The Honorable CLIFFORD R. HOPE, House of Representatives. DEPARTMENT OF STATE, MY DEAR MR. HOPE: The congressional bill H. R. 5292 relating to the tax on oleomargarine which you submitted for comment in your letter of February 25, 1948, to the Department has been reviewed. It is noted that the bill introduced into the House of Representatives has the effect of reducing the tax on oleomargarine when manufactured from fats or oils of which at least 99 percent are derived from domestic production. The tax would not be changed for oleomargarine containing more than 1 percent of fats and oils produced outside the United States, its Territories or possessions. Such a change in existing law whereby different treatment would be accorded articles manufactured from imported materials compared with domestic materials would be inconsistent with United States commercial policy with respect to national treatment as to internal taxation. This country has long taken the lead in the movement to reduce or eliminate trade barriers which restrict the expansion of international trade, and has found this particular national-treatment policy useful in protecting concessions obtained abroad for American exports. A number of documents have given expression to this basic policy. Treaties of friendship, commerce, and navigation which we have signed with numerous countries contain provisions according national treatment with regard to the internal taxation of merchandise of one country within the territories of the other. The same rule has been included in many trade agreements and other commercial agreements. Although the wording varies somewhat between the different treaties, the provision in the treaty with Honduras is a representative example. In this treaty it has been agreed that "The nationals and merchandise of each high contracting party within the territories of the other shall receive the same treatment as nationals and merchandise of the country with regard to internal taxes, transit duties, charges in respect of warehousing and other facilities, and the amount of draw-backs and bounties." The same policy is contained in the general agreement on tariffs and trade concluded at Geneva on October 30, 1947, which was provisionally put into effect on January 1, 1948. Article III of this agreement makes specific reference to charges which indirectly discriminate against foreign products as compared with domestic ones. This article provides that "The products of the territory of any 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." A similar provision is contained in article 18 of the Geneva draft of the Charter for the International Trade Organization now in the final stages of negotiation at Habana by some 60 nations which will be submitted for legislative approval in the United States. Moreover, the bill would conflict with a comparable provision in the agreement signed by the United States and the Philippine Islands on July 4, 1946 pursuant to the Philippine Trade Act of 1946 (Public Law 371, 79th Cong.). The bill now under consideration will increase the protection given domestic fats and oils and hence have the effect of a further restriction on imports of foreign fats and oils. The Department feels that it is more important than ever at this time that barriers to international trade be not increased. Many countries have still in effect controls over imports. Some of these are remnants of wartime activity, but others are of longer duration. Such restrictions have served to hamper seriously the exports of this country, and this Government has been concentrating its efforts to reduce them. If such efforts are to be successful, we should not adopt similar measures against products exported to us. The Department would like to call your attention to the fact that under this bill products of the trust territory of the Pacific islands and other trust territories which may also be placed under United States administration would apparently be treated as products of a foreign country. The difference in treatment for oleomargarine derived from products of the trust territory compared with oleomargarine from domestic products under the proposed bill would hamper the flow of fats and oils from the trust territory to the United States and might well have serious effects on the economy of the area for which this country has assumed responsibility. The Department is also concerned with section 2306 of the Internal Revenue Code, which is not modified in the bill. This section provides for an internalrevenue tax of 15 cents per pound on imported oleomargarine in contrast with the present taxes of 10 cents and one-quarter cent applicable to domestically produced oleomargarine. This is also restrictive legislation directed against an imported product and is contrary to our commercial policy and the commercial treaty provisions referred to above, although it is excepted from some of the other agreements. Because of the urgency of the matter, this letter has not been cleared with the Bureau of the Budget, to which a copy is being sent. Sincerely yours, CHARLES E. BOHLEN, Counselor STATEMENT OF CONGRESSMAN OLIN E. TEAGUE, SIXTH TEXAS DISTRICT, BEFORE THE HOUSE COMMITTEE ON AGRICULTURE REGARDING THE PRESENT TAX ON MARGARINE Mr. Chairman, I wish to join in with the many others who have testified before this committee regarding the necessity of removing the discriminatory Federal tax upon oleomargarine. I do not see the justification in maintaining such a tax on colored margarine which has been proved to be a wholesome and nutritious spread and is now widely accepted. Cottonseed oil, peanut Both margarine and butter are products of the farm. oil, and soybean oil are among the ingredients of margarine. The sale of these various vegetable oils by farmers constitutes an important part of the income of many of our farmers. I do not think it proper to tax the vegetable-oil products of this group for the benefit of another which is untaxed. The cost of the tax is passed on to the consumer, which is an additional burden during this high cost of living. Mr. Chairman, I respectfully urge that the committee report this pending legislation to the House of Representatives in order that its Members may vote to remove this discriminatory tax on margarine. Hon. CLIFFORD R. HOPE, HOUSE OF REPRESENTATIVES, Chairman, House Committee on Agriculture, House Office Building, Washington, D. C. 25. MY DEAR MR. CHAIRMAN: I am in receipt of a communication from Miss Alice W. Hunt, president of the Consumers' League of Rhode Island and chairman of the Mayor's Food Committee of the city of Providence, R. I., requesting that I inform your committee that the Mayor's food committee has gone on record favoring Federal legislation to eliminate restrictions on the coloring and sale of margarine. I would request that the Mayor's Food Committee of the city of Providence be listed in the records of the hearings on this subject as approving the legislation above referred to. Sincerely yours, AIME J. FORAND. [Telegram] SABETHA, KANS., March 10, 1948. CHARLES W. HOLMAN, Secretary, National Cooperative Milk Producers Federation: Butter and oleomargarine are basically unlike. Butter is a natural product; oleomargarine synthetic product. Butter is a natural color where oleomargarine is white. Don't let the housewife be misled. Take the tax off if that is what they want, but let's keep both products their natural color so that our housewives will not be misled. Supported by 7,000 dairy farmers of northeast Kansas. NEMAHA COOPERATIVE CREAMERY ASSOCIATION. STATEMENT OF R. C. BEEZLEY, GIRARD, KANS. Mr. Chairman and members of the committee, I appreciate very much the opportunity afforded me to appear before you and present to you my views with respect to the bills before you pertaining to the taxes on oleo. I am R. C. Beezley, a dairy farmer from Kansas. I have been engaged in farming all my life, in fact, I still live on the farm and in the same house in which I was born. I am here as chairman of the dairy committee of the Kansas State Board of Agriculture. Our board is truly representative of Kansas agriculture, being composed of two members from each congressional district who are bona fide farmers chosen to the annual convention by the delegates from regularly organized farm bureaus, granges, farmers' unions, county fair associations, Statewide breed associations, and Master Farmer organizations. The board is absolutely nonpolitical in nature. At their annual convention in January of this year, they adopted the following resolution: "BUTTER SUBSTITUTES "Scientific research shows that butter contains essential nutritional properties superior to those of substitute products which are sometimes colored to resemble genuine butter. Because of this, we feel that the consuming public is fully entitled to protection from imitations which tend to undermine the natural market for butter and thus threaten the stability of this nation's essential dairy industry. We urge, therefore, that our lawmakers stand firmly against any attempt to weaken present laws dealing with the coloring and sale of butter substitutes." I would also like at this point, Mr. Chairman, to insert resolution recently adopted by the Kansas Interbreed Dairy Cattle Council, with which council I am associated: "Whereas the State of Kansas ranks thirteenth in total milk production among the States of the Nation; and "Whereas the dairy industry is the third largest source of agricultural income in Kansas with a total of about $90,000,000 annually; and "Whereas 87 percent of the farmers of Kansas depend on the dairy business for a part of their income; and "Whereas the dairy industry is the largest single source of agricultural income exceeding wheat, cotton, and soybeans combined; and "Whereas the butter industry is the backlog of the dairy industry representing nearly half the total butterfat marketed; and "Whereas disturbance of the butter industry would seriously jeopardize the other phases of the dairy industry such as the market milk, ice cream, etc., to the detriment of the nutritional welfare of the Nation and particularly such segments of the consuming public as children and pregnant mothers; and "Whereas the removal of taxes and other existing controls of butter substitutes threatens to seriously affect the welfare of a large segment of the agricultural population which represents all the best standards of agricultural community life, and also threatens to jeopardize the welfare of the consumer: Be it "Resolved, That the Kansas Interbreed Dairy Cattle Council representing six dairy cattle breed associations in Kansas, go on record as urging the Congress of the United States to keep the present taxes and controls on butter substitutes in order that the best interests of the entire population may be best served over a long period of time. Particularly do we urge that the representatives of the State of Kansas in both the Senate and House be specially on guard that the best interests of Kansas which is primarily an agricultural and exporting State be served effectively." According to the 1946 statistics, which are the latest complete data available, Kansas has 141,200 farms. It is estimated that about 85 percent of these produce milk in varying quantities. Thus there are approximately 120,000 farms producing milk in Kansas. In 1946 the value of their product was $87,000,000. Incidentally, the value of the soybean crop that same year was $6,427,000 of which, as estimated by the National Cooperative Milk Producers Federation from statistics available from the BAE, the butter-substitute people could have bought $228,223 worth of oil while the dairymen were feeding to their cows $845,405 worth of soybean meal. In other words the dairyman utilizes, by value, better than 31⁄2 times as much of the soybean-growers' product as do the butter-substitute people. And from information which I got from our local cooperative soybean mill as to the price of oil today and from my own knowledge as to the price of soybean meal in the last year, the dairy farmer is a better customer of the soybean grower in 1947 than was the butter-substitute manufacturer. There is not animal that fits more beautifully or more snugly into the balanced farming program than does her majesty, the dairy cow. The No. 1 problem in America today is soil conservation. The interests of the State and Nation in soil conservation transcends all others as upon a fertile land depends the welfare of its people and institutions. A country of worn-out farms is a country dead at the roots, and little good can come from it. Dairy farming returns to the soil nearly all the substance taken from it and farms improve under such a system of tillage. Every dairy farm is a potential fertilizer factory dotting the countryside from Canada to the Gulf and from the Atlantic to Tillamook, producing humus and nitrogen in abundance, two elements sorely needed in any soil-conservation and soil-building program. Butter is a soil-conserving crop. Butter substitutes are soil depleting. In I wish to pause here to quote a tribute to the dairy cow as penned by the late Frank O. Lowden, former Governor of Illinois and a dairy farmer: "The cow is a most wonderful laboratory. She takes the grasses of the pasture and the roughage of the field and converts them into the most nearly perfect food for man. fact, in that food is a mysterious something which scientists have found essential to the highest health of the human race and which can be found nowhere else. Men have searched for centuries for the fabled fountain of youth. The nearest approach to that fountain, which has yet been discovered, is the udder of the cow. Without her milk children languish, the vigor of the adult declines, and the vitality of the human race runs low." Why do the proponents of these bills want to color butter substitutes yellow? Will it increase the vitamin content? Will it increase the palatability or the food value? No. Then their only purpose is to increase the sales of these substitutes through deception and fraud and in so doing it will decrease the sale of butter. What will that do? If we are to have a prosperous dairy industry we must have adequate markets, and should we allow such markets to be destroyed or undermined, by the unregulated sale of such products as oleomargarine and filled milk, made so nearly in the imitation of the bona fide product that they are almost indistinguishable to the casual consumer, though lacking the valuable nutritive elements of the former, we will certainly destroy this most essential industry as we now know it. Butter is one of the oldest foods known to man. In fact, the word butter appears seven times in the Old Testament and I dare say it was yellow even then. Butter substitutes are mere fledglings dating back only to 1870. It is not my purpose in this statement to ask that the manufacturers of butter substitutes cease operations, but rather that they sell their products for what they are on their merits. If the so-called low-income groups want butter substitutes they are not prohibited from getting them in their natural color and no sizable tax imposed. However, I believe there is another point worthy of consideration. I was in a public eating place a short time ago and they were quite liberal with their yellow spread for bread. The wiatress said, "Will you have more butter?" And then gave me a butter substitute. The public should be protected and they have a right to know whether they are getting butter or something else. STATEMENT OF CONGRESSMAN CHARLES R. ROBertson, North Dakota (AT LARGE) Mr. Chairman, I am very happy to have this opportunity to discuss with this committee the matter of Federal taxation of oleomargarine. I do not propose to make a lengthy statement, as I know that all arguments have been marshaled before you. Unfortunately, the propaganda of the oleo interests has also been presented and magnified. However, I am confident that you will weigh the matter carefully, distinguishing fact from fancy and will arrive at a sound conclusion. There are several pertinent facts I should like to point out to you, which I feel cannot be refuted, and which I feel indicate the urgent need for maintaining existing taxes. The issue is deeper than one of butter versus oleo—the issue is the protection of our dairy industry, the consuming public, and also the soil fertility of the United States. There is no need to relate the importance of dairy products from the nutritive standpoint. Any action which will harm the dairy industry will impair the health and welfare of the Nation. The executive secretary of the North Dakota Dairy Industries Association, Mr. John Burnham, has provided me with some significant figures from North Dakota. We have 475,000 milk cows, located on more than 90 percent of North Dakota's farms. We also have 130 milk plants, employing many workers. The livelihood of all these persons would be seriously affected if we repeal the present taxes. North Dakota produces between 48 to 49 million pounds of butter annually, making the State seventh in butter production. The almost 2,000,000,000 pounds of milk must be largely used in production of butter for shipment to terminal markets, because with a relatively sparse population, North Dakota has no large fluid-milk outlets. The income from dairying is an important source of income in our State. Diversified farming is important to the welfare of the people of North Dakota as it is important to any agricultural community. The dairy industry provides this opportunity for diversified farming. In bad crop years, the farm population will need to depend largely upon dairy herds to manage to eke out an existence. Not only is it important from this standpoint, but the fertilizer problem is solved to a large extent through the use of dairy herds in North Dakota. The maintenance of livestock on our farms is essential to restore organic matter to the soil. Without a market for butter, the dairy industry in North Dakota would cease to exist, and the soil-conservation practice would soon be discontinued. This is true throughout the Nation, and is not limited to my State. The high-pressured and costly propaganda of the oleomargarine forces has pitted the cotton and soybean farmer against the dairy farmer. Actually the interdependence of these groups of farmers is much stronger than the relation between the cotton and soybean farmers and the oleo industry. Facts prove this. In 1940 the oleo industry used $3,830,000 in cottonseed oil while farmers used $29,301,000 in cottonseed cake and meal. In 1942 the soybean farmers' income from the oleo industry amounted to $8,000,000, whereas the value of soybean meal fed to dairy cows amounted to $34,000,000. Further, the oleo industry can use, and will use any vegetable oil which can undersell cottonseed oil or soybean oil, whether it comes from trees or plants or weeds and it can use mineral oils. Yet the oleomargarine interests have assumed to speak for soybean and cotton farmers. The truth is that the dairy industry is much more important to these farmers than is the oleo industry. There is another point which should not be overlooked if we are to make an intelligent study of the problem. Skim milk is used in the making of oleo; that is what makes it acceptable to the public; that is what gives it its near butter flavor. If we effect legislation detrimental to the dairy industry, where in the future will the oleo people acquire skim milk for their product? Cows do not. produce skim milk, but skim milk is a byproduct of the butter industry. With the decrease in dairy herds, and the lack of skim milk for oleo manufacture, the price of oleo is certainly bound to increase. The Federal tax on uncolored oleomargarine is slight-a quarter of a cent per pound. The impression being given the housewife by the oleo interests is that the price of margarine will drop if these Federal taxes are eliminated. It will not drop more than a quarter of a cent a pound, for that is all the Federal tax amounts to. The only difference is that the margarine would be colored, should the 10 cents per pound tax be eliminated. The 10 cents tax is the only protection consumers have against the fraudulent sale of oleo as butter, and the use of it in restaurants and elsewhere instead of butter. Since the Federal Food and Drug Administration does not have authority over the correct labeling of foods strictly within intrastate commerce, this fraud could be perpetrated against the interests of the consumer. If oleo is truly as remarkable a product as is claimed by the proponents of this legislation, why does not the oleo industry color its margarine? Adding this 10 cents per pound, oleo will still sell for only 50 or 60 percent of the price butter sells for today. There is nothing to prevent the oleo industry today from coloring its products a palatable pink, an orange, or green or blue or lavender or any color except yellow. The only purpose in eliminating this tax is to put an inferior product in competition with butter. If it were not an inferior product, I am certain the oleo industry would pay 10 cents to color it. The first thing a doctor does when ulcers are diagnosed is to insist that the patient cease using foods cooked in vegetable fats. This is for the simple reason that vegetable fats do not dissolve at body temperature. A normally healthy person can digest vegetable fats, but many of us cannot. Animal fats, such as butter, will dissolve at body temperature. The nutritive value of butter is well known. This is a fight not only of the butter interests, but of the entire dairy industry, and the entire consuming public. We must not be misled by propaganda, but should make a careful study of the true facts involved in this very important consideration. It is imperative that the 10-cent tax on colored margarine be retained. Too much is at stake for us to legislate otherwise. |