nations have provided measures to facilitate the use of imported wheat and its reexportation as flour. Germany in 1914 had a protective tariff on wheat and products, but encouraged German mills to import wheat and to export flour by permitting its manufacture with loss of identity, the retention of the offals or feeds, and the refund of the duty on the amount of wheat required to manufacture the unit of flour exported. For example, the miller upon the exportation of 100 kilos of flour was refunded as much as an equivalent of the import duty on 160 kilos of wheat, and this regardless of the fact that the miller had or had not imported any wheat. (S. Doc. No. 149, pp. 85-86, 61st Cong., 1st sess., Department of Commerce Tariff Series No. 38, p. 13.) Since we have already recognized in present and former tariffs the principle of like exportation of product for an importation of raw material as to weight or quantity, is it not proper that it should be made operative, particularly when it possesses such apparent advantages to so many elements? SUPPLEMENTARY EXPLANATORY NOTES AND FIGURES. Supplementary note No. 1.-Bulk prices are used in order to eliminate the complications of comparing sack costs. Manufacturing points chosen are those taking the same basis of freight to a common point of delivery. Canadian money is reduced by 8 per cent (prevailing rate of exchange) to equal American dollars. The conversion to American funds is made immediately in order to avoid confusion in comparison. Comparison of cost of 95 per cent flour delivered in bulk at New York City Nov. 10, 1921, manufactured at various points as shown. Yield: The difference between yield of 4 bushels and 30 pounds for United States wheats and 4 bushels and 20 pounds for Canadian wheats is due to the heavier weight of the Canadian wheats. These figures are adduced from actual experience. 2 No. 1 dark northern spring wheat at 7 cents over the Minneapolis December. Manitoba No. 1 northern at $1.09 Fort William, Canadian value equals $1.0028 in United States funds. Price at Buffalo in bond is Fort William price plus freight. The Canadian dollar will cover manufacturing costs in Canada, so it is entirely justifiable to use the American valuation in this item. These are the actual returns received from the sale of 9.8 pounds of second clear and 64.2 pounds of feed. These are the actual returns received from the sale of 9.8 pounds of second clear and 54.2 pounds of feed. ? These are the net returns received from the sale of 54.2 pounds of feed and 9.8 pounds of second clear after payment of duty. The duty in this case is the retaliatory duty of 10 per cent and is based on the assessed value of a similar amount of imported material. 8 From 4 bushels and 30 pounds of wheat used only 186.2 pounds of 95 per cent flour is produced. This is 95 per cent of a barrel (196 pounds). Showing the full value of a barrel based upon cost of $6.13 for 95 per cent of a barrel. 10 Freight prepaid. 1120 per cent ad valorem. 12 This conceives that the principal product uld be withdrawn from bond upon payment of duty equal to the duty which would be assessed upon a similar product imported from a foreign country. The duty, therefore, would be assessed on the valuation of the goods if manufactured at Fort William, which is the origin of the wheat used in the comparison. (This is not permitted under the existing law.) 13 The comparison between Minneapolis and Fort William is one more of price difference than of duty. The actual discrimination of duty, however, is 58 cents a barrel. Operating under the present wheat schedule (35 cents on wheat, 20 per cent ad valorem on flour) on November 10, 1921, a unit of Canadian wheat sufficient to make a barrel of 95 per cent flour, if manufactured in Canada on the basis of cost, could be sold in the United States at 58 cents less than the identical unit of Canadian wheat if it had been milled in United States mills with a payment of duties. Proof of this will be found in the column marked "Fort William," the difference here being the duty which the Canadian miller would pay on flour ($1.02) and the duty which the United States miller would pay on a sufficient amount of wheat to make a barrel of flour of the same grade (4 bushels 20 pounds) at 35 cents a bushel ($1.52) for 95 per cent of a barrel or $1.60 duty for sufficient wheat to make a full barrel of flour. The difference between the duty paid by the American miller on the wheat ($1.60), and that paid by the Canadian miller on a like quantity of flour ($1.02) equals 58 cents. The Canadian miller and Canadian labor are therefore given preference over the United States miller and United States labor by the operation of our own tariff. Each sale of Canadian flour made in the United States not only means a loss of a corresponding amount of operation in United States mills but also a loss to the United States farmer of a sale in the United States of an equivalent number of bushels at the better price which the tariff aims to obtain, and the subsequent sale by him of this same number of bushels for export at the world's price. The United States miller, in theory if not in fact, can import Canadian wheat, manufacture it in bond, sell the flour to a Canadian buyer acting for him; the latter can accept the goods, hold them in bond, and export them to the United States subject to a rate of 20 per cent ad valorem, whereas while the goods were in the United States the miller was refused the privilege of withdrawing them from bond upon the payment of a like duty, and could only do so upon the payment of the higher duty on wheat. Supplementary note No. 2.-United States flour industry, capacity, output, operating conditions. Flour milling to-day ranks fourth among the manufacturing industries of the United States, and the production of milling feeds is one of the basic factors in the dairy industry. The flour mills of the United States have a potential daily capacity of more than 1,000,000 barrels, sufficient to supply home requirements in a little over 100 days, or to grind the entire crop in six months. The output, even in unusual war years, has never exceeded 120,000,000 barrels per annum. Despite the lack of concentration and the intensive competition in such a widespread industry, which has resulted in the lack of sufficient volume at any one point to secure the greatest economy in production, nevertheless the margin as between producer and consumer has been lower than in any other country. With an output approaching its capacity, these margins could be further reduced. While there is no reliable data available on the world's movement of flour, from the compilations made by L. M. Estabrook, chief of the Department of Crop Estimates, Department of Agriculture, we show this to average about 28,000,000 barrels annually. Assuming this to be constant, the United States in 1903 commanded 68 per cent of the total, thus showing its ability under proper conditions to compete successfully in the open markets of the world. The successful operation of flour mills and the low cost of production has in a great measure been due to the percentage of export flour shipments. If these margins are to be preserved, we must maintain an export trade commensurate with former years. The fact that by 1914 the United States percentage of the world's total export flour trade had shrunk to less than 40 per cent is responsible in a large sense for the increase, both in the cost of production and in the relative high cost of the better grades demanded in the United States. Supplementary note No. 3.-Canada's growing dominance in the world's wheat and flour markets. "Wheat is Canada's principal asset and her chief means of equalizing exchange rates. Her climate, distance from markets, and sparse population limit the choice of agricultural production almost exclusively to wheat." The following table shows the increasing trend of production, and there are still great areas available for future settlement and cultivation. 1908. 1909. 1910. 1911. 1912. 1913. 1914 8. 1915 3 1916 3 1917 3 1918 3. 1919 3 1920. 1921 Acreage, production, and exports of wheat in Canada. 1 Acreage and production are for crop years. Net exports are for fiscal years ending Mar. 31 following. Including flour in terms of wheat (4.5 bushels to the barrel). 3 War years. Source: Acreage and production for 1908 to 1919 from United States Tariff Commission Report on Agricultural Staples and the Tariff, page 44; for 1920 and 1921 from Monthly Bulletin of Agricultural Statistics (Canadian) November, 1921, page 434; net exports from Report on Grain Trade of Canada, 1919 and 1920, pages 100 and 96, respectively; and Monthly Bulletin of Agricultural Statistics May, 1921, pages 194 and 195, and Monthly Trade Report (Canadian) March, 1921, pages 15, 17, and 280. It is very difficut to secure accurate data on Canada's exportable surplus, but it is generally conceded that this is fast approaching, if it has not already passed, 200,000,000 bushels annually. When you take into consideration that the world's production is around three and three-fourths billion bushels of wheat and that approximately only 650,000,000, or less than one-fifth, enters into international trade, the large volume of this Canadian export shows its growing dominance in the world's markets and the influence that this movement of wheat and flour must have upon prices and trade in general. This position was formerly occupied by the United States. Supplementary note No. 4.-Comparisons of United States and Canadian flour exports. For For years American brands of patent flour led the world in reputation. eigners strove in vain to equal them but never succeeded. Foreign buyers (to a certain, though unfortunately, diminishing extent) are still willing to pay more for United States brands of flours. Other nations have done their best to overcome this lead; they have encouraged their own millers and the millers of some other countries by preferential rates, subsidies, and similar inducements. Quoting from Liverpool Milling of January 21, 1921: "British millers, however, are now out to produce from hard Manitoba wheat, from No. 1 northern spring, and even from No. 1 hard winter, a flour which will hold its own before exports against the best that comes from west of Lake Erie and Buffalo." The efforts of these other countries are beginning to show results. That we are playing a losing game in the face of conditions which now surround us is undeniably shown in the records of our flour exports between the years 1903 and 1914. The data pertaining to our export flour trade during war years and the period immediately succeeding are in no way indicative of this position and should be disregarded in any consideration. Beginning with the Federal fiscal year of 1920-21, which is practically coincident with the wheat-crop year of the country, there are unmistakable evidences of an alarming decline in our export flour trade. This decline is merely a continuation of a decided downward trend of flour exports during the period preceding the war. The accompanying table shows flour exports in the normal period, 1903 to 1914, and evidences a decline of 43 per cent from the peak, whereas Canada's exports during this same period show an increase of 275 per cent. Comparison of wheat-flour exports from United States and from Canada, (Source: United States Tariff Commission, Tariff Information Series No. 20, page 50; 1920-21 figures from Supplementary note No. 5.-Canadian wheat movement through United States. By referring to the map of North America you will see that the great wheat- As shown by the accompanying table, in the eight years preceding 1914 more This movement has continued until within the last few years and has fur- Canadian wheat exports through United States ports. [Source: Statistics 1907 to 1914 from United States Tariff Commission Report, "Agricultural staples and 1907. 1908. 1909. 1910. 1911. 1912. 1913. 1914. 8 years. 1915. 1916. 1917. 1918. 1919. 1920. 1921. 1 Fiscal years ending March 31. 2 1907 to 1914, fiscal years ending April 30. 1915 to 1921, fiscal years ending March 31. Supplementary note No. 6.-Percentages of export flour and wheat ship- The steady reduction in the exportation of flour from the United States exporting nations) has increased the percentage of the United States crop exported in the raw state, reduced the milling demand, lessened the premiums on United States wheat, and reflected a direct loss to the producer of wheat. The loss of 9,000,000 or more barrels of flour export in this period means that the farmer lost a home market for approximately 45,000,000 bushels of wheat, which he would otherwise have sold at the better domestic price, and subsequently sold this same wheat at the lower world's level. A kernel of United States wheat in the markets of the world possesses no outstanding pecularities that command either prestige or premium. The same kernel of United States wheat under United States flour brands has an established foreign trade and an outstanding individuality which gives it added value. A striking illustration of this fact will be found in the accompanying table. In the year 1905, when we had no exportable surplus of wheat at the world's competitive prices, still the demand for established United States brands of flour at an enhanced price was such that the importing countries took from us nearly 9,000,000 barrels of flour, constituting over 90 per cent of our combined wheat and flour exports. While there are variations during this period in the percentages that wheat and flour bear to the total exports of wheat and flour, the trend in flour exports is steadily downward, except in those years where we have a small amount of exportable surplus, when the permanent nature of the flour trade in comparison with the varying wheat demand is clearly evidenced. United States trend of percentage of flour exports to total wheat and wheatflour exports compared with trend of percentage of wheat exports to total wheat and wheat-flour exports. [Source: United States Statistical Abstract and Monthly Summaries of Foreign Commerce. Basis for estimating wheat equivalent to flour exports, 4 bushels of wheat to 1 barrel of flour.] Each million-bushel reduction in the flour export means the loss in production of approximately 9,000 tons of feeds. Since the loss of flour exports between 1903 and 1914 was equivalent to approximately 37,500,000 bushels annually, it means that the farmer suffered a yearly reduction in these available valuable feeds to the extent of 337,500 tons. Between 1914 and 1919 (the peak year) there was an increase of flour exports equivalent to approximately 57,500,000 bushels, meaning an increase of feeds available of 517,500 tons. Between 1919 and 1921 the decrease was equivalent to approximately 36,000,000 bushels, resulting in a loss of 324,000 tons of feed available to the American farmer. In considering the loss of these valuable feeding materials, you must also take into consideration the loss of fertilizing elements contained therein. Of 81527-22-MISC- -3 |