prerogative of the Department of Agriculture within its administrative authority? Could they do it if they were sold on it, or would we have to have basic laws changed? In other words, they say to me, "How do we go about trying to do it?" What should I tell them? If they want to make some inquiry as to about how to try to do it, should it be through the Department of Agriculture, or through this committee, to get a basic law changed?

Mr. WILLIAMS. Well, it is not a basic law. It is a basic policy of the Commodity Credit Corporation. They could set them up and organize, and before they could function they would have to have a contract with the Commodity Credit Corporation.

Mr. MATTHEWS. I am sorry to prolong this, but are there not certain States that contribute a lot more, you might say, to the exporting of flue-cured tobacco than others?

In North Carolina do they not accept some kind of a fee to push export trade?

Somebody told me one time that the North Carolina growers put into some fund a certain amount of their income to promote the export trade.

Mr. MCMILLAN. South Carolina farmers pay 10 cents per acre. Mr. WILLIAMS. Yes; South Carolina does, too.

Mr. MATTHEWS. Can my growers do that, to?

Mr. WILLIAMS. In Florida I do not think you have got it in the law yet, but I think you take up a collection down there. That is TobaccoAssociates. The farmers go out by two-thirds vote or above that and vote on themselves a tax of 10 cents an acre and set up Tobacco Associates. And the purpose of that organization is to sell tobacco in export trade.

We happen to have Mr. J. C. Frink, the vice president of that organization, with us today.

It is doing an excellent job on exports with tobacco. The burley side for their association, they have a full-time man that stays in Europe, and they have an aggressive export program on burley tobacco.

So the farmers help themselves.

Mr. ABBITT. Now I understand we are to hear Mr. Owen.

STATEMENT OF ROBERT A. OWEN, DIRECTOR, TOBACCO DIVISION, FOREIGN AGRICULTURAL SERVICE

Mr. OWEN. My name is Robert A. Owen. I am the Director of the Tobacco Division of the Foreign Agricultural Service. Yesterday, the committee requested information as to how much tobacco moved abroad under Public Law 480.

This

Since the beginning of Public Law 480 until March 15, 1957, there have been 30 agreements for tobacco with 18 countries. was for a total of $102.6 million and was for the amount of approximately 145 million pounds.

Now, in addition to the tobacco which moved under Public Law 480, with foreign currency, a substantial portion of the dollar sales increase has been due to Public Law 480, as a result of the normal dollar purchase requirement.

I have for the record a detailed breakdown of the countries, but I won't read it unless specifically requested.

Agreements signed under title I of Public Law 480 providing for the sale of United States tobacco, as of Mar. 15, 1957

Mr. MCMILLAN. What was the total export last year?

Do you have that?

Mr. OWEN. I do not have the 1956 figures with me, but I know it is 5%1⁄2 percent below 1955.

Mr. MCMILLAN. We could have those placed in the record. (The information referred to is as follows:)

In 1956, 510.3 million pounds of leaf tobacco were exported-flue-cured, 420.4 million; burley, 29.2 million; Kentucky-Tennessee fire-cured, 24.2 million; Maryland, 12.1 million; Virginia fire-cured, 4.4 million; and all others, 20 million. These figures are shown on an export weight basis.

Mr. OWEN. I believe it would be helpful to the committee if I made a brief statement about the world market for tobacco.

The world market for leaf tobacco is not, as so many people seem to believe, an unfillable abyss. The total market is well-known, is quite measurable, and compared to the market existing for many other farm commodities is not large. It is, however, a relatively stable market. The high duties on leaf tobacco and/or the high internal taxes on tobacco products are, in the main, responsible for the limited market in foreign countries, since resulting consumer prices in relation to income are very high.

In 1955, there were 8.4 billion pounds of leaf tobacco grown in the world. Approximately 1.6 billion pounds (farm sales weight) or onefifth of this tobacco was exported to other countries. The United States supplied about 610 million pounds (farm sales weight), or about 40 percent of the total exports.

Of that portion which other countries exported, nearly one-half moved under Government trading agreements. Much of the remainder was exported under the compulsion of reciprocal trade.

I want to emphasize that the United States could not move approximately 60 percent of the free-traded leaf tobacco unless it was sold at world competitive prices. The United States' price actually establishes the world market price. The United States provides such a large percent of the market that it also furnishes an umbrella of price support-up to a point-over the production of substitutable leaf of the entire world.

My personal opinion is that approximately 40 percent of the total world market is the maximum that the United States can hope for. Much of remaining free-traded leaf is either different in characteristics from the United States types or is substantially lower in price.

Mr. MCMILLAN. I was just wondering if we have less foreign market for the sale of tobacco than before the war.

Mr. OWEN. We have less in pounds for some types but substantially more in dollars.

The 1935-38 average was $128 million.

In 1955, it amounted to $356 million.

Mr. MCMILLAN. That is pounds or dollars?

Mr. OWEN. That is dollars. I do not have the poundage figures with me. I could furnish that for the record.

(The information referred to is as follows:)

United States: Exports of unmanufactured tobacco, average 1935-39; annual 1955 and 1956

Mr. McINTIRE. Does that mean that the world price has moved up that much?

Mr. Owen. Not that much; no, sir. The world price has gone up substantially but some of this increase is attributable to sales of higher quality tobacco. This matter of world price is a very difficult thing to discuss, and I would like to make a complete statement on that subject.

Approximately one-half of our export market is with a group of countries which desire our leaf tobacco, but are limited in the price which they can pay for leaf. I firmly believe that all of those countries would be happy to have our "pale and slick" leaf but they definitely do not want it at the expense of the flavorful varieties. Nor, in many cases, do these countries want to spend dollar exchange for pale and slick varieties when similar less flavorful varieties can be purchased for soft currency in such countries as Rhodesia and India. Our pale and slick tobaccos are very similar to Rhodesian leaf. They are, of course, much superior to Indian leaf.

Any move to export a substantial volume of these pale and slick varieties would, of course, increase the leaf stocks available abroad. You, gentlemen, are well aware that excessive stocks have a depressing effect on the market when they are in our warehouses. Such stocks have an even more depressive effect when they are in our customers' warehouses.

Since I have made reference to world market price, I think I should clarify the meaning of the phrase.

There is no measurable world price for tobacco, as there exists for such commodities as cotton and wheat. The United States, up to last fall at least, has competed fairly effectively from the standpoint of

price in world markets, particularly for the better grades of flue cured and burley. But prices for the lower and heavier grades of these tobaccos in the United States are now so high that they face exclusion from a number of important export markets. As for dark tobaccos, the United States is unable to compete on a price basis with many similar tobaccos produced abroad.

Now, if there were any questions on the world market price, I would be very happy to answer them.

Mr. MCMILLAN. What has the United States Congress done to encourage our export market?

Mr. OWEN. Several years ago the Congress increased the size of the Foreign Agricultural Service. The Congress also returned the agricultural attachés to the Department of Agriculture.

The Foreign Agricultural Service has a Tobacco Division which attempts to increase the sales of our tobacco.

Congress also passed Public Law 480, which allows the Department of Agriculture to make agreements with foreign countries to sell tobacco above the normal exported amount for foreign currency. Congressional committees have taken great interest in Foreign Agricultural Service operations and export success.

Mr. MCMILLAN. Do you think our good neighbor policy has held back our foreign trade?

Mr. OWEN. For tobacco?

Mr. MCMILLAN. Yes.

Mr. OWEN. I believe that this policy has not affected our tobacco sales at all. I think our tobacco has pretty well moved over the world according to quality. Of course, some of our good customers do buy tobacco from other countries at a favorable price differential.

Mr. MCMILLAN. Have we recaptured our trade with Germany? I believe before the war that was one of our largest markets.

Mr. OWEN. Before the war we did not have much trade with Germany. But right after the war, since Germany had no leaf tobacco, we did move a considerable amount of leaf tobacco to Germany.

For the last 2 or 3 years, we have been dropping percentagewise in our sales to Germany, but we have held our volume. That is because the consumption of tobacco in Germany has gone up considerably.

In the last 5 or 6 months, the Germans have been using an increased percentage of United States tobacco in cigarettes. That is mainly due to the increased sales of filter-tip cigarettes in Germany.

Mr. MCMILLAN. I believe you stated that there was no established world price for tobacco. Now, you would have a certain grade, would you not? World price for certain grades?

Mr. OWEN. I think when you would make the statement "world price," you must have an open market.

All tobacco is sold pretty much by negotiation. There is no world standard by which you can describe tobacco in words for purpose of sale, because tobacco is so varied in its growth that no two tobaccos are exactly alike.

Mr. MCMILLAN. This pale leaf tobacco that we are talking about that is in surplus-the reason we have that tobacco is because one of the tobacco companies in this country paid for the development of that type of tobacco; is that not right? I understand they paid a majority of the cost.

Mr. OWEN. I cannot answer that statement, Mr. Congressman, but I do know that the demand for tobacco in the past was for a milder variety. And most thought that was what the consumers wanted.

Mr. MCMILLAN. It is good tobacco I understand.

Mr. OWEN. It is good tobacco. But, of course, the consumer demand had changed. The consumers want tobaccos which will make the filter tip seem right to them in the matter of taste. And

I think the manufacturing companies are going to have to indulge the consumers.

Mr. MCMILLAN. They do not want to use the word "nicotine" any more, do they?

Mr. OWEN. Well, I do not know the reason, Mr. Congressman. Mr. MCMILLAN. That is all I had.

Mr. McINTIRE. Under Public Law 480 there is a provision that some part of the funds can be set aside for market development within those countries. That provision is being used by FAS in many of these countries.

Mr. OWEN. That is true, sir. We are using this provision where the foreign governments will allow us to do it. In the case of our biggest market, we have not had much encouragement for having market-development programs. And in some countries, where we might like to have such programs, we do not have foreign currency because we do not have an agreement.

Mr. McINTIRE. Do I understand correctly, Mr. Owen, that some of the problem of moving this tobacco relates not just to the product, but to some extent, to the internal affairs of the countries in which you would like to move a larger quantity. Their excise taxes and all those things that are their decision with respect to the commodity are also considered.

Mr. OWEN. That is correct. Price is not the only factor involved. I think in many countries the availability of dollar exchange is the most important factor. And Public Law 480 is only helpful in that case where dollar exchange is a problem. Public Law 480 does not solve a price problem; not in any way. I think there is much misunderstanding on that.

Mr. MCINTIRE. And it does not, except by negotiation, get into some of the restrictions laid down by that country against even importation into that country.

Mr. OWEN. That is quite true. There are many countries that have restrictions on tobacco coming into their country, and there are also many countries which have monopolies, which just do not desire to buy it, even though there is no legal restriction on the tobacco coming in.

Mr. McINTIRE. Most of those countries handle their imports through the government, through a government vehicle.

Mr. OWEN. I would not say they always handle it through a government vehicle, but there is usually a government agency that controls it in one way or another, by issuing import licenses or by issuing a license for foreign exchange. In one way or another they are able to control, in most of these countries. And many of these restrictions are not made public.

Mr. WATTS. I do not have any questions, but I would like to call the committee's attention that Mr. Owen is a constituent of mine, in