Evening star., 1935-04-26
TEXTILE SUBSIDY
PLAN Wins FAVOR
Rebate to Shippers ,ll Devised
to Meet Japanese Cost.
Tax Would Stay.
BY DAVID LAWRENCE.

American cotton textile and cotton
growing industry has found itself Is
now under consideration by the spe-
cial cabinet committee created to
placate' the antagonism to the New
Deal program in New England and
the South.
Briefly, the plan would reverse the
idea OF restricted production and
make possible return to natural
production. Also, it would meet Japa-
neSe competition It would increase
employment in textile mills through
out the United States and stabilize
the whole textile situation.
The proposal, known as the Lamport
plan, because it is the work Of Samuel
Lamport OF New York, chairman of a
committee set up by the Cotton Ex-
porters' Association. has been given
careful consideration by Government
officials and is in process of being
developed.
No New Money Involved.
The cost of the plan, curiously
enough, does not involve new money
but a willingness on the part OF the
Government to use cotton it has al
ready acquired or will acquire shortly
through the cotton loans of the last
year or so.
Here is how it works:
Cotton is selling at II cents q
pound. to which must be added AZ
cents for a processing tax and about
2la cents for wastage. or about 10
cents a pound when the cotton tex
tile mill buys it. Using bale of cot
tor with 500 pounds as the unit. this
means a cost of sos bale to the
professor of cotton goods.
Now add to that an item of $40 for
direct labor costs and another SIS
for the cost of taxes. insurance, and
overhead. and you have $3.50 as the
direct cost of manufacturing that bale
Of cotton in goods OF the coarser
kinds.
But 500 pounds of cotton goods
bring 80 cents pound, or $3.50. so
there is no profit in the transaction
and many mills which cannot operate
on close margins such as are involved
in the above calculation simply must
60 out of business.
japanese Labor Is So.
It so happens that the item Of labor
in Japan is So. whereas. in America
1t is $40. Against such ratio OF
5 to /, the American textile mer-
chant cannot compete in world
markets. Indeed the price is about
% cents pound instead of 80 cents.
This differential Of s cents a pound.
or $40 on 500 pounds, Is what causes
America to lose her outlets for selling
cotton goods.
The Lamport plan proposes an ex-
pertinent. 1t is that the American
manufacturer shall go ahead produc-
ing for the domestic market exactly
as he has been doing, which means
cost of $3.50 on 500 pounds or q
bale Of cotton. But instead of buying
his cotton for $95 bale. the Gov
ernment would sell it to him for much
less. In order not to disturb the in
ternal price structure. the reduction
would be in the form Of rebate.
Thus for every bale OF cotton bought
from the Government at s95 bale or
IL cents pound-the domestic price
the Government. upon receiving evi-
dence OF shipment to a foreign Coun-
try OF an equivalent amount of cot
ton goods, would pay back $35. This
would make the textile manufac-
turer's cost $3.50 just the same, but
the rebate of S35 wound enable him
to absorb a large part of the labor
item and leave him a margin for
operation besides.
A Direct Subsidy.
In effect. it's a direct subsidy by
the Government on account OF the
labor charge so that American labor
would not be reduced to the japanese
standard and yet American labor
would remain employed.
For this reason labor leaders here
are in favor of the plan and SO are
textile manufacturers in the code
authority. and it is believed the cot
ton growers will indorse it, too.
The plan is kind Of equalization
fee and resembles some OF the agri-
cultural equalization fee ideas which
came with the McNary- Haugen BILL
of less than decade ago. with respect
, to farm products generally.
bales out of the Governments supply
of 5,500,000 bales. This means q book
cost to the Government OF about
$17,500,000 which Is obtained by
multiplying 100000 bales by an equal
ization fee of about cents pound
of cotton, which is the approximate
difference per pound between Japan
ese and American production cost.
The theory is that If the 100000
bales work out as planned-and
market abroad for American cotton
goods at the 22-cent price or there
abouts is said to be assured-the
Government might gradually, over a
period of three years, release In this
way into world trade the entire pres
ent surplus, and the average book loss
would be about $58,000,000 for three
years.
Keeps Processing Tax.
The plan is being commended also
. because it involves no Treasury outlay,
does not disturb the processing tax or
the wage scales and is not dumping
in any form. because it merely meets
world competition on even grounds.
BY restoring American points Of
contact with foreign sales, it is assumed
that American quality of goods will
Immediately increase the opportunity
for American sales. Also. it is con-
tended that increased production in
America will be possible because of
the increased purchasing power Of
textile labor and of other working
people. who will be benefited by the
increased volume of cotton merchan-
diSing.
The sponsors of the plan frankly
concede it is an emergency device and
not a permanent idea because the
subsidy could not be continued in
definitely. 1t is assumed, however,
that as world trade is restored the
acquired momentum would take care
of q larger and larger American pro-
duction of cotton. Also, 1t Is expected
to lead to better strategic situation
for the making of reciprocal agree
ments in foreign trade.
The belief DrevailS in informed