Mr. BELL. Of course, it would be hardly fair to take the average of the whole American crop and say that it is not up to the duty between Canada and the United States, because there is a marked difference in the quality of the wheat.

Senator MCCUMBER. I am segregating this hard spring wheat entirely from the rest of the wheat that is raised in the United States, because that is all that we raise and that is practically all that you grind in your section of the country.

Mr. BELL. Yes; but there are some hard wheats from the Southwest. It is coming to be quite a factor.

Senator MCCUMBER. That will, of course, affect it.

Mr. BELL. That finds its way abroad.

Senator McCUMBER. That will be a sort of substitute for the northwestern wheat.

Mr. BELL. To a certain extent.

Senator McCUMBER. I have tried to present to you just as nearly as I could what appears to me to be the great danger to our farmers in North Dakota and Minnesota, especially western Minnesota, in being deprived of tariff protection at the time when they most need it; that is, when there is a short crop. If you can explain that to me, I shall be very glad of it.

Mr. BELL. I shall try to do so.

Senator MCCUMBER. I want to say that I have asked Senator Ladd, who has made a special study of the matter, to be present and ask you any questions that he desires to ask.

Mr. BELL. I shall be very glad to answer them here, or I shall be glad to meet you and Senator Ladd and go into a longer discussion than we can have at this time.

Senator McCUMBER. I think it would be well to make it as clear as possible now.

Senator SMOOT. In your answer to Senator McCumber's question I should like to have you differentiate as between a condition where you export a product to a country and where you do not export but have to import for American consumption.

Mr. BELL. I am afraid that I did not follow you, Senator Smoot. Senator SMOOT. I will put it this way: We import and must import sugar from Cuba.

Mr. BELL. Yes, sir.

Senator SMOOT. I know that under that condition, where we are compelled to import and we do not export anything at all, that their request here would have a detrimental effect upon the producer of sugar in this country.

Mr. BELL. Yes, sir.

Senator SMOOT. In your answer I would like to have you differentiate so I can follow it.

Mr. BELL. I think I understand you now.

Senator SMOOT. What is the difference between the condition as to sugar and the condition as to wheat, wheat being produced in this country to an extent greater than it is consumed?

Mr. BELL. There being a surplus?

Senator SMOOT. Yes; a surplus.

Senator MCCUMBER. I want to ask Senator Smoot to keep in mind all the time that the wheat produced in the northwestern section is never greater than the amount that can be consumed right at home.

Senator SMOOT. That is what I wanted him to do this for.
Mr. BELL. I understand, I think.

Senator SMOOT. We have a surplus with us.

Senator MCCUMBER. We have a surplus of winter wheat.

Mr. BELL. Canada's great surplus gives her a dominating influence in the world's markets. She to-day sets the standard for price and quality. She has for many years had a big influence on quality and on price, and to-day she has practically a dominating influence. When we say that we are meeting the world's competition, it really means that we are meeting Canadian competition.

Now, we could go over into Canada and get a mill over there and we could buy under the same conditions they do and sell under the same conditions they do. However, we do not want to do that. We have an American mill over here. If we go out and sell from this American mill in the world's market we have to meet that Canadian standard of quality and price. Now, the American price for similar grades of wheat is higher by reason of the duty or by reason of the heavy demand that exists in the United States, because I believe the demand itself is sufficient to raise the price from Canada regardless of the duty, although I have no objection to the duty. In fact, if it will encourage production, I am strongly in favor of it. Therefore we can not sell in the world's market against Canadian competition. except at a loss. We want to operate our mills continuously. Continuity of operation is the thing which enables us to operate successfully and efficiently and economically and helps to reduce the margin as between the consumer and producer in the United States market. If we lose the export business it stands to reason that the English wheat that formerly went abroad as flour and sold in the domestic market at the domestic price is going at the world's price level.

I do not care how you figure it out, that is the sum total of it. If the surplus moves as flour, it goes at our price; if it moves as wheat it goes at the world's price. We say that we could use domestic wheat for domestic requirements. When it comes to the export wheat, we say let us step over into the Canadian lines. We do not ask for the privilege of 100 per cent on that wheat and of meeting competition based upon 100 per cent. We simply say, "Let us step over the line and take a portion of it and mix with it 43 per cent American wheat." That 43 per cent is either going out of the country in the form of wheat or flour. If it goes as flour, it is going to bring about a better price. There is no question about that. I can not use that Canadian wheat under the proposal which I make here unless I pay a duty. I can not use it unless I incorporate with it 43 per cent of the American wheat. That is what we ask. We are asking the privilege of going up against Canada, against Great Britain, and against French mills under this handicap, and yet I say to you that because of American methods and American efficiency and America's position with reference to the markets of the world, we will be able to carry the load. That load means 43 per cent of the higher priced commodity blended with a lower priced commodity going out to meet 100 per cent of the lower prices.

Senator CURTIS. What effect will that have upon the people of Kansas and Nebraska?

Mr. BELL. What effect?

Senator CURTIS. Yes. We export flour.
Mr. BELL. You have the same privilege.

Senator CURTIS. Yes; but the freight rates would be such that we could not afford it. We could not afford to bring wheat from Canada and pay freight rates and compete with you people on the line.

Mr. BELL. I think you will find that the railways would come to you. To-day you can come down from the Lakes and come down through the valley and to the Gulf on just as good a basis as we can- -a better basis than we can from Minneapolis. In some sections this will not help, but what helps a large portion of the industry must help the whole. Competition in the milling business has reached a point where it is destructive. There is not enough concentration of volume at one time and one point to insure the greatest economy of operation, and the American public pays the bill.

Now, if we can cut off pressure that comes that way and gives the mills a greater per cent of operation, this cutthroat competition is going to cease, and the American public is going to get the benefit of economy of production.

That movement of this Canadian wheat through this country has been valuable in a great many ways. It has represented practically 200,000 carloads of tonnage a year. Canada is doing her level best to divert that movement over Canadian rails. That she has succeeded is evident from figures for the last few years. Without the magnet of commercial attraction to bring that Canadian wheat through the United States, all that valuable tonnage will be lost. There is no question about that.

Now, we need feed, we need fertilizers, we need everything that we can get, gentlemen, to have our wheat ground at home. We have lost 43 per cent of our export trade, and we will lose all in a short time unless we are put on a basis of equal opportunity with other exporting nations, and I say to you that this proposal that we have made does not put us on a basis of equality with the other nations, but it gives us an opportunity to go out and see if, through efficient methods, we can not meet and beat them. We realize that it is a difficult proposition, but we are willing to take our chances, and I say to you that through this means, which is one of the most constructive things ever offered, we are going to increase the demand in the home markets for American wheat of all kinds and character. Senator CURTIs. Have you a printed brief there?

Mr. BELL. Yes, sir.

Senator CURTIS. You had better make it a part of the record. Mr. BELL. Have I made myself clear in answering your questions? Senator SMOOт. Yes; I can see the difference.

Mr. BELL. If I may have the privilege after the first of the year to come to see you, I shall be glad indeed. I think, gentlemen, that I have nothing else to say unless you want to ask me more questions.

BRIEF OF JAMES F. BELL, REPRESENTING THE WASHBURN-CROSBY CO.,

MINNEAPOLIS, MINN.

We assume it is the desire of this Congress not only to encourage American wheat production, but equally American manufacture and the use of American facilities in the growth and development of the Nation's export trade.

In full confidence of this attitude, we, as representatives of one of the greatest of our national industries, one in fact that is fourth in rank, beg to call your attention to certain administrative features of the tariff which should be amended to harmonize with the protective character of any tariff imposing a duty on wheat which Congress may make at this time or later.

As we are without knowledge of the proposed duties upon wheat and wheat products which your committee in its wisdom will recommend, we must as

sume certain principles and refer to them throughout the argument, since it is upon these that the administrative features are based.

In the matter of a tariff on wheat and its products, the wide extent of the country, the differentiation in the kinds and character of wheat raised, the changing demand in quality and the highly important fact that we are a surplus-producing Nation, introduces so much of theory into the subject that it is difficult to determine whether free entry or protection serves the best interests of all parties.

Since we are a surplus-producing nation, it necessarily follows that the inclusion in a tariff act of a duty on wheat must have as its primary object, encouragement in production of wheat and the manufacture of its products. Increased production follows in the wake of better prices, but the problem of the manufacturer of wheat products is unfortunately not dependent upon such a simple law.

The operation of the present schedule furnishes indisputable proof of wide discrimination and inequalities and that the relationship between the raw material and the finished product must be carefully preserved, otherwise the purpose of the duty would be entirely destroyed and both producer and manufacturer injured (see supplementary note No. 1).

On an equal basis of opportunity, not privilege, with other wheat-producing countries, the American miller can furnish flour to United States trade at a minimum margin as between producer and consumer and can also successfully compete in the open markets of the world. It is essential that he should do both, since the present milling capacity of the United States makes a foreign outlet necessary if the mills are to operate on an efficient and economical basis and to maintain the narrow operating margins which have marked the history of the industry (see supplementary note No. 2).

At the present time Canada (fast becoming a leading factor in the wheat markets of the world), with cheaper lands, cheaper labor, cheaper prices and increasing production, is gradually absorbing a very large proportion of the foreign trade which formerly belonged to this country (see supplementary note No. 3). The fact that the American export flour trade in the year immediately prior to the World War, 1914, was nearly 50 per cent less than 10 years earlier is ample demonstration of the displacement of our trade by Canada, whose exports of flour in the same period had increased over 200 per cent (see supplementary note No. 4).

The Canadian miller has manufactured flour and has always shipped it in bond through the United States without the payment of any customs duty and in full enjoyment of our transportation facilities. Under similar manner and privileges, 60 per cent of the Canadian export movement of wheat has passed through the United States (see supplementary note No. 5).

The replacement of American flour by Canadian brands through lower prices and good quality has increased the percentage of our wheat shipments in the form of wheat instead of flour, decreased the home markets for our wheat, and resulted in our shipping abroad increasing amounts of valuable feeding and fertilizing elements contained in the grain (see supplenrentary note No. 6).

A duty on wheat may increase the price in the domestic markets, but the surplus will still continue to go abroad at world prices (see supplementary note No. 7). Unless means are provided to maintain continuity of operation in American mills commensurate with their former export output, the home market for that considerable portion of the wheat crop that formerly went abroad as flour will be destroyed and an increasing percentage of wheat will be sold for export, not at the home price which a duty aims to improve, but at the world's price.

Further, the decreased operation of American mills widens the margin of manufacture and increases the relative cost of flour in the United States.

The corresponding decrease in the production of mill-feeds (already wholly inadequate to the demand) raises the price of these essential commodities and gives added impetus to the importations of dairy products from those countries who have a surplus of feed or who are acquiring same by increased importations of wheat in replacement of former supplies of flour (see supplementary note No. 8).

The large number of failures which have been recently recorded in the industry are indicative of the inequalities of existing conditions, which make operation both costly and hazardous.

If the producer of wheat is to get full benefits arising from a duty on that commodity, the manufacturer of wheat products must also be given equal pro

tection on flour in the home markets and placed on a parity with other manufacturing countries in the world's market.

In recognition of equal protection to both the producer and manufacturer, we conceive as proper a duty on flour commensurate with the duty on wheat (specific or ad valorem in both cases) (see supplementary note No. 9).

NOTE. AS to the rate of duty on feed, in view of the fact that the domestic supply is inadequate to the demand, this is left to the wisdom of your committee without recommendation.

Equal opportunity in the world's market to the United States miller with other exporting nations, if not secured through free access to the great supply of Canadian wheat without duty, rests in the administrative features, based upon a tariff that is alike in its protection to the producer and manufacturer. These administrative features should permit facilities for grinding Canadian wheat. for the export trade, which may be accomplished through:

(a) Bonding (note 11B) and drawback (note 10) provisions which will cancel the charge against the bond or satisfy the drawback upon exportation of that portion of the principal or by-product which is subject to duty.

(b) Bonding provisions which will permit withdrawal of the principal product or by-product from bond upon payment of duties equal to that imposed upon similar articles of import; and

(c) Bonding (note 12A) and drawback (note 12B) privileges allowing charge against the bond to be canceled or satisfying the drawback upon exportation of like weight of the principal product.

This latter provision, in effect, would permit the American miller to export 100 pounds of flour in full liquidation of 100 pounds of imported wheat, even though he had produced from the 100 pounds of wheat so imported approximately 70 pounds of flour and 30 pounds of feed. The 30 pounds of feed under this simple plan, would be retained in the United States where it is much needed, and 30 pounds of American flour made from American wheat bought at American prices and which would otherwise be sold at the export price, would find its way into the export markets of the world with the flour product of every 100 pounds of Canadian wheat so imported (see supplementary note No. 13).

These are the brief conditions which we, in our long experience, offer to you as an essential to the successful operation and full benefits to be secured for the farmer from a duty on wheat and also for the preservation of a great industry with its accompanying rewards in price, transportation, and labor. These are the principal features necessary to preserve our fast failing export trade, which is recognized as necessary in the establishment of a general economic equilibrium.

These are the provisions which are necessary to provide that continuity of operation in industry which has been held by Federal investigators to be so desirable.

These are the means which are necessary to retain for the benefit of our railroads and other transportation facilities, the large tonnage represented in the movement of Canadian wheat through the United States (see supplementary note No. 14). The Canadian Government, with preferred rates and all the great resources at its command, are urgently seeking to divert this tonnage to Canadian rails and Canadian ports. Without the magnet of commercial milling demand, it is clear from the experiences of this current year that this diverson will be effected (see supplementary note No. 15).

These are the means which will provide for the dairy industry and increasing supply of wheat mill feeds and effectively end the growing competition from imported dairy products.

A tariff in itself is negative; it prevents, but it creates nothing. The administrative features, however, may make it constructive, and in so doing assure not only the full benefits for which a tariff was designed but make it a positive force for further betterment.

It is manifest that full benefits which the tariff on wheat aims to secure for the farmer can not be obtained without the inclusion of such features as we have suggested, and it is equally clear that the benefits to the milling trade arising from the proposed plan would be equally felt by those most directly connected our transportation lines, our labor, and the consuming public.

The principle involved in this proposal is not new. For many years it has been recognized in the tariffs of our own and other countries, but with this difference, that whereas in our case the provisions of the tariff act have proven cumbersome and precluded the possibilities of successful operation, other