Mr. HOLMAN. No; I do not think so.

Mr. PACE. That is an ingredient, and why would that language not apply to a coloring matter just as much as to the oil? I believe your interpretation is right.

Mr. HOLMAN. You do not think it is?

Mr. PACE. I say I think I do.

Mr. HOLMAN. All right. A practical case is this.

Mr. PACE. We cannot put a tax on margarine that has any foreign oil in it. Neither can you put a tax on any margarine that has foreign coloring matter in it. Are not the two similar? There is a possibility there.

Mr. HOLMAN. I was wondering what would happen if an oleomargarine plant was located on the border and obtained its skimmedmilk ingredients from over in Canada.

Mr. PACE. That is right. In other words, there is some terrific possibility in that language that your distinguished fellow Texan, Mr. Clayton, has written in there.

Mr. HOLMAN. I am sure of that.

Mr. PACE. What percentage, Mr. Holman, as a rough estimate, of milk is used in the manufacture of butter?

Mr. HOLMAN. Well, the cream goes into the churn, and, of course, there is some skimmed milk in there, and there may be some water there.

Mr. PACE. Let us say the skimmed milk goes, too. What I want to know is what percentage of whole milk is set aside for butter and other byproducts?

Mr. HOLMAN. Well, I would hardly know how to answer that question. Maybe Mr. Herrmann here could answer that.

Mr. HERRMANN. I think the answer you want is the percentage of the national production of milk which is used for producing creamery butter.

Mr. PACE. That is right.

Mr. HERRMANN. At one time just prior to the last war, it was as high as 42 percent. More recently it is about 25. Our national milk production has increased and our butter production, due to wartime regulations, primarily, has decreased.

Mr. PACE. Well, it will be safe to say now about 20 percent?
Mr. HERRMANN. About 25.

Mr. PACE. Then, do you know, Mr. Holman, what percentage of soybean oil goes into the manufacture of margarine? We had those figures before the committee.

Mr. HOLMAN. Yes, sir. I think we have them here.

Mr. PACE. I think it was about 21 percent. Is that about right? Mr. HOLMAN. I was under the impression it was around 18. There are some of these tables it is difficult to find. I can get it in half a second. Table 24 contains the factory consumption of cottonseed and soybean oil by classes of products. That is not on a percentage basis, though.

Mr. PACE. I think the soybean people testified it was 21 percent. Mr. HOLMAN. On this table you will find in 1946 that oleomargarine consumed 200,681,000 and the total consumed for all purposes was 1,220,743,000.

Mr. PACE. Well, the exact figure is not so important for my purpose, Mr. Holman. Let us agree that it is around 20 percent of the soybean

Mr. PACE. I would not say so, Mr. Chairman. If it is a restriction, I think it is a very healthy one and one which I favor very heartily.

The CHAIRMAN. It certainly is a restriction and is inconsistent with the idea that the country should not be under any restrictions or restraints as to the manufacture of oleomargarine.

Mr. PACE. It would be the same type of restriction, Mr. Chairman, as the import duty on butter, would it not? Ifavor it very heartily. Do not understand that I criticize it.

The CHAIRMAN. Of course, there are a lot of different types of restrictions.

Mr. PACE. Yes, sir; which brings up the first question, Mr. Holman. I wanted to briefly get your views with regard to this question, and if it is a fair question and if you are not prepared to answer it, you may say so. Would you, individually support the ITO?

Mr. HOLMAN. No.

Mr. PACE. Neither would I.

Mr. HOLMAN. Neither does our organization support the ITO. We are opposed to it.

Mr. PACE Do you not rather feel that there is a good possibility that the Congress will never approve that document?

Mr. HOLMAN. Yes; that is true; but in my testimony I was not referring to the ITO.

Mr. PACE. I beg your pardon. I thought you were.

Mr. HOLMAN. I was referring to the general agreement on tariffs and trade executed in Geneva and participated in, I think, by something over 20 countries.

Mr. PACE. I know what you are talking about.

Mr. HOLMAN. In which a little ITO was set up, but not the big one we are talking about.

Mr. PACE. This went into effect January 1?

Mr. HOLMAN. And it is in this general agreement which is binding upon us without having to come to Congress for ratification or consideration, that the language appears which would knock out, as I judge it, any administration support of the proposed Corbett bill.

Mr. PACE. Now, is that section in your interpretation an excise tax or an import duty they referred to?

Mr. HOLMAN. I will read the language:

The products of the territory of any contracting party imported into the territory of any other contracting party shall be exempt from internal taxes and other internal charges of any kind in excess of those applied directly or indirectly to like products of national origin.

Exempt from internal taxes and other internal charges

Mr. PACE. Or the products thereof.

Mr. HOLMAN. Yes, sir

of any kind in excess of those applied directly or indirectly to like products of national origin.

This, as I interpret it, means that if we put a 10-cent tax upon oleomargarine containing any foreign ingredient, we must put a like 10cent tax upon oleomargarine or be in conflict with the trade agreement that has already been signed.

Mr. PACE. Let me ask you this question, then: Would not the margarine manufacturers be able to solve their problem by simply getting their coloring from some foreign country?

Mr. HOLMAN. No; I do not think so.

Mr. PACE. That is an ingredient, and why would that language not apply to a coloring matter just as much as to the oil? I believe your interpretation is right.

Mr. HOLMAN. You do not think it is?

Mr. PACE. I say I think I do.

Mr. HOLMAN. All right. A practical case is this.

Mr. PACE. We cannot put a tax on margarine that has any foreign oil in it. Neither can you put a tax on any margarine that has foreign coloring matter in it. Are not the two similar? There is a possibility there.

Mr. HOLMAN. I was wondering what would happen if an oleomargarine plant was located on the border and obtained its skimmedmilk ingredients from over in Canada.

Mr. PACE. That is right. In other words, there is some terrific possibility in that language that your distinguished fellow Texan, Mr. Clayton, has written in there.

Mr. HOLMAN. I am sure of that.

Mr. PACE. What percentage, Mr. Holman, as a rough estimate, of milk is used in the manufacture of butter?

Mr. HOLMAN. Well, the cream goes into the churn, and, of course, there is some skimmed milk in there, and there may be some water there.

Mr. PACE. Let us say the skimmed milk goes, too. What I want to know is what percentage of whole milk is set aside for butter and other byproducts?

Mr. HOLMAN. Well, I would hardly know how to answer that question. Maybe Mr. Herrmann here could answer that.

Mr. HERRMANN. I think the answer you want is the percentage of the national production of milk which is used for producing creamery butter.

Mr. PACE. That is right.

Mr. HERRMANN. At one time just prior to the last war, it was as high as 42 percent. More recently it is about 25. Our national milk production has increased and our butter production, due to wartime regulations, primarily, has decreased.

Mr. PACE. Well, it will be safe to say now about 20 percent?
Mr. HERRMANN. About 25.

Mr. PACE. Then, do you know, Mr. Holman, what percentage of soybean oil goes into the manufacture of margarine? We had those figures before the committee.

Mr. HOLMAN. Yes, sir. I think we have them here.

Mr. PACE. I think it was about 21 percent. Is that about right? Mr. HOLMAN. I was under the impression it was around 18. There are some of these tables it is difficult to find. I can get it in half a second. Table 24 contains the factory consumption of cottonseed and soybean oil by classes of products. That is not on a percentage basis, though.

Mr. PACE. I think the soybean people testified it was 21 percent. Mr. HOLMAN. On this table you will find in 1946 that oleomargarine consumed 200,681,000 and the total consumed for all purposes was 1,220,743,000.

Mr. PACE. Well, the exact figure is not so important for my purpose, Mr. Holman. Let us agree that it is around 20 percent of the soybean

oil that goes into the manufacture of margarine. Is that roughly all right?

Mr. HOLMAN. Well, we will agree with that tentatively.

Mr. PACE. I think the exact figure is 23, but let us say, 20, about 20 percent of cottonseed oil goes into the manufacture of oleomargarine. Is that satisfactory?

Mr. HOLMAN. It is pretty close, yes. It is the ratio of 222,000,000 to 1,120,000,000 of total.

Mr. PACE. No, sir, you have taken the wrong percent. I meant the percentage of all cottonseed oil that is used in the manufacture of margarine. You are using the percentage of cottonseed oil as a percentage of other items going into it.

Mr. HOLMAN. No, I am using the percentage of oil used in oleomargarine in relation to the total cottonseed oil produced.

Mr. PACE. All right. Let us say, then, for the purpose of my illustration, that 20 percent of the milk goes into butter, 20 percent of soybean oil goes into margarine, and 20 percent of cottonseed oil goes into margarine. Then we have three big commodities, milk, soybean oil and cottonseed oil, one of which, butter, is a byproduct. Mr. HOLMAN. Butter is a byproduct? All right, go ahead.

Mr. PACE. I think if butter takes only 14 or 20 percent of milk, that it is one of the byproducts with dried milk and cheese and numerous others with which you are more familiar than I am. Then we have soybeans, of which margarine is a byproduct, and cottonseed, of which margarine is a byproduct. Then, are not the products basically in somewhat the same percentage, milk in relation to its percentage to butter, and soybeans versus the percentage to margarine, and cottonseed versus the percentage to margarine? Should the three products not, so far as possible, be treated on the same basis? Mr. HOLMAN. In your production of seed cotton-and you and I know what seed cotton is you get your lint and you have to get your seed if you sell any cotton. The seed itself is in the status of being a byproduct of seed cotton. Then when you take your seed to the mill, you break it into four constituent parts. You take your hulls and you get your meal and you get your oil.

Mr. PACE. But you have comparable byproducts of milk. There is no difference there.

Mr. HOLMAN. When you are raising your products on a million and a half dairy farms, mostly in the Middle West, and I am speaking now of the corn-hog country-until just a year or two ago most of those farmers used home separators and separated their cream and sold it as a commodity all by itself. They fed the skimmed milk to the hogs. Then you have the other case where we have creameries that receive the whole milk and themselves do the separating and determine the uses of the fat. In the case of soybeans, you have two products out of it, the meal and the oil and you have the uses of the oil, hundreds of uses, primarily for shortening and oleomargarine and paints.

Now, the essential difference in the picture that you give me lies in the pricing of the products, the way in which the prices are made. Mr. Poage knows that the average cottonseed oil mill, when it sells, if it is an independent mill, sells through the blind broker system. does not know who is buying the oil and does not care until he gets the order from the broker to ship. That tank of crude might go to Armour

He

or Swift or Procter & Gamble or Lever Bros. and so on, but no matter what use is made of that oil, it all takes the same price, according to grade, whether it goes into soap or into shortening or into salad oil dressings or oleomargarine.

In the case of milk, both the so-called byproducts of milk, evaporated and the cheese and the butter, are all intimately geared to the prices which butter brings. It is customary to say that the price of 92 score butter at Chicago is approximately equal to twice the price of Wisconsin Twins at Plymouth, Wis. That is cheese. It is customary to say roughly that the price ot the farmer of evaporated milk is the price of butter plus approximately 30 percent. Also in the sale of fluid milk in the markets, for many years the fluid milk has been sold on a usage basis. The price of the milk in the bottles is the highest priced milk. The next highest is the price of fluid cream. Then you get down to the price of milk based on some markets like fancy cheeses and things of that kind and you have an ice cream price. Then you have finally a residual price, which is the butter price and you must have the butter price because it is the easiest and most convenient, the most economical method by which excess milk in a fluid market can be disposed of.

Once the milk gets into the market and it cannot be handled by the fluid-milk dealers, what I call the residual product has to be separated and you probably make your skimmed milk into cottage cheese, but you have a concentrated product which you can handle and store and even ship out of the district to be made into butter. So you have this whole interlocking pricing system on a usage basis.

What happens to one affects the prices of the others, so I do not see any parallel between the soybean- and cottonseed-oil industries and the dairy industry with respect to the pricing problem and I think that is a very important factor to be considered.

Mr. PACE. I think you made a splendid explanation, but at the same time the point I was bringing out was that you take a commodity in which soybean oil and cottonseed oil are used and you burden it. On the other hand, with butter, you do not only not burden it, but you lighten it by 7 cents a pound import duty against competition.

Mr. HOLMAN. If I may say so, we are on a permanent fat-deficit basis in this country, at least as long as any of us in this room lives. There has been no

Mr. PACE. May I stop you right there? You covered that in your statement. I do not know whether I can go along there because there has been an enormous increase in soybean acreage, from three to between ten and eleven million acres.

Mr. HOLMAN. It is an artificial industry built by artificial prices and subsidies and it cannot last.

Mr. PACE. If we go into free trade, all oils will become worthless. Mr. HOLMAN. And the soybean producer will gradually return to other things. In the case of cottonseed, you cannot do that but we have not produced enough cottonseed for our edible uses in just two of the commodities, salad-oil dressings and shortenings, and as the cottonseed oil has gone in increasing quantities into oleomargarine, the amount of cottonseed oil used in the shortening industry has had to decline and its place be taken by the other fats.