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HEARING

BEFORE THE

SUBCOMMITTEE ON POULTRY

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

EIGHTY-EIGHTH CONGRESS

FIRST SESSION

MAY 29, 1963

Serial W

Printed for the use of the Committee on Agriculture

U.S. GOVERNMENT PRINTING OFFICE

23-341 WASHINGTON : 1963
COMMITTEE ON AGRICULTURE

HAROLD D. COOLEY, North Carolina, Chairman

W. R. POAGE, Texas, Vice Chairman

GEORGE GRANT, Alabama

E. C. GATHINGS, Arkansas

JOHN L. McMILLAN, South Carolina

THOMAS G. ABERNETHY, Mississippi

WATKINS M. ABBITT, Virginia

PAUL C. JONES, Missouri

HARLAN HAGEN, California

LESTER R. JOHNSON, Wisconsin

a R. (BILLY) MATTHEWS, Florida

FRANK A. STUBBLEFIELD, Kentucky

RALPH R. HARDING, Idaho

G. ELLIOTT HAGAN, Georgia

GRAHAM PURCELL, Texas

JAMES H. MORRISON, Louisiana

BENJAMIN S. ROSENTHAL, New York

ROBER r B. DUNCAN, Oregon

ALEC G. OLSON, Minnesota

ROBERT L. LEGGETT, California

SPARK M. MATSUNAGA, Hawaii

MRS. CHRISTINE S. GALLAGHER, Clerk

HYDE H. MURRAY, Assistant Clerk

JOHN J. HmmuuauErt, Genera/ Counsel

ROBERT C. BRUCE, A.808taNt Counsel

FRANCIS M. LEMAY, Staff Consultant

CHARLES B. HOEVEN, Iowa

PAUL B. DAGUE, Pennsylvania

PAGE BELCHER, Oklahoma

CLIFFORD G. McINTIRE, Maine

CHARLES M. TEAGUE, California

ALBERT H. QUIE, Minnesota

DON L. SHORT, North Dakota

CATHERINE MAY, Washington

DELBERT L. LATTA, Ohio

RALPH HARVEY, Indiana

PAUL FINDLEY, Illinois

ROBERT DOLE, Kansas

RALPH P. BEERMANN, Nebraska

EDWARD HUTCHINSON, Michigan

• RESIDENT COMMISSIONER

A. FERNOS-ISERN, Puerto Rico

SUBCOMMITTEE ON POULTRY

G. ELLIOTT HAGAN, Georgia, Chairman

THOMAS G. ABERNETHY, Mississippi

WATKINS M. ABBITT, Virginia

ROBERT L. LEGGETT, California

JAMES H. MORRISON, Louisiana

II

PAUL B. DAGUE, Pennsylvania

CLIFFORD G. MeINTIRE, Maine

CATHERINE MAY, Washington

;

r:
CONTENTS

Statement of Hon. Orville L. Freeman, Secretary of Agriculture; accomDepartment 

panied by Ray Ioanes, Director, Foreign Agricultural Service, U.S. Page of Agriculture 2

7 1963.1
z
POULTRY EXPORTS

WEDNESDAY, MAY 29, 1963

HOUSE OF REPRESENTATIVES,

• SUBCOMMITTEE ON POULTRY

OF THE COMMITTEE ON AGRICULTURE,

Washington, D .0 .

The subcommittee met at 10 a.m. in room 1310, Longworth House

Office Building, Hon. G. Elliott Hagan (chairman) presiding.

Present:• Representatives Hagan of Georgia, Abernethy, Abbitt,

Leggett, Dague, and Mrs. May.

Also present: Representatives Gathings, Grant, Hagen of California Johnson of Wisconsin, Hoeven, Findley, Beermann, Huddleston, Hemphill, Elliott, Kornegay, Taylor, Marsh, Weltner, Tuten,

Sikes, Sisk, Hall, and Reifel.

Christine S. Gallagher, clerk; John J. Heimburger, general counsel; and Francis M. LeMay, staff consultant.

Mr. HAGAN. This first official meeting of the House Committee

on Agriculture, Subcommittee on Poultry, will now come to order.

We are certainly delighted to have so many visiting Members

of Congress with us. This indicates the interest our colleagues have

in the poultry industry.

At this time we would like each Member of Congress to rise and

I ask the reporter to make a note of each Member present for the

record, please.

Will the Members please rise, the members of the subcommittee as

well as our guests.

Mr. SIKES. Robert Sikes, of Florida.

Mr. TUTEN. Russell Tuten, Eighth District of Georgia.

Mr. WELTNER. Charles L. Weltner, Fifth District of Georgia.

Mr. HALL. Durward Hall, Seventh District of Missouri.

Mr. FINDLEY. Paul Findley, of Illinois.

Mr. HOEVEN. Charles B. Hoeven, Iowa.

Mr. KORNEGAY. Horace R. Kornegay, Sixth District of North

Carolina.

Mr. ELLIOTT. Carl Elliott, Alabama.

Mr. HEMPHILL. Robert Hemphill, Fifth District of South Carolina.

Mr. GATHINGS. E. C. Gathings, Arkansas.

Mr. HUDDLESTON. George Huddleston, Jr., Alabama.

Mr. REIFEL. Ben Reifel, South Dakota.

Mr. TAYLOR. Roy Taylor, North Carolina.

Mr. SISK. B. F. Sisk, of California.

Mr. BEERMANN. Ralph F. Beermann, Nebraska.

Mr. ABERNETHY. Thomas G. Abernethy, of Mississippi.

1
:2 POULTRY EXPORTS

Mr. LEGGETT. Robert L. Leggett, the first poultry State in the

-United States, California.

Mr. ABBI1T. Watkins Abbitt, of Virginia.

Mr. JOHNSON. Lester Johnson, of Wisconsin.

Mr. HAGEN. Harlan Hagen, California.

Mr. DAGUE. Paul B. Dague, Pennsylvania.

Mrs. MAY. Catherine May, Washington.

Mr. HAGAN. G. Elliott Hagan, of Georgia.

'We appreciate your being with us this morning.

I see Congressman Roy Taylor coming in at this time. Please

come forward.

I would like to welcome all interested visitors before our committee this morning.

At this time I would like to commend Chairman Harold D.

Cooley, the chairman of our full Committee on Agriculture, for

recognizing the importance of the poultry industry to the agricultural economy of our Nation as well as our total economy, and for

exercising his foresight and wisdom in setting up a separate committee for the purpose of handling poultry matters coming before

Congress.

I would like Chairman Cooley to know that the fanners of

this country recognize and appreciate such leadership on his part.

In behalf of all agriculture of our Nation, I am sure this subcommittee is pleased to follow the leadership of Chairman Harold D.

Cooley in all such important endeavors.

As you know, and as has been announced, we are here for a specific

purpose this morning, and that is to hear from our Secretary of

Agriculture, the first witness to appear before the first formal meeting of the Subcommittee on Agriculture.

This morning I want particularly to express the appreciation of

this subcommittee for the interest that Secretary Orville Freeman

has in this poultry industry as well as in agriculture generally.

From my observation, as well as from what oldtimers have told me

in the Congress and on the outside, never have they seen, and certainly neither have I seen, a more able and more dedicated man,

devoting his full time and total interest to the problems of agriculture in this Nation, giving all of his energies to the task.

We appreciate you, Mr. Secretary, and in behalf of the committee

we want you to know we are delighted to have you with us this

morning.

If there is any information you may want to give us with respect

to our Government's policies, foreign or domestic, relating to the

poultry industry, we want you to know you are most welcome and

you may have all the time that you desire.

STATEMENT OF HON. ORVILLE L. FREEMAN, SECRETARY OF AGRICULTURE; ACCOMPANIED BY RAY IOANES, DIRECTOR, FOREIGN

AGRICULTURAL SERVICE

Secretary FREEMAN. Thank you very much, Mr. Chairman and

members of the Poultry Subcommittee of the House Committee on

Agriculture and other distinguished congressional leaders.

AKA
POULTRY EXPORTS 3

I am very pleased to See so many in addition to the competent members of this committee here to review this very, very important and, as you know, very involved problem of American poultry, particularly as it relates to our export markets.

I think this group knows probably better than any other the 'outstanding success story that poultry represents in terms of the development of new nriarkets abroad.

Might I just say, if you will pardon me a personal reference, that I

spent as much time and energy in trying to maintain and improve the channels of commerce for poultry as I have done for any other commodity in the foreign trade field.

The history of U.S. poultry shipments to the Common Market, particularly West Germany, is fairly recent. It is well known history but it might bear some repeating. It does add up to a very outstanding market development effort.

The program got underway in 1956 when members of the poultry industry and officials of the Department of Agriculture concluded that West Germany could be an excellent market for U.S. frozen poultry exports.

This feeling persisted and this decision was made despite the skepticism of most German food importers who seriously doubted that they could sell frozen, yellow-skinned, ready-to-cook birds. The Germans preferred, so the argument went, fresh-killed, whiteskinned, unfrozen poultry.

We went ahead, anyway, with plans to give the German consumers a chance to try our product. In 1956, the Department of Agriculture provided financial assistance for the first shipment of

4 million pounds of poultry to West Germany so as to keep the price of those first "samples" at a reasonable level.

The German poultry trade was astounded at the reception U.S. frozen birds got. I rather suspect that the German enthusiasm sur- prised even the most optimistic American suppliers. At any rate,

German consumers turned out to be eager buyers. Poultry stocks

were soon exhausted. (At about the same time, a comparably

successful sales effort was made in Switzerland, but without any

Government assistance.) Exports of poultry continued to increase. From virtually nothing in 1955, poultry sales to West Germany in 1962, reached the high total of 152 milion pounds.

But let me make one point right here. German consumers were enthusiastic about U.S. poultry, but the West German Government was not. Despite the fact that their duty was bound under the GATT at 15 percent ad valorem they were most reluctant to

remove quantitative restrictions against poultry imports. As the result of strong pressure by our Government, these restrictions

were relaxed in a piecemeal fashion and finally were ended only 2

years ago. When these were removed our exports shot up dramat- ically. For the first 12 months after liberalization our poultry exports

doubled to West Germany.

While this is an outstanding example of market development,

there have been many other remarkable achievements by our agricultural groups cooperating with the Department in our market development effort., I was heartened the other day to note that our agricultural exports during the first 10 months of the present
4 POULTRY EXPORTS

fiscal year—through April—were $4,175 million—practically as

large as the $4,197 million exported through April of last year.

And you will recall that last year's exports of $5.1 billion were at

record high. I consider this year's performance, in the face of record competitive crops abroad, particularly of cotton and grains,

where some places had bumper crops, and our shipping strike last

December, a tribute to the merchandising efforts of our agricultural

exporters and the ingenuity of our cooperators in developing and

maintaining new foreign outlets for their products.

Last year we were confronted with a new situation, far more complex and difficult than the German import restrictions. I refer to

the European Economic Community's common agricultural policy

for poultry which was and is the series of rules regulating both internal and external poultry trade of the Community.

The Common Market's protective system is not a single levy. It

is a complex system of levies and charges.

First of all, the EEC has established what it calls a gate price,

which is simply a minimum import price. We had been told on

more than one occasion that this gate price was being established to

prevent dumping by state-trading countries, such as those in Eastern

Europe. By the time the regulation appeared, however, the intent

and purpose of the gate price had been altered drastically. The

purpose of the gate price came to be a protective wall. It presumably was based upon production costs in third countries, such as

Denmark and the United States, but we found no relationship between the gate price and our own costs. The gate price was established at a landed price of about 33 cents a pound for ready-to-cook

broilers, and it has been a long time since our domestic prices for

broilers have reflected a landed price as high as this figure. It was

abnormally and inaccurately high.

In addition to the gate price, the EEC Commission established

what they called the poultry levy. For outside countries, such as

the United States, this levy consists of three parts: (1) The old ad

valorem tariff existing prior to the issuance of the poultry regulation, but with a slight downward adjustment; (2) the difference in

value of feed grains needed to produce a pound of broilers inside

and outside of the Community; and (3) a 2-percent ad valorem duty,

to give a preference to producers within the Community.

I realize that these are complex details. I'll try to clarify them.

They mean simply this: A few years ago, German consumers were

able to buy U.S. poultry by paying, in addition to the landed cost,

a 5-cent-a-pound import duty. At that rate, U.S. producers could

compete with other suppliers. Today, the total import fees have

been jumped to 13 cents a pound. Because our exporters can land

broiler chickens at Hamburg for roughly 30-31 cents a pound, these

levies figure out at about 43 percent ad valorem, a most highly restrictive—in fact, I should say—highly excessive rate.

I might say at this point that many months before the new poultry

regulation became effective we had stressed to EEC officials that a

marked, sudden increase in the 5-cent-a-pound duty could severely

damage our export trade. Despite our representations, the change in

.duties became effective overnight. On July 29 the duty was 5 cents

per pound. The next day it jumped to about 10 cents a pound, and
POULTRY EXPORTS 5

shortly thereafter to 13 cents a pound on broilers. And, of course,

this group knows of the harmful effects that this high protective rate

had on our exports.

Only part of the problem is with broilers. West Germany used

to buy millions of pounds of backs and necks from our broiler industry, because of the great popularity of soups and stew in West

Germany. Before EEC, these backs and necks used to be landed in

Germany for about one-third of the price of whole broilers, or about

10 cents a pound. However, because backs and necks were competing with European-produced stewing hens, the EEC decided to step

up the tariff on these parts to extremely high rates. And how they

stepped them up. EEC set the gate price and poultry levy for backs

and necks at 125 percent of that imposed on whole birds—the same

percentage adopted for other poultry parts, such as breasts. The

relationship was substantially changed.

What have been the effects of this complicated system on trade?

First of all, this system has really worked to limit imports from

outside countries to the markets of the Community, particularly

West Germany. Our trade has suffered the most. For the first 9

months of the new system, West German imports of poultry from all

sources have dropped to 70 percent of the previous year's comparable

9-month period.

Sharp gains have been achieved by Belgium and France, and the

Netherlands has about held its own. So the drop in trade has been

at the expense of outside countries, particularly the United States.

Imports of U.S. poultry were only about 40 percent of the 1961-62

level and only about 75 percent of the 1960-61 level. U.S. shipments

of broilers and stewing hens have been hit especially hard—in contrast to turkeys where, despite the higher levies, we have almost held

our own.

But there are problems within the Community as well. The

poultry regulation permits heavy subsidies, which they term "restitutions," to be made. This has permitted one Common Market

country to cut its export price on shipments to West Germany over

10 cents a pound as compared with its internal prices. The use of

these subsidies is being contested strongly by other member countries.

As a result, the poultry market in West Germany has suffered considerable disruption. This internal squabble over conditions of fair

competition is being hotly debated in Brussels, and is a matter which

must be resolved by the member countries. But it certainly is

adding complications to our problem.

Nor are problems created by the poultry import system of the

Community ending at its borders. Spillover effects have been

created. Another outside exporting country, whose market in the

Community has been curtailed, has responded by aggressively expanding its exports to Switzerland, our second most important

export outlet. It has done so, by selling poultry in the Swiss

market—as best we can tell—at a price about 15 cents per pound

lower than in its home market. As a result, our share of the Swiss

market has been cut in half.

These in brief are the problems. What has been done about them?

We have taken vigorous steps to protect our rights. The President has taken a strong personal hand in this matter, and has

23-341-63------2
6 rovvut.Y. Exeoirrs

urged Common Market officials to modify the protective elements of

the system to improve access for our poultry. U.S. Ambassadors

and our agricultural attaches have joined in this process.

We have beefed up our staff and have an agricultural attache

at Brussels. I have been there on several occasions. We have sent

a team there to work with their technical people and their staff.

I can state unequivocally that we have had the wholehearted cooperation, at both the technical and policy level, of the whole

machinery of our Government in trying to achieve a reasonable solution to this problem. On all my trips to Europe and in my conversations with Common Market officials visiting here in Washington,

I have hammered away at this issue. Nor should we forget that we

have had the full cooperation of the U.S. poultry industry in

this effort. In this connection, I particularly want to compliment

the American Institute of Poultry Industries, which has. done so

much to help build this market, and which worked hard to keep it

and protect it.

We have kept the poultry problem alive on the negotiating

table. We haven't let it be swept under the rug.

In a sense we feel that as poultry goes, so goes our overall trade

prospects. 

sense,

believe we must meet the challenge to our poultry

trade, not only because of the merits of the product itself, but because

of the symbolic importance it has to all our agricultural trade.

What we are seeking, and what we think it is reasonable for us

to obtain according to any reasonable interpretation of international

trade rules and policies, is fair access to the European market for

our poultry. And we would define fair access to mean modifications in the EEC poultry system to permit us to maintain the

same share of the market that we had attained prior to the start

of the common agricultural policy. After all, we are providing

access, in our own market, to a wide range of EEC products, including many agricultural porducts. I could mention a few—wines,

ham, cheese, fruit and vegetable products, and even a certain

amount of poultry products.

This fact, and the fact that we have relatively liberal trading rules

in our own country as compared to most countries, is very often

overlooked. I think we should take every occasion, those of us who

have the privilege to speak for agriculture, to make it clear that

we are not a protective country but quite the contrary certainly we

are one of the more liberal.

There has been a tendency to assume, because of certain critical

commodities where there are price supports and where we have

supply management quotas, to assume we have a strongly protective

agriculture policy. This is not the case, and I think it is impotrant

we clear the air on this with the American public.

I would say that the Secretary of Agriculture has taken every

opportunity he has to emphasize this point. I know the members of

this committee have done that as well. It happens to be the truth..

We are much more liberal in our import policies than most countries around the world.

In our efforts to obtain relief, we have urged modifications of the

existing EEC system. This does not mean that we have accepted in

principle the inequity of the various elements of the system.
POULTRY EXPORTS 7

For example, we have insisted that it is unfair to impose the gate

price against products received from countries—such as our own—

which do not subsidize poultry exports. We have argued the inequity of applying arbitrarily high levies on poultry parts—such

as backs and necks. We have urged reductions in the grain component of the poultry levy, because we believe that it overcompensates for the costs added to poultry by the higher grain prices prevailing within the Common Market.

Despite all our efforts, I can only list two instances where the

poultry system has been liberalized. The first of these occurred late

last fall when the EEC Commission decided to impose a uniform

supplemental lvey to replace the individual invoice method of enforcing the gate price. For a while, it appeared that the West

German Government was trying to collect two gate price charges—

the one under the old as well as the one in the new system. At that

time I was in Europe, and personally protested to Commissioner

Mansholt this case of apparent double jeopardy. He assured me that

this threat of dual charges was a mistake, and would be corrected.

It was.

Also, we had been seeking a more equitable application of the gate

price and levy on poultry parts—particularly backs and necks. As

I mentioned earlier, these charges originally were set at 125 percent of those imposed on whole birds. Here again, strong representations were made to Community officials. And about a month ago,

the Commission lowered the protective level to 60 percent. So now

the total charges collected for backs and necks are around 18 cents

per pound-7 cents less than before. We still think that this level is

overly protective, but it should give some measure of relief to this

area of our trade.

One of the things that we have been pounding away at is the

feed conversion factor used in the gate price-levy system. From the

start, we have been convinced that it was set too high. In order to

convince the Commission that this element of the system should be

modified, we sent a team of competent poultry experts to the Community last January. I think they did an outstanding job. As a

result of their efforts, and, I am sure, independent studies by Commission experts, the EEC Commission proposed in late March a,

lowering of the gate price and levy-based on reduced feed conversion factors. The total amount of the reduction proposed was 1.83

cents per pound. This would mean a reduction in the total charge

against imports of U.S. broilers into West Germany from just under

13 to a little over 11 cents per pound. Although we believe that

the feed conversion factors are still higher than they should be, the

Commission proposal is a step in the right direction.

This proposal has not yet been acted upon by the EEC Council

of Ministers. We have to deal with a good number of governmental

bodies and it complicates matters. It must be unanimously approved by the Council of Ministers before it becomes effective. We

have, of course, lent our strongest support to the Commission proposal in representations made at the capitals of the six countries.

We have made it clear that in our view we cannot wait for a resolution of this matter beyond the meeting of this council which will

take place on May 30 or 31, of this year.

•

11•11
8 POULTRY. EXPORTS

We are, of course, hopeful that the decision will be favorable.

But if the meeting does not bring results, I think that we will have

to take an entirely different approach.

We have been patient, perhaps overly patient, in seeking a solution within the existing system. We have demonstrated to Community officials that our trade has been damaged by the new system.

And the Commission has acknowledged that remedial action is

called for.

The next step in the process would be to invoke our negotiating

rights under the so-called standstill agreement concluded as part of

the settlement in the last round of tariff negotiations with the Community. Under this agreement, the Community is committed to

negotiate with us regarding access to its market for our poultry

products. You remember that before the close of the Dillon round

of tariff negotiations there was a great urgency to complete the tariff

bargain, but we were loathe to close the book on a system such as

this which could seriously hurt our trade. Finally, at our insistence,

this standstill agreement was concluded with the Community.

We would, of course, carry to the negotiating table the rights we

held with respect to poultry as of September 1, 1960. We regard

these as extremely valuable rights. They encompassed a large and

growing volume of trade at a fixed, reasonable rate of duty.

I would hasten to explain that although the Community is

required to negotiate with us, we must come to a mutual agreement

as to what constitutes reasonable access for our poultry products

based on our negotiating rights,

Should we fail to agree—and of course our aim first and foremost

is to protect our poultry trade—our only recourse would be to redress the tariff bargain—which is what the Community did when

we raised our duties last year on imports of carpets and glass.

Finally, let me say a few words about the implications of the

recently concluded GATT Ministerial meeting. At that session,

the U.S. Delegate, Gov. Christian Herter, said that agriculture

must be included in the negotiations. He said that the United.

States could not agree to the closing of negotiations until satisfactory terms of access were developed for agricultural products. The Ministers accepted the recommendation of the United

States that agriculture be included in the negotiations. I am

greatly encouraged by this decision. Despite all the problems that

remain to be worked out, the GATT Ministers have accepted the

principle that agricultural negotiations must be worked out side

by side with industry.

For the first time, agriculture no longer will be sitting in the

corner at these negotiations. Under this administration, agriculture will be sitting as an equal partner at the bargaining table.

We are no longer "Peck's bad boy." In this negotiation we will

be examining, jointly with other countries, the fundamentals of

our production and price policies—in other words, the elements of

our different systems which affect trade. We welcome this kind

of examination on a truly reciprocal basis, since for many commodities there is such widespread governmental influence on both

the level of trade and the prices at which commodities are traded.

I am convinced that this examination will indicate the relatively

liberal access that foreign suppliers enjoy in the U.S. market
POULTRY EXPORTS 9'

for a wide range of agricultural products. On the basis of true

reciprocity, I think we can expect and demand more liberal

access for our exports to foreign countries.

The road ahead will be difficult, but there can be no misunderstanding of the firm intention of our Government to resolve trade

problems of the kind we have been talking about today in a fair

and equitable manner. Without such solutions, trade negotiations

will not be concluded.

Mr. Chairman, I thank you for your kind attention.

Mr. HAGAN. Thank you very much, Secretary Orville Freeman.

We appreciate this excellent message which you have brought

us on the problems of poultry—particularly those regarding the

European Common Market.

It is most encouraging to know that you will continue to give such

energy to resolving these problems.

I would like to express the regrets of two members of our subcommittee who unfortunately were unable to be with us. They are

Congressman James H. Morrison, of Louisiana, and Congressman

Clifford McIntire of Maine.

I do not recognize any Senators in the room but I think we have

some administrative assistants representing Members of the Senate.

At this time we would appreciate your standing so that the reporter can record your presence here this morning.

Mr. FLEMING. Pat Fleming, Senator J. W. Fulbright.

Mr. WESTBROOK. Jim Westbrook, Senator John McClellan.

Mr. MEssicK. Wiley Messick, Senator John Sparkman of Alabama.

Mr. UDELL. Jerry Udell, Senator Birch Bayh of Indiana.

Mr. HAGAN. We are delighted to have you and we appreciate

your Senators sending you here this morning. We are delighted to

have each and every visiting Member of Congress.

Mr. ABERNETHY. Mr. Chairman I would like the record to show

that a member of my delegation, Mr. Winstead, is a substantial producer of poultry. He planned to be here this morning and would

have been, but a member of his family is undergoing surgery and he

could not be here.

Mr. Gomm. I am Mr. Justinius Gould, majority counsel of the

House Small Business Committee.

With me is Mr. John J. Williams, representing the minority.

The chairman of the Small Business Committee is Mr. Joe L.

Evins, of Tennessee.

Mr. HAGAN. Thank you.

Mr. VEGHTE. I am Lewis Veghte, representing Congressman

James E. Bromwell, Second District, Iowa.

Mr. OTwELL. William Otwell, Senator Talmadge of Georgia.

Mr. HAMMOND. Phillip W. Hammond, Congressman Louis Wyman, First District, New Hampshire.

Mr. HAGAN. Thank you.

At this time I want to recognize Congressman Abernethy.

First I want to say, Mr. Secretary, we hope that at a later date

your technicians will be coming to subsequent meetings of our Subcommittee on Poultry. We shall look forward to it. At that time

we can go more fully into background material for the benefit of

this subcommittee with emphasis on further details regarding the
10 POULTRY EXPORTS

broiler industry, the egg industry, and various phases of the poultry

industry.

We appreciate the fact you have already said that we can look

forward to having those gentlemen with us from time to time, and

we would appreciate your coming back at any time you feel you

have additional information we would need and would like to have.

Secretary FREEMAN. Thank you, Mr. Chairman.

Mr. HAGAN. Mr. Abernethy?

Mr. ABERNETHY. On page 5 of your statement, Mr. Secretary,

you state "We have taken vigorous steps to protect our rights."

I am aware of the fact, and I think everyone is, that your

Department, as well as the other branches of the executive department, has taken steps to improve our situation in this market.

I am wondering what you mean, Mr. Secretary, by the words "our

rights." I presume you have reference to some vested interest which

we have or should have in this market.

Can you define what those rights are?

Secretary FREEMAN. Yes. When I referred, Congressman Abernethy, in the testimony to the standstill agreement, I referred to the

insistence of our agreement at the close of the Dillon round of

negotiations, because we were concerned about potential developments in agriculture, that we were unwilling to sign that agreement until we arrived at a standstill agreement that you might

almost liken to a contract. This is obviously an analogy and not an

exact one. It said that our rights under trade rules and GATT

principles which were in existence as of September 1960, should

continue.

Based on that fact, it meant we had not signed that agreement

except with this reservation. So we have, under our agreements with

other countries under normal GATT procedures and agreements,

some rights which, by specific signed agreement, continue. These

rights we have sought, in every way that we could, to protect and

carry forward.

Mr. ABERNETHY. Boiled down to a question of dollars and cents,

does that mean that we, in your judgment, are entitled to a particular share of the poultry market in the Common Market area?

Secretary FREEMAN. Yes.

Mr. ABERNETHY. Do you care to suggest to what extent we are

entitled to that market?

Secretary FREEMAN. In my judgment, to the proportionate share

of that market that we had as of the time the variable fee system

was imposed in August 1962.

Mr. ABERNETHY. Then, as I understand, it is the feeling of your

Department and the administration that the poultry producers

of this country have a vested right to a particular percentage of

the poultry market in the Common Market area? I think that is

what you mean.

Secretary FREEMAN. In terms of trying to be precise about this,

if I may state it in a way that I think might be a bit more precise,

I believe it would be this: I believe that our rights appropriately

ought to be a percentage of that market based upon the percentage

we enjoyed at the time the variable fee system was invoked. When

I say vested rights, again I make the contract analogy. It would be

in terms of the volume of trade and its relationship as of September
POULTRY EXPORTS 11

of 1960. These may or may not be exactly the same, but fundamen- tally we have some definitely vested rights, and I would define them

as I have.

Mr. ABERNETHY. Wherein lies our vested right to the market?

Secretary FREEMAN. It is based upon the rights which we had under the agreements in effect as of September of 1960.

Mr. ABERNETHY. Then it is your opinion that there has been an abrogation of some agreements we have entered into on the part of the Common Market area?

Secretary FREEMAN. The extent of those rights, as I point out, is often a case, again, of our analogy to litigation in a court of law. There would not be litigation if there was not a difference of opinion

as to what the rights are and what the contract said. So, the extent of these rights is a matter of negotiation, a matter of difference of opinion. Our first effort that we thought would bring the quickest and the most immediate results for the American poultry producers has been to try to get modifications of this system, which would have

an immediate impact, because it is much better, in a sense, to settle

a lawsuit, if you can settle it on reasonable terms, than it is to have

to go to trial and have it appealed and get into protracted litigation.

So, in effect—again, the analogy is not a precise one—in effect, we have tried to negotiate within the system because we hoped we could

get quicker, and more effective and more immediate results. As the

statement says, if we do not get some results as defined in it, in a

modification of the fees, in the meeting of the Council this month,

we shall then open negotiations in relation to the standstill agreement or, let us say, the contract, and will have to be prepared to undergo litigation in connection with it.

Mr. ABERNETHY. Where would that litigation take place?

Secretary FREEMAN. In effect, the negotiations would be to try

to find the extent of our rights under GATT rules. If there are

some differences of opinion on it, it will then go through the normal

GATT procedures until those rights are defined. Then compensation would be paid in the normal fashion, under the agreements and treaties with which we operate.

Mr. ABERNETHY. Approximately when do you anticipate these con- clusions will be reached and agreements had?

Secretary FREEMAN. It will depend on how the negotiations go under the standstill agreement. Instead of trying to modify the

system, and saying, "This is the quantity," it will depend upon what

the response will be from them. Hopefully, we can negotiate an

agreement on this and might do so with reasonable promptness.

I think there is more likelihood that this would be rather protracted. If we did not think so, we would have followed that

course a long time ago.

Mr. ABERNETHY. When did we reach our peak of exports to the

Common Market area?

Secretary FREEMAN. It was the early part of the 1961-62 year.

We can give you for the record the exact month. There was a

loading-up period there for a few months before the gate price

system went into effect, because, seeing this coming, our own

exporters and their importers built up their inventories. Mr.

Ioanes can provide the exact month.
12 POULTRY -EXPORTS

Mr. ABERNETHY. What was the approximate dollar value of our

exports at that time?

Secretary FREEMAN. In the neighborhood of $45 to $50 million,

which had gone up, incidentally, since 1958 from $3.5 million, which

I think is a phenomenal record of trade expansion.

Mr. ABERNETHY. What is the export value at this time?

Secretary FREEMAN. About 40 percent of that, about $20 to $25.

million.

Mr. ABERNETHY. Are these countries self-sufficient in the production of poultry?

Secretary FREEMAN. I do not know exactly how to answer that.

They can produce a lot of poultry. They produce most of it at

a higher price than we do. Therein lies our problem.

Mr. ABERNETHY. Is that what they want to do?

Secretary FREEMAN. Yes they want to produce poultry for their

own market. I think the Common Market was not designed to

improve our trade. It was designed to improve theirs.

Mr. ABERNETHY. In your judgment, are they capable of producing poultry to meet the full demand of their market?

Secretary FREEMAN. It depends on the availability of grain to

the birds

'

but I think they would need grain from the outside to do it. Farmers in the Common Market are creative, imaginative people who are able to produce effectively. I am sure they can

expand their production.

Mr. ABERNETHY. I believe that is all, Mr. Chairman.

(The Department subsequent to the hearings submitted the

following tables concerning poultry exports:)

United States: Estimated production and exports of broilers, with comparisons,

1958-62

Year

Production 1 (million pounds)

Exports

Quantity (million pounds)

Percent of production

1958 1959 1960 1961 1962 

3.910 4,149 4,332 4,922

4,977

23. 7

70.4 93.0 149.3 172.6

0.6 1.7 2. 1

3.0 3. 5

1 Commercial.

Source: ERS and U.S. Department of Commerce.

Total U.S. poultry exports to EEC countries, 1956-62

[In thousands]

Year Germany Netherlands Other EEC Total EEC

1956 

1957 1958 1959 1960 1961 1962 1 

Pounds 4,451 5,712 7,690 52,374 85, 980 137,749 152,321

Pounds89 841 2,415

5, 712 11,444 20,863 26,808

Pounds121 171 252 332 194 1,212 1,201

Pounds 4,662 6,724 10,393 58, 418 97,618 159,824 180,330

..

Dollars1,522 1.881 3,354 15,358 24,814 42,701 49,987

1 Preliminary.
POULTRY EXPORTS 13

U.S. exports of broilers to EEC countries, 1956-62

[In thousand pounds]

Year Germany Netherlands Other EEC Total EEC

1956 3,517 89 69 3,675

1957 5,510 782 166 6,498

1958 3,243 1,290 82 4,615

1959 23,887 3, 896 80 27,863

1960 40,814 6,953 78 47,845

1961 79, 505 14, 824 301 94,630

1962 1 93,290 19,456 122 112,868

1 Preliminary.

Mr. HAGAN. Next I shall call on Congressman Paul Dague.

Before that, I believe a few other administrative assistants from

the Senate side have come in, and there may be additional administrative assistants of House members who were unable to be here

earlier. At this time I do want to express the regrets of Congressman Phil Landrum,

i

of Georgia, whose district is the largest poultryproducing district n the country, I believe and also to express the

regrets of Congressman Richard. Ichord, of Missouri. Both wanted

to be here but it was impossible for them to be at this particular

meeting.

Are there other representatives from the offices of any Members of

Congress ?

Mr. MILLS. William 0. Mills, from the office of Congressman

Rogers C. B. Morton of Maryland.

Mr. BRADFORD. Robert E. Bradford, from the office of Congressman Richard H. Poff, of the Sixth District of Virginia.

Mr. RICHARDS. Richard Richards, from the office of Congressman Laurence J. Burton, of Utah.

Mr. ANDERSON. Laird B. Anderson, from the office of Congressman Phil M. Landrum, Georgia.

Mr. NORBET. Walter J. Norbet, from the office of Harris B.

McDowell, Jr., Delaware.

Mr. BRISCOE. Wally Briscoe, from the office of Congressman Oren

Harris Fourth District of Arkansas.

Mr. 14ILHOLLIN. Gary L. Milhollin, from the office of Congressman

James T. Broyhill, of North Carolina.

Mr. STATHAM. Alfred P. Statham, from the office of Senator John

Stennis, of Mississippi.

Mr. POEHLMAN. Lloyd Poehlman, from the office of Congressman

Sherman P. Lloyd, of Utah.

Mr. WEKENBORG. Virginia Wekenborg, from the office of Congressman Richard Ichord, of Missouri.

Mr. HAGAN. We are certainly delighted to have each of you gentlemen with us.

We shall now hear from the ranking member on the Republican

side of this committee, Mr. Dague.

Secretary FREEMAN. Sorting out in my mind and trying to be as

directly responsive to Congressman Abernethy's penetrating and pertinent questions in connection with what our rights are, perhaps it

would be a clear statement for the record if I put it this way: A

of September of 1960, with a binding tariff agreement under GATT

of 15 percent, which was around 41/2 to 5 cents a pound, we had a
14 POULTRY EXPORTS

trade, despite a quantitative restriction then in effect, of somewhere in

the neighborhood of 100 million pounds a year. As of that point,

we would say this is as close as you could get your finger on it. You

wanted it as exact as I can get. Our vested right would start from

then.

Then as we moved ahead and this increased, we believe that a

proportionate share of that increase would also be our right, but

perhaps it would not be as vested as the earlier one. That is where

I have had trouble in being as directly responsive to your question

as I might have been.

Mr. HAGAN. Thank you, Mr. Secretary.

Congressman Dague.

Mr. DAGUE. Mr. Secretary, I wish to compliment you on a very

fine report and express the personal opinion that you have represented our interests quite ably before the EEC.

The definition of vested interest intrigues me, and I wonder if

there is not a reciprocal vested interest that the EEC may feel it

has in the American market.

Secretary FREEMAN. Certainly the member countries under socalled bindings under GATT have comparable rights that are, in

effect, agreements, and under the operation of this system, if those

rights are not honored, then compensation is accorded which they are

entitled to. This is what happened on carpets and glass with some

of the member countries. When they changed some of their trade

arrangements with us, it had a negative effect on our trade. This

is what it comes down to.

Mr. DAM:M. At the bottom of page 6 you list certain agricultural

products which we import. Do you think it will be the intention

of our Government to reciprocate in regard to some of these importations if we do not receive a satisfactory redress for what we think

is unfair treatment?

Secretary FREEMAN. When we have reviewed and gone through

the procedure and end up with the conclusion that we are entitled

to x amount that we have been deprived of contrary to our rights,

then as a practical matter we take a look at the various commodities

on which that compensation can be realized. These are some that

might be used in reaching that goal.

Mr. DAGTJE. May we express the hope that even some of the other

facilities left to our Government—and they are not inconsiderable—

might be brought into play. I am talking now about the question

of many of the contributions we make to the economy of many of

these countries. I wonder if we can hope that in the end, if you

are not able to settle these things at the council table, we might

suggest to them that some of these benefits they enjoy at our hands

might be looked at a little more closely. Do you think we can hope

for that as a weapon for negotiation, even if it is not emphasized

at the outset?

Secretary FREEMAN. The President has made the point, very

emphatically and repeatedly, that if we are to maintain some of

the installations that are costly to the U.S. taxpayer, we obviously

must have a reasonable balance of trade. We cannot have a resonable balance of trade if they put restrictions on that trade. This

is very much a part of this. It is a very variegated and complicated

problem.
POULTRY EXPORTS 15

Mr. DAGITE. Thank you very much, Mr. Secretary.

Mr. HAGAN. The Chair now recognizes Congressman Abbitt, from Virginia.

Mr. ABBITT. Mr. Secretary, I know we all realize the great effort

you and your associates in the Department of Agriculture have made in trying to get this matter worked out. I commend you for it.

I have always been a little bit leery of some of the people in the State Department. I just wonder if you have had the wholehearted cooperation of all segments of the State Department or if some of them have been sort of dragging their feet, trying to hold back a little bit. Or is that a fair question?

Secretary FREEMAN. Any question you ask me is a fair question.

You make the rules and I answer the questions.

I would have to respond by saying sometimes, Congressman, I

am not sure I got the full cooperation of everybody in the Department of Agriculture. Your question is a very sweeping one. May

I say during this last year in particular, this probably began to move into focus. We have had very strong support from the State Department, and I think a new understanding of the significance of American agriculture.

May I say because of the very fact that we have been positive and firm, as the State Department has been and Mr. Herter has been in the present instance, agriculture will be, as I put it, not "Peck's bad boy." We shall sit at this bargaining table. We will not sit in the corner with a dunce cap, as has been the case sometimes in the past. I think that is the best answer to the question.

Mr. ABBrrr. I interpret from your statement that you are getting

a fair amount of cooperation. It seemed to me in the past that

some segments of the State Department were more interested in. the welfare of foreign nations than they have been in different seg- ments of our society in America. I hope all segments of the State Department will realize there is some agriculture in America. We

may be a small segment, but we do have some interest in the eco- nomic situation and contribute largely to the economic growth and well-being of America.

I want again to compliment you for what you are trying to do in the interest of agriculture as a whole.

Secretary FREEMAN. Thank you, sir.

Mr. HAGAN. At this time the Chair would like to recognize the charming lady from the State of Washington, Mrs. May, a member of our subcommittee.

Mrs. MAY. Mr. Secretary, I, too, as a member of this subcom- mittee, would like to commend you for a very articulate state- ment, putting in clear perspective a very complicated problem.

We have taken a great deal of your time and of those working with you to try to resolve a problem under difficult circumstances. It certainly is heartening to hear that we are having improvement in what I know has concerned you and your Department, and that we shall take a firmer position at the trade bargaining table on behalf of American agriculture.

In connection with the tools this country might have for use in

more firm negotiation, could you generally, for the record, state
16 POULTRY EXPORTS

what is the importance of the United States to these Common Market

countries as an export market for their agricultural commodities, as

compared to manufactured goods or durable goods, textiles, and so

forth?

Secretary FREEMAN. We could be specific on this for the record.

Their agricultural exports to us are probably about 10 percent of

their total exports.

Mrs. MAY. In other words, just negotiating between their countries

and ours on the basis of agricultural commodities alone would not

give us as firm a position as if we went into the whole picture of

all commodities in trade between our countries?

Secretary FREEMAN. The Congresswoman has put her finger, very

frankly, on a vital part and one of the difficulties of this whole

matter which makes it more complicated than it might appear on

the surface. When we buy 10 percent of their trade from them

and they buy one-third of our trade from us, obviously the strength

of our position is not so great as it would be if the tables were

reversed.

Mrs. MAY. Another question, Mr. Secretary. You and others

representing our country will be involved in hoping that we can

obtain favorable actions on these major decisions. Before we know

how they will come out—as you have indicated, it may involve a

great deal of complicated negotiating—while that is going on, are

we looking at other possibilities and potentials for export of our

poultry products outside the Common Market countries? Is there

any possibility here?

Secretary FREEMAN. Yes, indeed; the Department of Agriculture

is pushing a very vigorous trade expansion program, of the same

kiwi, but with appropriate variations, that were so successful in the

West German market. Japan is another example of an expanding

market.

Mrs. MAY. This might be one other area that might be helpful

to the overall picture. Thank you very much, Mr. Secretary.

Mr. HAGAN. The Chair will now recognize the last member of

our subcommittee present. Before we do that, we want all of you

to know that we would like to hear from each of you or give you

the opportunity to ask the Secretary any questions you might like.

Our time is limited, as you know. As soon as Mr. Leggett finishes,

we would like to recognize any member who has a brief question he

would like to ask the Secretary. We do not want to impose too

much on his time.

I recognize Congressman Robert Leggett, from California.

Mr. LEGGETT. Thank you, Mr. Chairman. As the last member

of our subcommittee, I would like formally to commend you on

running a pretty taut ship the first time out.

As a grain and wheat farmer, Mr. Secretary, I think you also have

done a fine job in understanding the poultry business. I want to

commend you for your statement. I think you pointed up a lot of

the problems that many of us on the Poultry Subcommittee have

become aware of thorough correspondence and otherwise over the

past several months when the committee has been in de facto existence but actually not operating.

As I understand, you peg our rights in Europe, which I suspect

are really rights through negotiation, at about 35 million pounds
POULTRY EXPORTS 17

,of broilers per year. Are those the figures you quoted to the other

Congressman?

Secretary FREEMAN. It would be about $35 or $40 million.

Mr. LEGGETT. As I understand, we have lost now 40 percent of

that market, or we have 40 percent of our prior market?

Secretary FREEMAN. We have lost about 40 percent of the level

to which it had climbed by the time of the imposition of the variable fee.

Mr. LEGGETT. Which would mean, then, that our level at the

present time is more on the order of 40 percent of $35 million. Is

that true?

Secretary FREEMAN. No. Woud you repeat the question? Are

we talking about 1960 or 1962?

Mr. LEGGETT. I was wondering at what level of performance or

satisfaction of our rights in dollars we are now. How much of

our rights in dollars do we now have?

Secretary FREEMAN. The estimated trade for this year would be

$20 to $25 million where it was $40 to $45 million.

Mr. LEGGETT. You indicated our negotiations would be protracted

as far as making conditions substantially better. I am wondering,

can we keep that $25 million level under existing conditions?

Secretary FREEMAN. Yes; as nearly as we know. So long as they

maintain a highly protective system, which means a substantially

higher price than would otherwise be the case, their production may

well respond very rapidly to it. Of course consumption will not

grow as fast as it did when, due to our efforts primarily, the price

was lower. Therefore, even our current position is subject to erosion.

It is a little difficult to be too precise about how fast this will come.

Mr. LEGGETT. Is that substantially your position, Mr. Ioanes ?

Mr. IOANES. Yes. I was nodding when the Secretary said there

would be the possibility of further erosion if the levy stayed as high

as it is. Therefore, for another year, unless we get the levy lower,

it would be less than $20 or $25 million.

Mr. LEGGETT. What is happening at the present time to the $10

million worth of production that we have lost from our alleged

right level here in the United States?

Secretary FREEMAN. As I indicated in the statement, there are

some rather chaotic conditions in the whole EEC market because

a number of the countries have been subsidizing their production and

shooting for the West German market, and a number of them have

been subsidizing their production and shooting for markets in nonmember countries because they felt this impact. The whole thing is

in some disarray.

Mr. LEGGETT. As far as the United States is concerned, are we

creating now a surplus in broilers, and how are we handling that

surplus?

Secretary FREEMAN. There is no purchase program for broilers.

Mr. LEGGETT. I understand that. I am wondering what the

farmers are doing with those broilers.

Secretary FREEMAN. The broilers have to move to market just

as other perishables have to move to market. This is reflected

in the price. This year the price of broilers has been stronger, and

our production has come down a bit over what it was last. There
18 POULTRY EXPORTS

have been stronger prices. Generally speaking, the broiler producer

is in better shape this year than he was last year.

Mr. LEGGETT. One other question. You mentioned as far as

Switzerland is concerned, there was an outside country which you

did not identify, which apparently is selling in Switzerland at 15

cents below their domestic cost. I wonder how they do that with

the GATT price.

Secretary FREEMAN. Switzerland is not in the Common Market.

This is part of the spillover. The country to which I refer is

not in the Common Market, either, but they are affected somewhat,

as we are, although not so strongly, and their response then is

to subsidize, in effect almost dump in another country, which disrupts our market. Of course, it has a steamrolling effect. The

net result now is that poultry market conditions in the community

are quite unsettled.

Mr. LEGGETT. Thank you very much.

Mr. HAGAN. We welcome to this hearing this morning the ranking Republican on the full Agriculture Committee, the Honorable

Charles Hoeven, from Iowa. We would like him to have the opportunity to question the Secretary at this time, if he so desires.

Mr. HOEVEN. Thank you, Mr. Chairman.

Mr. Secretary, I think we all agree that you have a very rough

assignment in dealing with the Common Market countries. I am

sure that you are doing what you can in trying to protect the interests of the United States.

In your colloquy with Mr. Abernethy, you referred to vested

rights, which rather intrigued me. As I understand it, such

vested rights are by virtue of some agreement that was entered into

in 1960.

Secretary FREEMAN. 

No, 

sir. This was by virtue of an agreement that was entered into early in 1962 before we signed the agreement which culminated in the so-called Dillon round of negotiations

in Geneva. That was a standstill agreement. It said that our

negotiating rights under the GATT as of September of 1960

were preserved and therefore they are more than just requests. They

are legal and, we believe, enforcible rights.

Mr. HOEVEN. Is there an expiration date on that agreement?

Secretary FREEMAN. No.

Mr. HOEVEN. It is a perpetual agreement.?

Secretary FREEMAN. As a practical matter, I expect this will become merged into the Kennedy round of negotiations which begins

next year, when a lot of things, hopefully, will be sorted out.

Mr. HOEVEN. Mr. Secretary, will you not agree with me when I

say that our experience with the Common Market as of today has

not been very satisfactory?

Secretary FREEMAN. Yes, sir.

Mr. HOEVEN. As I gather the figures, our poultry industry alone

has suffered about a $59 million loss, of which we have recouped

about $9 million. This still leaves about $50 million net loss. Is

that approximately correct.?

Secretary FREEMAN. I think a more accurate figure—we will submit for the record tables on this, Mr. Hoeven—would probably be

$20 to $25 million with the EEC countries.
POULTRY EXPORTS 19.

Mr. HOEVEN. At any event, we have sustained a substantial loss.

Secretary FREEMAN. Yes, sir.

Mr. HoEvEN. You say we are not a protective government, and I

imagine that is true, but if the present situation worsens, will we

not become more of a protective government in order to protect our

own industry?

Secretary FREEMAN. It tends to move in that direction, inevitably.

Restrictions beget restrictions. That is a part of the problem. I

feel hopeful, and I would even say optimistic, that out of the broad,

overall negotiations there will come a kind of arrangement which

will benefit all the free nations of the world.

Mr. HoEvEN. You are hopeful the negotiations may be successful,

but in the last analysis, the only thing we have left is to raise our

own tariffs somewhat as a sort of retaliation measure to protect our

own people.

Secretary FREEMAN. In the last analysis, if we are put upon, we

have no recourse but to put upon.

Mr. HOEVEN. I sort of visualize the main objective of this Common

Market operation is a United States of Europe, and eventually they

may want a common currency, a common army, one capital, and

that they will make every effort to make themselves self-sustaining

and self-sufficient. Then they will not be importing anything which

they do not have to from the United States of America. It seems

to me there is a lot of nationalism over there, and that we may soon

be confronted with a real problem which would compel us to completely reverse our policy as far as foreign trade is concerned. Do

you share that concern?

Secretary FREEMAN. Yes; I think it obvious that there is real

basis for this concern. I think the answer will be forthcoming, depending on what philosophy and policy carries the day in Western

Europe. There are certain very key political leaders who are inwardly looking and who will protect every market they have and will

not be expansive in their concepts. There are others who feel very

strongly about this, and who would seek to become eventually a.

political unit, and they would look toward liberalizing trade gradually to the benefit of all concerned in the Western World.

Which one of these different political and economic viewpoints

prevails will determine what happens.

Mr. HAGAN. Are there other Members of Congress who would like

to ask questions? Congressman Johnson.

Mr. JOHNSON of Wisconsin. I wish to compliment you, Mr.

Secretary. I know you have had a hard job in Europe. I wonder if

European countries' going into the mass production of broilers as

we have in our country has been the cause of some of this trouble,

or are they just raising the same number as they used to?

Secretary FREEMAN. A number of countries are going into the

mass production techniques and are increasing the efficiency of their

operations. I think this is one of the real underlying causes of our

problem.

Mr. JonNsoN of Wisconsin. Can they raise them as cheaply as

they can at the present cost of feed?

Secretary FREEMAN. No, not yet. It is our feeling if we are given

a reasonable opportunity to compete, even recognizing they are
20 POULTRY EXPORTS

people of ability and will be able to produce efficiently as well, we

will be able to compete effectively.

Mr. JonNsow of Wisconsin. How long has this mass production

been going on?

Secretary FREEMAN. I think they started 3 or 4 years ago in a

number of places to apply some of the techniques of heavy production to bring down costs.

Mr. JOHNSON of Wisconsin. That is the cause of our trouble?

Secretary FREEMAN. It has been a contributing factor, sir.

Mr. JOHNSON of Wisconsin. That is all.

Mr. HAGAN. Congressman Hagen, of California.

Mr. HAGEN of California. If it is a question you are permitted

to answer, Mr. Secretary, with respect to what agricultural commodities does the Common Market seek U.S. concessions?

Secretary FREEMAN. Do they seek to negotiate about?

Mr. HAGEN Of California. There must be some commodities

they seek to negotiate about to secure concessions from us?

Secretary FREEMAN. Surely. Actually, their approach, which is

one in which we took the lead when I spoke in Paris, is to say that

agricultural trade is influenced by internal agricultural policies of

various kinds, quotas, mixing regulations

'

subsidies, a whole variety

of things. Every country in the world has a very complex set of

laws. They have them because historically the farmer always has

been the low man on the economic totem pole, and every country of

the world has built up legislation in an effort to rectify that.

One of the things to be done is to take a look at the systems in

various places and try to sort them out to the benefit of all concerned.

Mr. HAGEN of California. Do they make requests to negotiate

about our policy about such things as wine and olives?

Secretary FREEMAN. No, not at this point, because I think it has

been running the other way strongly. They have not been in a

position to ask for particular liberalization. We have been on the

initiating end.

Mr. HAGEN of California. We have large numbers of specialty

crops in California. We are afraid we might be traded off in the

negotiations. The volume might not be so important as poultry.

For example, I understand certain types of our California wines

are absolutely prohibited from importation into some European

countries.

Secretary FREEMAN. You make a very valid point. You have been

very militant and concerned about this, as I well know, for a long

time.

The agricultural ministers of France, England, Belgium and

most of these countries, have sat across the table and complained

about various kinds of restrictions that run to specialty crops. We

have not made as much progress. We have made some. We are

hopeful to make more. I would assure the Congressman that California's specialty crops will properly command first-rate attention.

Mr. HAGEN Of California. If there are any reprisals, apply them

to olives and things like that.

Secretary FREEMAN. I am aware of that.

Mr. HAGEN of California. Thank you.
POULTRY EXPORTS 21

Mr. FINDLEY. Mr. Secretary, we have a relatively protected

market system ourselves. The European Common Market is emerging with some similar characteristics. Consequently, we are in the

position of trying to work out arrangements between two relatively

protected markets. Has your Department made any serious study

of the possibility of trying to unite these two market areas into a

single common market?

Secretary FREEMAN. We have tried to study every possible

aspect of this. Any single common market does not seem practicable

at the current state of our information, sir.

Mr. FINDLEY. As far as you know, there is no specific study on

that question?

Secretary FREEMAN. No.

Mr. FINDLEY. Mr. Secretary, as a tool to use in trying to bargain for better treatment of our poultry exports in the Common

Market, have you used the threat of a U.S. import quota on shoes? 

There is a petition being circulated which has about 100 names of

Congressmen on it, asking for voluntary quotas. I presume under

the authority embodied in the so-called Cotton Textiles Agreement

Act last year. Is the threat of import quotas being used as a tool

to try to get better treatment?

Secretary FREEMAN. When I was privileged to speak at the OECD

in November of 1962, and make a rather important, I think, policy

speech about agriculture, I pointed out this possibility is one which

always exists.

I hasten to add, we do not come with a club to threaten anyone,

and this is a matter of last resort, and we hope we can mutually

agree on programs and arrangements which will be beneficial.

As Congressman Hoeven pointed out a moment ago, if one school

of thought prevails, we will certainly be pushed in the direction of

being more protective ourselves. If another school of thought prevails, we can look forward to a closer working relationship, both

politically and economically, in my judgment to the immense benefit of the entire free world.

At this stage, which affects many, many commodities, agricultural

and nonagricultural, in my discussions with responsible Western

European leaders I am not saying, "If you don't do this, we are

going to do something about shoes." I am sure that was not the

question, but we are not on quite that level of discussion.

Mr. FINDLEY. This idea that we have a sort of fixed right to poultry markets in Europe might serve to be a limit as well as a guarantee on exports. I am wondering what effect this might have on

other commodities.

For example, can we expect to win larger cash markets abroad

for wheat if the price of wheat goes down as you predict it will?

Secretary FREEMAN. You are speaking now about the price of

wheat in the United States. The answer would be no. The danger

is otherwise that our markets will diminish as our price falls, because it will stimulate protectionism on the part of the Common

Market because they will be fearful of our great production.

Our problem in the market is not one of price. Right now we

are competitive pricewise, and more so. Their support price in

Western Europe is substantially higher than ours. Our problem
22 POULTRY EXPORTS

is not a price problem. Our problem is an access problem—how do

we get in? We are competitive all right. If they would let us in.,

we would have no problem. My concern is that our great productive potential will stimulate and strengthen the protective forces

and, rather than bring their internal support price down, will tend to

bring it up.

Our strong plea to them, basic to a lot of these things, is the cost

of grain from the very beginning. For example, Commissioner

Mansholt, who is EEC vice president for agriculture, has led the

way in pointing out that a moderate and reasonable price for grain

which would not stimulate additional production within the Common Market is of critical importance, and this would be somewhere

between the German price, which may be $3.20 a bushel, and the

French price at $2.20 a bushel. If it goes to the German price, there

will likely be increased production, maybe 4 to 6 million acres, and

they will not only be able to meet their own needs but will have a

surplus for export.

So, we are asking them to watch out and not stimulate more production, because there is enough wheat in the world, as we all know.

My concern, therefore, would be the option that you reflect. We

will have to see what the reaction is.

Mr. HAGAN. Congressman Marsh, of Virginia.

Mr. MARSH. Mr. Secretary, I admire and respect the position you

have taken in regard to keeping the American quota to a level of

1960 or 1961, but I cannot agree that we should be limited to this.

Perhaps I misunderstood your approach, but I would like to inquire in regard to three specific items:

First, what is our Government doing in regard to the attack being

made on the wholesomeness of American poultry, particularly on

broilers, attacks on the use of antibiotics and several other things

that are being leveled at American poultry products?

Secondly, will members of the industry be represented on the

negotiating teams, not just experts of Government, but will leaders

of the industry be represented?

And third, what is being done to prevent the recurrence of what

occurred last fall when the equalization fee was reduced by approximately 6 cents on geese but remained at approximately 91/2 cents on

turkeys, which had previously had approximately the same equalization fee, as a result of which the large fowl market was captured by

geese, many of which were imported from Poland and Yugoslavia,

and the American turkeys were practically frozen out of the large

holiday market?

Secretary FREEMAN. The first was the attacks on the wholesomeness of American poultry?

Mr. MARSH. Yes.

Secretary FREEMAN. On this we have (a) sent our best, our highly

qualified experts in this field, to consult with and maintain constant

contact with competent authorities in these countries to prove objectively that this charge is not accurate; and (b) we are seeking in

every way we can to respond to this publicitywise.

Your second question should be directed not only to the Secretary

of Agriculture but more specifically to Secretary Herter, but I am

sure that people of the industry will be consulted with and will participate in the negotiations. This will certainly be done.
POULTRY EXPORTS 23

Mr. MARSH. The other was with regard to the reduction of the

'equalization fee on geese last fall.

Secretary FREEMAN. We have protested the unfairness of this

action to the countries involved and to the Common Market machinery as well and we hope it will not be repeated.

Geese from Poland are the traditional holiday birds. They do

-come in. This is not a processed bird, but a live bird, and it is part

of their holiday tradition. But to let them come in at this preference is not fair and I hope we will not see a repetition of that.

Mr. MARSH. On the question of wholesomeness, is this matter get-

-ting better or worse?

Secretary FREEMAN. It has been improving substantially, I think.

•The attack is highlighted strongly, in these kind of things, early

-and then it takes time for the facts to catch up. The facts are catching up.

Mr. MARSH. The industry is quite concerned about it.

Secretary FREtMAN. We are concerned, too. It is quite important.

Mr. MARSH. That is all. Thank you.

Mr. HAGAN. Gentlemen, as you know, our time is on the wane. We

want to give each of you an opportunity to ask a question.

Mr. Hall, of Missouri.

Mr. HALL. Thank you, Mr. Chairman. I appreciate the opportunity of being here at these hearings. I do not think I will delay

the proceedings any further.

Could we have the relative percent of our exports of broilers, for

example, as compared to our total market?

Secretary FREEMAN. Mr. Ioanes says it is about 31/2 percent of our

total market.

Mr. HALL. Thank you.

Mr. HAGAN. Mr. Grant, of Alabama.

Mr. GRANT. Mr. Secretary, it is nice to have you here with us

today.

I think from the number of wires and letters I have received on

this subject that some of our friends from the Southeast thought

we would get this problem settled this morning. But I would ask if

the most we might report to them on this hearing this morning is

that the Department is doing everything within its means to bring

about a better price relationship and that you are going to continue this study and going to continue working on it?

I believe you stated it would be probably sometime next year

before you would have any definite answer on it?

Secretary FREEMAN. First of all, we hope there will be definite

action taken by the end of this month on a recommendation from the

EEC Commission to the Council of Ministers. If the ministers

approve this proposal, import duties would be reduced about 2 cents

per pound.

If we do not get satisfaction we propose to immediately initiate

the negotiation of an agreement to improve our condition. How

rapidly this will move it is impossible to foresee. We would hope

there could be a fairly rapid agreement. It might drag out; we just

could not be very sure.

Mr. GRANT. Thank you.

Mr. HAGAN. Mr. Beermann, of Nebraska.
24 POULTRY EXPORTS

Mr. BEERMANN. Mr. Chairman—Mr. Secretary, I would like to

say in the spirit of cooperation I appreciate your statement this

morning on the Common Market problem and I would like to ask,

when you have been at the negotiating table in the Common Market,

in what area were the Common Market countries most critical of the

United States?

Secretary FREEMAN. Actually, they were not being critical of us,

because we were discussing with them a problem that had been created by a change in their own policy and focusing attention on this.

Basically in these discussions there is no particular item that sticks

out where they were being especially critical of us. They have expressed the concern the United States would engage in a dumping

operation. They realize the extent of our productivity and this is

a matter of constant fear on their part. But there was no particular thing that came sharply to the front.

Mr. BEERMANN. I ask this on the basis the chairman and I attended a plenary session of the International Cotton Advisory Committee, in Bangalore, India, and we heard firsthand some of the

criticism of the U.S. policy and, frankly, it gets under your skin a

little bit. I was asking this hoping we could be helpful. As you

point out, it is primarily our agricultural production that is in

issue.

Secretary FREEMAN. I misunderstood your question. I thought

you were asking about the countries of the Common Market. They

do not produce cotton. I have had comparable complaints from

some countries in regard to our policy and export sales of cotton and

I share your description of some of those criticisms.

Mr. BEERMANN. Thank you.

Mr. HAGAN. Mr. Kornegay of North Carolina.

Mr. KORNEGAY. Mr. Secretary, I would like to say I appreciate

very much your fine statement here this morning.

Secretary FREEMAN. Thank you.

Mr. HAGAN. Mr. Reifel, of South Dakota.

Mr. REIFEL. Mr. Chairman, I appreciate your invitation to be here

and certainly enjoyed the presentation by the Secretary.

I came in at the point of his presentation where he was discussing

the market for backs and necks. Off the record.

(Discussion off the record.)

Mr. REIFEL. I do appreciate the opportunity to be here. I have

no questions to ask. The questions I had in mind have already been

asked and it would be only redundant for me to ask other questions.

Secretary FREEMAN. Thank you.

Mr. HAGAN. Congressman Taylor, of North Carolina.

Mr. TAYLOR. Mr. Chairman, I appreciate the opportunity to attend the hearing and thank you for notifying me.

Mr. Secretary, I commend you on your statement and hope you

will do the best you can on the negotiations.

Secretary FREEMAN. Thank you.

Mr. TAYLOR. I think you said some Common Market countries

were selling some poultry products in this country. Will you give

us some information on that ?

Secretary FREEMAN. There are some specialized products, soup

concentrates and liver, goose liver, particularly.

Mr. TAYLOR. That is alL Thank you.
POULTRY EXPORTS 25

Mr. HAGAN. Congressman Tuten, of Georgia. I should say if

Mr. Tuten were a member of the Committee on Agriculture he

would not be sitting on that side.

Mr. TurEN. I appreciate the privilege of attending the hearing

before this committee and I am glad to know that the Department

of Agriculture is doing the best it can in behalf of the poultry

industry.

I have no questions.

Mr. HAGAN. Mr. Secretary, I want you to know we are deeply

grateful to you for your fine statement and the information you have

given to our committee and we are delighted to have you with us

today.

At this point I would like to ask you if maybe in a nutshell you

could tell this committee what we might be able to do. You may

not be able to tell us at the moment, but we would like to hear from

you in the future as to what this Subcommittee on Poultry can do

m helping you with your negotiations or any way we can be of

assistance. I understand the negotiations will begin within the next

day or two?

Secretary FREEMAN. The Council of Ministers will be meeting in.

a few days on the question of lowering the fees that were recommended to them and we are hopeful and are doing everything possible to bring about a favorable result.

Mr. HAGAN. We want you to know we are grateful for the information you have already given us today and if you have any

further instructions or suggestions you can give this committee as

to what we can do, we would like to hear from you further today or

certainly in the future.

Secretary FREEMAN. Thank you very much. I think this is extremely useful. I think it is very appropriate that this committee

should conduct hearings and focus attention on this problem.

Interest by a very distinguished congressional leadership is in itself

a very strong point in impressing on the leaders in Western Europe

that this is a matter of real concern to our people. There has been

some tendency to question this but the vigorous response of the

American people and their elected Representatives indicates we

consider this of very great importance, and I am grateful to you

for your help.

Mr. HAGAN. I believe what they do -with reference to the poultry

industry might be a forerunner of what they do in other export items

we have. Is that right?

Secretary FREEMAN. We think this is a symbol, so it is important

both as itself and as a symbol of the total EEC agricultural policy

as it comes into effect in the immediate years ahead.

Mr. HAGAN. The Chair regrets that the distinguished chairman

of the House Committee on Agriculture, Mr. Cooley, could not be

here at the outset when I made such a fine speech about him, but we

are delighted he is with us now and if he would like to make a statement at this time we will be delighted to hear from him.

Mr. COOLEY. Thank you.

Mr. HAGAN. Again we want to compliment Chairman Cooley for

setting up this Subcommittee on Poultry. It is indicative of his

wisdom in recognizing the importance of the poultry industry in
26 POULTRY EXPORTS

our overall economy, and I think, Mr. Secretary, that the number

of Congressmen and representatives from the Senate here today,

plus this large group of representatives from the industry itself is,

evidence of the need for such action. I wish time would permit

our hearing from industry representatives but we invite you to come

back. I recognize some who have come from great distances. We

welcome you to the first meeting of this Subcommittee on Poultry

of the House Committee on Agriculture and hope you will attend

our hearings in the future.

Mr. TUTEN. Mr. Chairman, I just want to say I hope you will

understand my sitting over here, because until I came here I did

not know we had two parties.

Mr. HAGAN. The subcommittee is now adjourned.

(Thereupon, at 12 noon, the subcommittee adjourned subject to the

call of the Chair.)

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