growing sugarcane. All except two of the plantation farms are incorporated and are owned by more than 15,000 stockholders, over 80 percent of whom live in Hawaii. Because the plantation farms are located in rural areas they have for many years made contracts with one or another of several agency firms in Honolulu to act as sugar factors. The agents provide the necessary financing for growing crops, purchase materials and supplies, handle shipping and marketing, and render valuable consulting services all at reasonable cost to the producers-in fact, at considerably less than it would cost each producer to perform such services for itself. The Hawaiian Sugar Planters' Association is a voluntary agricultural cooperative of sugar producers. It operates at its own expense an experiment station which it founded 50 years ago and which has grown to be recognized as an outstanding scientific institution of high standing. Twenty-six of the sugar producers in Hawaii own and operate as a cooperative the California and Hawaiian Sugar Refining Corp. Its refinery at Crockett. Calif., has as its sole activity the processing and marketing of the raw sugar and molasses produced by its owners. CONCLUSION We submit that this is not an appropriate time to impose upon domestic sugar producers the additional burden of a rigid statutory wage increase of large amount which could only be met if the price of sugar were to be considerably increased. It is recommended that the adjustments in wages which it is possible to make be left to the processes of collective bargaining, which in Hawaii are adequately covered by the provisions of the union contract with respect to the classification study now in progress and the adjustments in wage scales which are to be made as a result thereof. The sugar producers in Hawaii, therefore, protest the provisions of H. R. 3914 and respectfully urge that it be not enacted. EXHIBIT I. HAWAIIAN SUGAR PLANTERS' ASSOCIATION The following joint statement was issued August 3 by Richard G. Bell, chairman of the committee representing the Hawaiian sugar plantations, and Jack Hall, chairman of the Territorial International Longshoremen's and Warehousemen's Union policy committee, concerning the new sugar industry-union labor agreement: "The management of Hawaii's sugar plantations and the territorial policy committee of the ILWU announce their agreement on basic terms for a contract form that is acceptable to the management and which the policy committee unanimously recommends for acceptance by ILWU local unions as the basis for individual contracts on sugar plantations throughout Hawaii. Members of local unions will state their positions on these terms by secret referendum vote August 5. "The contract will be retroactive to July 1 if accepted by the local ILWU unions on plantations throughout the Territory. "This agreement, affecting 34 plantations and 20,000 plantation employees, including agricultural workers, is Territory-wide; and upon its embodiment in individual contracts between the several plantations and their employees, at added cost to the industry of about $5,000,000 a year, will present serious financial problems to some plantations. It will be one of the first and most extensive organization coverages ever accomplished for employees in an agricultural industry. "The conditions accepted and set forth in contract form were arrived at through voluntary collective agreement after prolonged conferences between committees representing management and union, with James P. Blaisdell, president of the Hawaii Employers' Council, conducting the negotiations on behalf of industry and Montgomery Winn appearing as legal adviser for the council. They are presented jointly by the two committees with the conviction that they provide means of accomplishing lasting benefits to the industry, to its employees, and to the community by insuring industrial peace and uninterrupted sugar production. "They are designed to maintain harmonious relations and further the interest in Hawaii's industrial progress that is mutual between management, labor, investors, and the public generally. Their objective is to provide desirable working conditions in the sugar industry that can be maintained without work stoppage and avoidable friction between management and labor. "With the execution of the present proposals, there is an agreement to proceed at once with the plantation job classification studies for the purpose of discovering any inequalities that may exist in wage rates of comparable positions so that equalizing adjustments can be decided on while production proceeds without interruption. The provision is made so that the workers whose jobs rate higher classifications will be given pay increases accordingly and that in instances of lower classifications there will be no reduction of pay for the workers presently employed in these jobs. "Immediate benefits to follow execution of contracts will be added wages and services to employees amounting to a total of about $5,000,000 a year. All workers affected will receive an over-all wage increase, including bonus of 7 cents an hour. "Terms include vacations with pay, recognition of seniority, extended coverage of hospital and medical perquisites, and machinery for the expeditious and amicable settlement of grievances. Lock-outs, strikes, sit-downs, work stoppages, and slow-down of production are prohibited. "Parties to the negotiations recognize the responsibilities that rest upon both management and labor for the successful operation of contracts made under the terms agreed upon and that strict observance of these conditions is an understood pledge in their acceptance. Only maximum cooperative effort and favorable prices will enable the industry to maintain and improve the wage schedules. Thus it becomes the concern of labor equally with management to establish and preserve production conditions that will be beneficial to both. "The parties joining in this statement believe that the terms agreed upon will be favorable to creating and maintaining these vitally necessary conditions. Higher pay levels and betterment of working conditions will be reflected in the welfare of the workers and of the community, and the recognition of mutual interest will be an incentive to cooperative effort beneficial to the industry as a whole, to its employees, to its management, and to the investors who finance its operations. "The accomplishment of this agreement places Hawaii in a leading position in American management-labor relationships and gives bright promise for Hawaii's industrial future." EXHIBIT II. HAWAIIAN SUGAR PLANTERS' ASSOCIATION WAR FOOD ADMINISTRATION, CCC LETTER NO. 3 TO PRODUCERS OF HAWAIIAN RAW CANE SUGAR Subject: Offer of Commodity Credit Corporation to Producers of 1945 Crop Hawaiian Raw Cane Sugar. In order to maintain or increase the production of Hawaiian raw cane sugar during the present emergency, the Commodity Credit Corporation, a corporate agency of the United States (hereinafter called "Commodity"), hereby offers to make payments with respect to raw cane sugar derived from Hawaiian sugarcane harvested during the calendar year 1945 (hereinafter called "1945 crop sugar"). 1. Payments with respect to raw cane sugar.-Commodity will, subject to the terms and conditions specified herein, pay to each producer of 1945 crop sugar (hereinafter called the "producer") 55 cents per 100 pounds (96° raw value, using conversion factors as provided in the Sugar Act of 1937, as amended) of 1945 crop sugar delivered by it. 2. Maximum production.-Producers shall use its best efforts to harvest during the calendar year 1945 a maximum quantity of sugarcane and to obtain the production of a maximum quantity of 1945 crop sugar therefrom. 3. Reduction of payments upon increase in price of raw cane sugar.— (a) Sugar delivered to continental United States: In the event of any increase or increases above $3.75 per 100 pounds, cost, insurance, and freight, duty paid, delivered, in the ceiling price of raw cane sugar at final destination in continental United States, or, if there is no such ceiling price, in the event of any increase or increases above $3.75 per 100 pounds, cost, insurance, and freight, duty paid, delivered, in the New York market price (as defined in the west coast cane refiner agreement, heretofore existing between Commodity and west coast refiners of cane sugar) of raw cane sugar, the total amount payable by Commodity pursuant to paragraph 1 hereof with respect to raw sugar delivered to the continental United States shall be reduced by the amount of any such increase or increases applied to that quantity of 1945 crop sugar so delivered dur ing the effective period of any such increase or increases at each destination. (b) Sugar delivered in the Territory of Hawaii: In the event of any increase or increases above the price per 100 pounds of raw cane sugar in effect in the Territory of Hawaii as of the date of this offer, the total amount payable by commodity pursuant to paragraph 1 hereof with respect to raw sugar delivered in the Territory of Hawaii for direct consumption or refining, or for any purpose other than shipment to the continental United States, shall be reduced by the amount of any such increase or increases applied to that quantity of 1945 crop sugar so delivered during the effective period of any such increase or in creases. 4. Appointment of Sugar Factors as attorney in fact.-Producer, in accepting this offer, shall be deemed to have appointed Sugar Factors Co., Ltd., a corporation organized under the laws of the Territory of Hawaii and having its principal place of business at Honolulu in the Territory of Hawaii (hereinafter called "Sugar Factors"), its attorney in fact, for it and on its behalf to make application for payment hereunder and to receive any and all payments due or to become due it hereunder and generally to do and perform each and every act and thing whatsoever which may be necessary or proper to effectuate receipt of payment hereunder. 5. Payment.-Application for payment hereunder shall be made on behalf of producer by Sugar Factors (a) on or before August 1, 1945, with respect to all 1945 crop sugar delivered on or before midnight June 30, 1945; and (b) on or before March 1, 1946, with respect to 1945 crop sugar delivered after June 30, 1945. The application shall be in such form, supported by such documents, and accompanied by such certifications and proofs as Commodity may prescribe. The amount payable by Commodity to producer hereunder shall be paid as soon as practicable after application has been approved by Commodity. 6. Settlement with planters and labor.-Producer shall treat the amount payable by Commodity hereunder as an increase in the New York market price of sugar for the purpose of settlement for sugarcane under the contracts between producer and the planters from whom it purchases sugarcane during the calendar year 1945 and for the purpose of determining the amount to be paid to labor pursuant to the bonus plan of the Hawaiian Sugar Planters Association in effect on January 1, 1945. Producer shall continue such bonus plan in effect throughout the calendar year 1945. 7. Books, records, and accounts.-Producer shall keep complete and accurate books, records, and accounts with respect to all 1945 crop sugar produced or delivered by or for it with respect to all sugarcane from which sugar is produced and with respect to all amounts paid by it to its workers and planters. Producer shall furnish to Commodity such information and reports relating to these transactions as Commodity may from time to time request. Commodity shall have the right at any time or times to audit any books, records, and accounts of producer and of Sugar Factors necessary for determinations hereunder. 8. Delivered defined.-For the purposes of this offer sugar shall be deemed to be delivered (a) at any port of destination on the mainland of the United States, upon arrival of the ocean carrier at such port, and (b) elsewhere, when title to the sugar is transferred from producer: Provided, however, That with regard to lost cargoes the shipping weight of such cargoes shall be deemed to have been delivered 14 days after date of clearance from loading port. 9. Officials not to benefit.-No Member of, or Delegate to, Congress, or Resident Commissioner, shall be admitted to any share or part of this offer or to any benefit that may arise therefrom, but this provision shall not be construed to extend to benefits arising from this offer if accruing to a corporation. 10. Assignment.-No contract resulting from an acceptance of this offer nor any claims arising thereunder shall be assigned in whole or in part by producer without the prior written approval of Commodity, and any such assignments shall be in such form as may be approved or prescribed by Commodity. COMMODITY CREDIT CORPORATION, By C. C. FARRINGTON, Vice President. Accepted: (Date (Producer) By (Title) EXHIBIT III. HAWAIIAN SUGAR PLANTERS' ASSOCIATION THE TAX-QUOTA-PAYMENT PROGRAM FOR SUGAR UNDER THE SUGAR ACT Predicted effect of tax As was officially predicted, the effect of the tax has not been to increase the price of sugar to consumers: * * one is likely to assume that excise taxes increase prices under all conditions; but an excise tax on sugar, within certain limits, under a quota system is one of the exceptions.' 1 "Quotas influence the price of sugar through the control of supply; consequently under a quota regulation of the supply of sugar, a tax may be levied without causing any adverse effect, over a period of time, on the price paid by consumers. "I recommend to the Congress the enactment of an excise tax at the rate of not less than 0.75 cent per pound of sugar, raw value. I am definitely advised that such a tax would not increase the average cost of sugar to consumers." Actual effect of tax "Since the total quota for sugar was completely filled each year, the quota system definitely limited the quantity of sugar made available for sale in the United States, regardless of the processing tax. Consumers would pay only a given price and aggregate amount for such a quantity, depending upon the existing state of demand, which is largely influenced by consumer purchasing power. Therefore, the tax did not affect the retail price in any way, at least over any appreciable period of time, and so could not have been passed on to consumers." * "Since the tax was not borne by consumers or by refiners or distributors of cane sugar and apparently was not borne by the manufacturers of raw sugar, it follows that the grower of cane sugar, as the residual element in the situation, did bear the burden of the tax as such." The tax under the sugar program has been borne principally by the producers of raw sugar and sugar beets, and the cost of sugar to consumers has not been increased. The following table illustrates these points by statistics for years when the processing or excise tax was in effect, compared with years when there was no such tax. 1 Bureau of Agricultural Economics, U. S. Department of Agriculture. / * Bureau of Labor Statistics, U. S. Department of Labor. The sugar program is a self-financing arrangement under which the tax is taken out of the normal gross proceeds of sale of sugar and principally reduces the income of the raw producer, who then, upon compliance with certain conditions, receives the remainder of his normal proceeds in the form of the conditional compliance payment. The total proceeds-sales price and conditional paymentare intended to return to the raw producer his normal share of the aggregate income of the domestic sugar industry. 1 Statement on Sugar, by the Secretary of Agriculture, U. S. Department of Agriculture press release, March 15, 1937; p. 9. 2 Message from the President of the United States transmitting a recommendation for the enactment of the sugar-quota system and its necessary complements. March 1, 1937. House of Repreesntatives Doc. No. 156, 75th Cong., 1st sess. 3 P. 67: An Analysis of the Effects of the Processing Taxes Levied Under the Agricultural Adjustment Act, published 1937 by the Bureau of Internal Revenue. An Analysis of the Effects of the Processing Taxes Levied Under the Agricultural Adjustment Act; p. 70. Note that this applies to cane sugar. In case of beet, the new tax program caused some shift of income from processors to producers, as explained and predicted in March 15, 1937, statement of the Secretary of Agriculture. The basic fact is that the tax on sugar is not a price-raising device at all. The sole purpose and effect is to withhold temporarily from cane and beet producers a substantial part of their normal income, in order to use it later in payments to producers as an irresistible incentive to carry out production adjustment and marketing control-as well as to induce them to meet standards for employment and soil conservation deemed necessary for the success of the program. As long as the tax remains in effect, any denial or drastic curtailment of conditional compliance payments to any group of domestic producers would inflict an injustice on all producers thus discriminated against and would, if carried very far, prove financially disastrous to many of them. The conditional compliance payment under the sugar program is not a burden on either taxpayers or consumers. It is, as has been explained, merely a practical device for inducing producers to carry out certain practices deemed by Congress to be essential and desirable from the standpoint of the general welfare, such as: (1) The payment of officially determined minimum wages. (3) The adjustment and control of production and marketing. (4) The payment by processors of not less than officially determined minimum prices for sugar beets or sugarcane. (5) The carrying out of farming practices intended to preserve and increase the fertility of the soil. A producer who has complied with the prescribed conditions has earned, and by right should receive, the payment for which he has thus qualified under a self-supporting program. The tax reduction in the proceeds of sale of the raw product makes it necessary for all producers to qualify for and receive the conditional payment in order to realize a normal return. Large-scale producers, under the graduated scale of reductions which is incorporated in the Sugar Act, receive in conditional compliance payments considerably less than the amount contributed through the tax on the sugar they produce. A scale of reductions in payments based on mere size of the production unit must necessarily give an inequitable result, because there is no direct relationship between the cost and the scale of production. It is incorrect to assume that large producers necessarily make large profits. Some large producers make little profit, and some make more. The same is true of small producers, some of whom produce at high cost and some at low cost. Those few large and small producers who have been fortunate enough to make substantial profits pay large income taxes and thus are subject to a levy on net income. In fact, it will be noted that any adjustment of producer income should be based on profits and not on merely the size of the farm in order that a program may operate successfully. This was pointed out by the Department of Agriculture in a letter to the Senate, as follows: Hon, E. D. SMITH, Chairman, Senate Committee on Agriculture and Forestry, JULY 1, 1939. United States Senate. TECHNICAL ASPECTS OF S. 2395 It is suggested that consideration be given to the following possibilities of improving the technical provisions of S. 2395: * 2. By modifying the provision in section 340 (b) whereby the certificate allotments per farm would be scaled down as the total number of bushels increases. It is possible that this provision was included on the assumption that large-producing units have a marked advantage from the standpoint of efficiency in production. If this assumption were correct, the ultimate effect of these scale-down provisions would be to foster the adoption of less efficient production units. On the other hand, efficiency of production seldom if ever increases in any given proportion to the increases in the size of the enterprise. Some small farms are low-cost producers, and some large farms are high-cost |