are a number of benefits. I do not want to get some back door reserve program that would permit foreign buyers to dump grain back on the market and depress domestic prices. I am not certain we could prohibit that, but we might be able to take care of it in some way.

Mr. BELL. We share that view with you, Senator.

Senator BELLMON. I do not believe, Mr. Chairman, that the foreign buyers are all that stupid. If the price goes down they are going to hold it. They are not going to dump it at a loss over here. Senator DOLE. I was thinking if the price went up. It has gone down, as you know. Maybe it has not gone down in Oklahoma, but it has in Kansas.

Senator BELLMON. We have a higher quality wheat. [Laughter.] Senator DOLE. I have no further questions unless you or Mr. Harris or Mr. Shanklin have something to add.

Mr. BELL. No, sir. Thank you very much.
[The prepared statement of Mr. Bell follows:]

STATEMENT OF RICHARD E. BELL, DEPUTY ASSISTANT SECRETARY OF AGRICULTURE
FOR INTERNATIONAL AFFAIRS AND COMMODITY PROGRAMS, U.S. DEPARTMENT
OF AGRICULTURE

I appreciate this opportunity to testify for the Department of Agriculture regarding S. 1354. The intent of S. 1354 is to assure foreign countries that reserve stocks of agricultural commodities and products, which they have purchased and stored in the United States under certain conditions, shall not be subject to export controls. The principal condition laid down in the bill is that the commodities or products must be stored for a period of 12 months or longer. Other conditions would be developed by the Secretary of Commerce in cooperation with the Secretary of Agriculture.

This bill gets at a problem which we have been concerned for several months. This is the question of who should hold and pay the costs for carrying stocks of grains and other foodstuffs needed to provide the world with some degree of food security.

The burden of carrying world food reserves has traditionally fallen to the United States-particularly upon the American farmer and the U.S. Treasury. In the early 1960's the United States accounted for two-thirds of all carryover stocks and nearly all reserve stocks of grains held in the world. Basically, this was a by-product of a farm policy which encouraged more crop production than could be absorbed by domestic and export markets.

Changes in U.S. farm policy in the mid-1960's led to some reduction in this burden. But in the late 1960's and early 1970's, the United States was still accounting for about 40 percent of all world carryover stocks and 80 percent of reserve grain stocks. Canada, and Australia to a lesser extent, carried larger grain stocks in the late 1960's. Again, this was a by-product of Canadian and Australian farm policies rather than a concerted effort to carry larger stocks of grains.

As we all know, carryover stocks of grain have been sharply reduced since the summer of 1972 for a number of reasons, the principal ones being the shortfall in Soviet grain production in 1972, the shortfall in world rice production in 1972 and 1973, and the disappointing feed grain crops in the United States in 1974.

It is our expectation, however, that there will be a rebuilding of grain stocks in the 1975/76 marketing year-both here and abroad. We believe stocks do need to be rebuilt above their present levels, but we do not favor a level that is too highas was the case during most of the 1960's and the first few years of the 1970's. Nor do we believe these stocks should be overly concentrated here in the United States at the expense of the American farmer and the U.S. Treasury. Therefore, we have been encouraging other countries to hold more stocks for their own needs. Not all countries, however, have facilities available for holding more stocks. Some lack the physical space or are hindered by climate in the building of such facilities. Therefore, we have been looking for a way by which foreign countries might be able to store part of their grain reserves here in the United States.

In our discussions with other countries, they have frequently raised the subject of export controls and the question of how they could be assured of access to re

54-496-75- 4

serve stocks stored in the United States should the U.S. Government impose export controls. They remind us of the summer of 1973 when export controls were imposed briefly on soybeans, soybean meal and related products. Although it is our policy to avoid imposition of export controls on agricultural commodities and products, some of our customers continue to feel a lack of security due to the action on soybeans in 1973.

The development of a program such as one envisaged by S. 1354 raises a number of complex issues. We in the Agriculture Department have not fully decided on all of them. Some will require further study. We will be pleased, however, to share our thoughts on these issues with you at this time.

Senator DOLE. Our next witness is Donald E. Johnson, Deputy Assistant Secretary of Commerce for Domestic and International Business. Don, welcome to the Agriculture Committee. If you have anyone with you, would you identify them for the record.

I have read your statement and am aware of some of the reservations you have. I share the view that we should have further hearings, that hopefully we can come up with something that would meet some of the objections, raised by your Department.

STATEMENT OF DONALD E. JOHNSON, DEPUTY ASSISTANT SECRETARY OF COMMERCE FOR DOMESTIC AND INTERNATIONAL BUSINESS, U.S. DEPARTMENT OF COMMERCE

Mr. JOHNSON. Thank you, Senator, and we would appreciate, of course, the statement being put into the record.

I would like to identify my associates. At the far end is Robert Milligan who is the Director of the Office of Policy Development in the Office of the Secretary. Next is Rauer Meyer, Director of Office of Export Administration. And finally Richard Hull who is the Assistant General Counsel for Domestic and International Business.

The Department of Commerce supports the objectives of S. 1354 particularly as it applies to the concern that has been expressed about the United States reliability as a major supplier, and we believe that this bill and its intent move toward that end.

We did raise certain issues in our submitted testimony so that this committee could properly consider some of the problems that we might envision in order that a record could be written during your hearings, this as well as subsequent hearings, which would provide background for the drafting of proper implementing regulations to carry out the intent of the Congress.

With that very short summary of what we have in our testimony, my associates and I would be glad to answer any questions you have, sir.

Senator DOLE. One reason that promoted my interest in this legislation was the 1973 soybean export control fiasco. I hope we learned a number of lessons from that effort. We should have learned how self-defeating such limitations really are. We should have learned how the Japanese consumers felt when they saw the source of $5 percent of their soy protein suddenly cut off without even prior discussion. We have learned also that some of our potential customers and some of our known purchasers have at least expressed some lack of confidence, after we spent millions of dollars for market development, based on the 1973 fiasco. Even more importantly, we are now beginning to learn how serious the market losses are as a result of that soybean export limitation.

The Japanese reacted to that embargo properly. They see a supplier in which they cannot have confidence of delivery. They have since invested heavily in the Brazilian soybean industry, and we have seen Brazil from 1969 to 1976 increase their production of soybeans from 2.2 million acres up to 15 million acres, from 39 bushels up to 395 bushels. They could take over the soybean market if that rate of growth continues. I happen to believe that much of it is due to the unwise policy imposed by the administration in 1973.

Then, as if that were not enough, someone convinced President Ford last year, to make a very timely announcement about 4 weeks before the election, that we should have a prior approval system on sales of wheat exports. That now has been changed and he has promised publicly that we will not do that again, which leads me to your statement where you indicate that we should not say flatly that we are never going to impose export controls. Maybe that is a valid point but, on the other hand, if you look at it from the purchaser's standpoint and the producer's standpoint, such controls really have had a great impact on our market.

Î assume you are talking about some emergency situation where we had a short supply and in our own interest it would become necessary to slap on some expert control of some kind.

Mr. JOHNSON. Well, Senator, of course, that is our thought. There is some concern for that one in a thousand emergency situation. Our testimony would indicate that much of this problem could be resolved, as well as restoring confidence in our reliability as a supplier, with some type of legislation, at least, as is envisaged in the bill which you have submitted.

Senator DOLE. You do provide that even in that event the Secretary of Commerce and Secretary of Agriculture could waive that requirement.

Mr. JOHNSON. As the witnesses from Agriculture indicated, we have not fully studied each and every feature and just raised the issue so that it can be publicly and properly debated.

Senator DOLE. I assume your comments would apply also to S. 1788 introduced by Senator Bentsen. Have you had an opportunity to look at S. 1788?

Mr. JOHNSON. Yes, sir. Very briefly.

Senator DOLE. Would your general comments apply both to S. 1354 and S. 1788?

Mr. JOHNSON. Generally. However, in S. 1788 there may not be enough recognition for the existing law, that is, the Export Administration Act, and the role that Commerce must apply under that statute in the matter of exports and export licensing.

Again there has not been any formal discussion within our Department concerning Senator Bentsen's bill.

Senator DOLE. Does the Department of Commerce have any different responses to the series of questions addressed to Deputy Secretary Bell? We are in the developmental stage of this legislation. It may or may not fly. But many of us believe that it deserves serious considerations.

Mr. JOHNSON. I did listen very carefully to Secretary Bell's responses and I in general would agree with him, and certainly we have been in discussion with the Department of Agriculture and I think we generally see eye to eye.

I would like to turn to Mr. Milligan to see if he would have anything to add to that last question of yours, Senator.

STATEMENT OF ROBERT S. MILLIGAN, DIRECTOR, OFFICE OF POLICY DEVELOPMENT, U.S. DEPARTMENT OF COMMERCE

Mr. MILLIGAN. I would just reiterate what Deputy Assistant Secretary Bell said with regard to the important role that agricultural exports have played in our total balance-of-payments situation. As you are well aware Senator Dole, wheat exports particularly from the State of Kansas, play such a vital role in our U.S. agricultural export markets.

I also think that legislation such as you have proposed would provide us with a potential tool for fuller utilization of the excess storage capacity that we have in this country by making it available to other nations. Because of financial, space, climatic or other reasons, a number of countries are not able to build or maintain the type of storage facilities that we have in the United States. Therefore, we can make that resource already in place in the United States available to them and thereby make good use of it. I think your bill, as well as that of Senator Bentsen, does provide us with that opportunity. Also, I think that these bills are very supportive of the objectives of the World Food Conference, particularly as regards the establishment of an international system of nationally held reserves that will help grain importing countries to better meet some of their needs and obligations, particularly those countries that are chronically food deficient.

Senator DOLE. I take it from the statement, Mr. Johnson, that you agree with the concept, that you believe and agree that it needs a great deal more work, research, coordination with USDA, questions raised and answered, that you are not at all opposed to the concept of the idea.

Mr. JOHNSON. No. I would like to reiterate that the Department of Commerce does indeed support the objectives embodied in the bill and that the purpose of our raising certain issues was to place them on the record.

I would further say, sir, that our Department would be more than pleased to work in cooperation with USDA and with your committee staff to develop this concept.

Senator DOLE. Senator Bellmon, do you have any questions? Senator BELLMON. Yes, Mr. Chairman.

Mr. Johnson, do you present this statement as the official administration position?

Mr. JOHNSON. Yes, sir, I do. If fact, I had a meeting with Secretary Morton early this morning to go over this final position and draft. Senator BELLMON. In your statement I note about 12 places where you talk about export controls. Is it the position of the administration that export controls are still a viable possibility?

Mr. JOHNSON. Well, certainly export controls might become necessary for certain commodities. We do raise the issue in our statement of whether this bill contemplates raw agricultural products only or does it include all manufactured or otherwise processed agricultural products, and we would need to know the answer to this before we could give you a definitive response to your question.

Senator BELLMON. What commodities are you thinking about when you talk about controls?

Mr. JOHNSON. Certainly some of the processed crops might have to be controlled although I have not developed that position, and would not attempt to predict future events.

Mr. Milligan?

Mr. MILLIGAN. I do not think we had any particular scenario in mind. We simply intended to be forthcoming in pointing out that a certain situation may still develop that would necessitate some form or degree of export controls. It is the position, the official position obviously of the administration, stated by the President, that we will avoid resorting to export controls to the maximum possible

extent.

Senator BELLMON. Until the heat builds up.

Mr. MILLIGAN. No; I do not believe so. I believe the President went much further than that, Senator Bellmon.

Senator BELLMON. Much further than what?

Mr. MILLIGAN. Much further than until the heat builds up. Senator BELLMON. Why did he put that control on wheat last fall?

Mr. MILLIGAN. I believe that the President felt that the situation warranted an additional monitoring feature, that an export review by the Secretary of Agriculture provided.

Senator BELLMON. What was the situation that warranted those controls?

Mr. MILLIGAN. The appearance of a very tight market supply situation.

Senator BELLMON. There was not any wheat being harvested. Those controls went on about the middle of October as I remember.

Senator DOLE. October 4.

Senator BELLMON. And the harvest is over in this country. There has been no wheat cut since then and yet the controls have been lifted. What was it that caused him to put them on and take them off again?

Mr. MILLIGAN. I believe the circumstances that allowed the President to modify his position was the Secretary of Agriculture's recommendation that they were no longer warranted.

Senator DOLE. What really happened, there was a lot of political heat from the other side.

Senator BELLMON. Sure there was. I am trying to get these fellows to be honest.

Senator DOLE. I do not think they had anything to do with it. Senator BELLMON. They say this is official administration policy. Senator DOLE. I do not think the President ever understood the thing and I never understood why he did it anyway.

Senator BELLMON. I was trying to get to that. I thought maybe they could enlighten us but I am afraid they do not know either. Mr. MILLIGAN. I am just saying, Senator, that we are not in favor of export controls.

Senator BELLMON. Not today, but what about tomorrow and the day after tomorrow?

Mr. MILLIGAN. I think we cannot rule them out absolutely at any time in the future unless you can absolutely rule out all short