the provisions of the Dingley bill of 1897, have become educated since, know now that they were imposed upon then, and have voiced their protest in the most recent elections against the attempt to perpetuate the provisions of the Dingley bill in the Payne bill of 1909. The House responded to this protest, which the Senate seems slow to heed. What we do believe is that the majority of the Senate Finance Committee do not understand the people, who are becoming restless over this tendency to temporize and defer. What we further believe is that this same majority of the Senate Committee on Finance did not understand the true significance of these plausible recommendations and were themselves imposed upon. They represent an alliance between the "Puritan Trust" and "Mormon Beets" for their mutual benefits and protection. On the one hand, the Senior Senator from Massachusetts beats the monotonous tom-tom of protection to frighten away attack upon the American Sugar Refining Co.; on the other, the Senator from Utah enlists the "Mormon choir" to charm the heart of the American farmer and soothe the soul of the "American" laborer by chanting pastoral lays. This "close harmony" is for the entertainment and distraction of the public at large so the trust and domestic interests may continue to plunder. As an added attraction, they offer the boll weevil, whose one virtue seems to have been to have aroused the Louisiana planters from the luxurious lethargy of a century, into which they had been lulled by tariff indulgence, and stirred in them an energy and enterprise hitherto dormant. Must the poor consumer, forced to submit to such a spectacle and travesty upon justice, continue to pay the price? We insist the time has come to censor and suppress such pantomime and undertake serious performance. It is high time to compel certain intrenched sugar interests, through legislation, to serve the people rather than, by continuing the present tariff, to force the people to pay everlasting tribute to these interests.
We trust the honorable Senate will legislate to this end by passing the House bill in preference to any makeshift measure reported from their Finance Committee. FRANK C. LOWRY, Secretary.
Mr. LowRY. There has been some question raised by the domestic sugar industry as to a reduction in the tariff going to the consumer of articles wherein sugar was used in manufacture. Condensed milk was one of the points which they raised, and I made some inquiries. on that question. It did not seem to me possible if you reduced the manufacturer's first cost that competition would not take care of a reduction in the sale price of his finished product. So, as I started out to say, I made some inquiries of condensed-milk manufacturers, and the conclusion is-well, I will read this:
Mr. F. C. LoWRY,
PHILADELPHIA, November 27, 1912.
Secretary and Treasurer, No. 138 Front Street, New York City.
DEAR SIR: Replying to yours of November 26, we beg to advise that approximately 17 pounds of refined sugar enters into the manufacture of an average case of condensed milk. This, figured at 13 cents per pound, increases the cost of condensed milk per case by 27 cents. There are 48 cans to a case, and the cost to the manufacturer is therefore increased by more than one-half cent per can. This one-half cent could be saved to consumers were the sugar duty abolished.
Yours, very truly,
HIRES CONDENSED MILK Co.,
Mr. LowRY. This one-half cent per can could be saved to the consumer, in the case of the condensed milk.
I also made some inquiries of candy manufacturers, and found those who handled bulk candies were in favor of free sugar or a material, reduction in the present rate of duty, while those who