Senator GORE. The what?

Mr. CULBERTSON. The menhaden oil.

Senator CONNALLY. Fish oil.

Mr. CULBERTSON. Fish oil; the question of why that industry is in the condition it is today.

Senator GORE. What about the displacement of cottonseed oil in oleomargarine by coconut oil?

Mr. CULBERTSON. The American public apparently prefers nut margarine. I am not an expert on it, but apparently there has been an increased demand for the so-called "nut" or vegetable oil margarines.

If they can purchase coconut oil at all over the high tax, it will result in an increase of price of margarine to the American public, or it may shift the production to the animal-fat margarines, and that would, probably to a small extent, increase the demand for cottonseed oil, but the only way in which cottonseed oil can have a large increased market is for it to descend to the price level of the soap kettle, and at the present time, apparently, the difference of 4 cents a pound between the edible uses of animal oils and fats, and the inedible uses, makes the soap kettle an unattractive market to the cottonseed-oil growers.

Senator CONNALLY. If you will allow cottonseed oil to be driven out of the edible field of margarine by coconut oil, it will have to descend to the soap kettle, won't it?

Mr. CULBERTSON. It might be better for them to sell in the international market, where they do today, and where cottonseed oil is now sold on the basis of an edible oil.

Senator GORE. On an export basis?

Mr. CULBERTSON. Export basis is also on the basis of edible oils, and is the price which determines the price level in this country of lard and cottonseed oil; and another point, there, Senator, is that if you shut out from the American market coconut oil, it will go to Europe and there compete with out exports of lard and cottonseed oil.

Senator CONNALLY. It would not hurt the Philippines any, then, at all? I say, that would not hurt the Philippines, if they could still sell it in Europe, the same as they do here?

Mr. CULBERTSON. There are established lines of trade, Senator, which would be destroyed, and which have, of course, been presented to you in great detail today.

Senator GORE. Do you happen to know the amount of cottonseed oil that is exported annually?

Mr. CULBERTSON. No. That will be in my statement, Senator, the

exact amount.

Mr. Chairman, in conclusion, let me say that a tax is no solution of this question.

A tax on these few oils is certainly no solution of it. It is another case of fooling the farmer with the tariff.

Senator GORE. What would you recommend as a substitute? You falk about interchangeability.

Mr. CULBERTSON. You are dealing, Senator, in this problem with the same problem that you are dealing within all of our great agricultural problems-the problem of wheat, and the problem of sugar, and the problem of cotton.

Senator GORE. Yes, I know.

Mr. CULBERTSON. It is a question of a great surplus, and in this case it is complicated further by the fact of the great diversity of products, and by the fact that we are on an international basis, as it were, both ways.

Senator GORE. And yet we go on the theory that trade is a curse. Mr. CULBERTSON. Yes. So I would suggest that the committee strike this section 602 from the bill and turn to the experts of the Government, and survey this question as a whole, accepting the corroboration of both sides of this controversy, in presenting the facts, and then reach your conclusion; but analyze the problem first, and then solve that.

Senator CONNALLY. Mr. Culbertson, the Foreign Trade Council only concerns itself with large questions of international trade; it does not espouse any particular tariff item, or thing of that kind, does it?

Mr. CULBERTSON. Well, it has appeared

Senator CONNALLY. You are representing the Foreign Trade Council?

Mr. CULBERTSON. Yes; I represent them as general counsel in Washington, Senator.

Senator CONNALLY. Yes, I know; but, today, whom do you represent?

Mr. CULBERTSON. I am, of course, interested so far as their members are interested in this particular problem.

Senator CONNALLY. Well, now, as I understand, that council only deals with large questions, but evidently you are interested here in some particular industry, or some particular concern. That is what I am trying to find out, who that is.

Mr. CULBERTSON. Mr. Thomas, the president of the council, to take another case, appeared yesterday before the committee on the question of the foreign-tax credit.

Senator CONNALLY. I am not asking about that. I would like to know now whom you are representing here today. I mean this whole thing.

Mr. CULBERTSON. The members of the council that are particularly interested in this case are the ones who are crushers in the Philippines.

Senator CONNALLY. Well, exactly. That is what I wanted to get, whom you are representing.

Mr. CULBERTSON. They also have plants in the United States. Senator CONNALLY. Yes. You are here, though, representing American investments in the Philippines whose owners do not want to pay any tax on the products they bring in, and yet you say you are representing the National Foreign Trade Council, this highbrow organization that is only concerned with large questions of building up our foreign commerce and trade, but today you are interested particularly in this because you are representing these crushers in the Philippines; now, isn't that so?

Mr. CULBERTSON. I am representing them, Senator, but

Senator CONNALLY. Well, you did not say that when you started out. You told us you were representing the National Foreign Trade Council.

Mr. CULBERTSON. My authorization is from the National Foreign Trade Council, and its members are entitled to the support of that council.

Senator CONNALLY. Certainly, but we would like for you to say that, when you start out. But the National Foreign Trade Council is only the window-dressing for your appearance here, and your real appearance is for the Philippine crushers, isn't it?

Mr. CULBERTSON. Those Philippine crushers are, in my opinion, entitled as American citizens to protections.

Senator CONNALLY. Certainly they are, but I just wanted to know whom you are representing.

Mr. CULBERTSON. But they are also interested in plants in the United States.

Senator CONNALLY. Yes.

The CHAIRMAN. They are members of this organization, are they? Mr. CULBERTSON. They are members of this organization, and are entitled to the use of the organization, for the object which I came here to speak to you about.

(Later in the day, Mr. Culbertson requested that the following additional statement be placed on record:)

Let me make my position entirely clear in respect to my position before this committee. I am general counsel in Washington for the National Foreign Trade Council, who is opposing this tax as a matter of general policy. The membership of the council includes not only American citizens interested in the Philippines, but also others engaged in shipping, commerce, and general economic relations between the Philippines and the United States. Affiliated with the National Foreign Trade Council is the National Federation of Foreign Trade Associations, which is made up of local associations all over the United States. These local associations at Los Angeles and San Francisco and New Orleans requested specifically that the council take action against the tax, and the council did take such action.

The CHAIRMAN. Have you finished the matter here?
Mr. CULBERTSON. May I present this brief?

The CHAIRMAN. Thank you very much.

STATEMENT OF HON. WILLIAM S. CULBERTSON ON SECTION 602, TAX ON CERTAIN

OILS, H.R. 7835, MARCH 14, 1934

I appear in behalf of the National Foreign Trade Council. The council is national in scope and includes in its membership a large number of representative leaders in production, distribution, shipping, and finance men who are interested in a sound constructive development of our foreign as well as our domestic trade. As a matter of general policy, the council is opposed to excessive tariffs and other unnecessary obstructions to the movement of goods in international commerce. It believes that American citizens engaged in business in foreign countries and interested in commerce which passes to and fro across our national frontiers are as patriotic and useful citizens as those who confine their activities within the Territorial limits of the United States. It advocates as a part of the recovery policy a liberal attitude toward both imports and exports. It believes that both foreign and domestic trade must revive and expand if we are to achieve real national prosperity.

The council is opposed on broad grounds of policy to the tax on certain vegetable oils proposed in section 602 of H.R. 7835. The proposed tax is in the form of an excise tax. It is, however, in effect, a tariff duty. Neither copra, the raw material for coconut oil, nor sesame seed are produced in the United States. They are imported either in their original state or in the form of expressed oils. To impose, therefore, an excise tax of 5 cents a pound on coconut oil and sesame oil at the time of their first domestic processing is, in fact, whatever it may be in form, a tax on importation. The unit value per pound of coconut oil imported from the Philippines was 2.71 cents in 1933. The ad valorem equivalent, therefore, of the 5-cent tax is only a little under 200 percent.

These products, thus singled out for special taxation, are not, however, products which can be treated alone; they are closely related to the numerous other products in the general classification of animal and vegetable oils and fats, and, moreover, they are raw materials consumed by important industries whose tariff status was fixed on the basis that their raw materials were free of duty. If we are to consider adequately and equitably the issue raised by the proposed excise tax, we must review the entire tariff question of animal and vegetable oils and fats. Your honorable committee might therefore dispose of this proposed tax without going into its merits by merely holding unscientific an effort to legislate on a few products selected arbitrarily from a broad related group. Your alternative would seem to be the reopening of the tariff question on the entire range of animal and vegetable oils and fats and on the varied industries using them as raw materials. I am sure that this conclusion is obvious to the members of this committee accustomed to deal with tariff questions. It is supported by extensive studies, in particular by the Report of the Tariff Commission, No. 41, and by the volume written by Dr. Philip G. Wright and published by the Brookings Institute. Dr. Wright, who was with the Tariff Commission in my day as expert on this subject, refers to the animal and vegetable oils and fats in these words:

"The commodities concerned in the present discussion are important and the tariff problems complex. The bare enumeration of the oils and the industries dependent on them is sufficient to indicate the importance in our domestic economy of the articles treated in this study. They include, directly or indirectly, butter, lard, tallow, oleo and nut margarin, lard substitutes, salad oil, peanut butter, soap, paint, varnish, oil cloths, printers' ink, important lubricants and illuminants, and articles contributing more or less remotely to the prosperity of many important industries not included in the above. It has also been made apparent that the tariff problem is far from simple. Both of these considerations suggest the danger of injudicious tariff action and the need of careful, comprehensive study.

Furthermore, the comprehensive character of the problem before us is indicated by a survey of the statistics. At this point I shall incorporate for the convenience of the committee 3 statistical tables prepared by the Tariff Commission. They show the range of products within the group which we are considering, the quantities of production, the imports, and the rates of duty in the Tariff Act. Although these statistics in themselves reflect both variety and complexity, they even do not tell the entire story, since the products listed are the raw materials which enter into the production of a wide range of finished and semifinshed products. A little later I shall, therefore, refer to the subject of consumption.

The 3 tables to which I have referred are as follows:

Production of principal domestic oils and fats 1929 to 1933

[In thousands of pounds]