Senator BINGHAM. Porto Rico's principal agricultural crop is coffee. Where does she send most of it? You say to the United States? Mr. GRAY. I can not give you that figure. I do not know. We are interested in the Porto Rican situation very largely on the sugar basis. Senator BINGHAM. As a matter of fact, she sells most of her coffee to Europe, to Spain and France. Mr. GRAY. I was not informed about that. We are not interested in the exports of coffee so much, because they are not directly or even indirectly competitive with what we raise. Senator BINGHAM. But you are interested in the food that is exported from here to Porto Rico? Mr. GRAY. We are; and the question in that regard might be, would not Porto Rico, if established on her own economic foundation 10 years from now, be happier if our rates of duty were applied to her commodities, so that she will be constrained to develop her markets elsewhere than exclusively in the United States? Senator BINGHAM. I see. Following out your former reference. to the colonies of Great Britain, you are advocating independence for Porto Rico and the Philippines so that they may be on an absolutely independent economic basis, and not bother us in the tariff law? Mr. GRAY. That would be preferable to the present condition. Senator BINGHAM. Then you are for Porto Rican independence? Mr. GRAY. We have no official position on that subject. Senator BINGHAM. Do you not think it would be wise if you took one? Mr. GRAY. I think this, Senator-that if this Congress, now writing a tariff bill, does not give different treatment to Philippine products than that which was given in the act of 1922, wherein Congress declared its absolute right to levy rates of duty against Philippine products and then excluded them all from the imposition of such duties, this winter, when many farm organizations get together in their own annual meetings, there will be a sort of a flood of resolutions in favor of Philippine independence. Senator BARKLEY. Not based upon principle, but upon economics? Mr. GRAY. Upon economics. Stating it briefly, if Congress does not settle this question of tariffs on crops from our colonies, whether those crops be directly or indirectly competitive to us, the farm organizations in self-defense, and in order to get the benefits from tariffs which we can not get much benefit from when stuff comes in duty-free from colonies, will this winter be required to advocate independence. Senator BINGHAM. In other words, you would haul down the flag in Porto Rico and the Philippines rather than continue relations with them under the flag? Mr. GRAY. It is not a question of hauling down the flag. Senator BINGHAM. How are they going to get independence if we do not haul down the flag? Mr. GRAY. It is a question of preserving the economic independence of the American farmer. Senator BINGHAM. How are they going to get independence if we do not haul down the flag? Senator SHORTRIDGE. That is merely a play upon words. Mr. GRAY. We will retire from those countries as the governing body, not immediately but in time, so that they can take over their own authority as a full-fledged independent nation. This does not mean that this independence is going to transpire next year or next month. It may, as President Roosevelt said 25 years ago, take a generation to accomplish that. A generation has elapsed since he said that, and still the Philippines are not independent. are not independent. It may take another generation to get them on their feet, where they can stand independently as a recognized nation of the world; but in the meantime are we going along coddling them, if I may use that expression, letting them have a preferential market in this Nation of ours, so that when they do want independence the economic severance will be so severe that they will not dare take the political one? In other words, are we going to give them our markets and not encourage them to develop markets all over the world, so that economically they will be denied the privilege of ever being politically independent? Senator EDGE. That is about all that we have given them up to date, is it not a little chance to do business with us? Mr. GRAY. A little chance to do business with us? Senator SHORTRIDGE. We have given them a great deal more than that. Senator SIMMONS. Mr. Gray, you want us to apply to the Philippines the same duties that we apply to all countries? Mr. GRAY. Yes. Senator SIMMONS. With a view to restricting the importations to this country from the Philippines? Mr. GRAY. Partially with that view, and partially, as I have just explained, so that they will develop other markets, and make it possible for them to secure political independence at some future date. Senator SIMMONS. Do you not know that whenever they stop buying from us we will be rather disposed to get rid of them? Mr. GRAY. That will hasten the development. Senator SIMMONS. If we stop them from selling to us, we may stop them from buying from us; and I just want to ask you if you do not think, if we stop them from buying from us, we will want to get rid of them pretty soon? Mr. GRAY. Perhaps, Senator Simmons Senator SIMMONS. Is not that practically the only reason why we are keeping them? Mr. GRAY. I was going to say that perhaps the most forceful reason why we find an advocacy in our Nation for retaining the Philippines is that they make a good market for industrial products. Perhaps that is the most potent reason for retaining them-that they make an industrial market. Senator SIMMONS. Mr. Gray is admitting, as I understand him, that the most potent reason why we retain them is because they buy from us, and yet he wants to put them in a position where they probably may not be able to sell to us because of our prohibitive tariff. Senator SHORTRIDGE. They can buy anywhere to-day. Senator SIMMONS. Of course they can buy anywhere; but when they stop buying from us we shall be very apt to feel like getting rid of them. Senator SHORTRIDGE. Senator Simmons, you are familiar with the dispatches that passed between President McKinley and our commissioners in Paris when they were negotiating the Treaty of Paris with Spain. Senator SIMMONS. My memory is not as good as yours. Senator SHORTRIDGE. I am sure you know that President McKinley and our commissioners never agreed to that treaty, taking over jurisdiction of the Philippines, because of purely commercial reasons, or in order that we might sell to them or they sell to us. There were other great questions discussed and reasons given for entering into that treaty, quite apart from the commercial considerations. Senator SIMMONS. Do you not think those are the only reasons we are holding them for now, after 30 years? Senator SHORTRIDGE. I do not. I do not think that commerce is the reason. Senator SIMMONS. Well, I disagree with you about that; and that is th end of that controversy. Senator REED. Mr. Gray, do you class Porto Rico as in all respects. on the same footing as the Philippines in this matter? Mr. GRAY. No. There are differences between the legal or constitutional status of Porto Rico and the Philippines. Senator REED. And under this bill there is a vast difference. Senator REED. This bill puts a duty on imports into Porto Rico. It does not put any duty on imports into the Philippines. Mr. GRAY. I know. Senator REED. Porto Rico is part of the United States as much as one of the 48 States is; and it is our duty to legislate for the benefit of the farmers of Porto Rico just as much as it is for the benefit of the farmers of Hawaii or Florida or Virginia. The CHAIRMAN. I disagree with you, Senator, that Porto Rico has exactly the same status as one of the States of the Union. Senator REED. I did not say that. If I had, there would be more ground for disagreement. Mr. GRAY. May I disagree kindly with Senator Reed, too? It is not even on the status of a territory. Senator REED. It is part of the United States, and the Porto Ricans are American citizens, and as such they are entitled to our consideration like other American citizens. Mr. GRAY. These things that I am referring to we may be in error about, because it is possible for anybody to be in error until some final judicial body passes upon them; but the Tariff Commission, and, if I am not mistaken, the Customs Court, have decided that for tariff matters Porto Rico is not a part of the United States, and that in revenue matters Porto Rico is not a part of the United States. The CHAIRMAN. Did not the Attorney General make a decision to that effect? Mr. GRAY. I could have cited the Attorney General as well. Senator REED. The fact remains that this tariff bill applies to imports into Porto Rico. Mr. GRAY. That is true. Senator REED. That the Porto Ricans are American citizens, and, being American citizens, are as much entitled to our consideration as any other American citizens. Mr. GRAY. Well, that is a point of view, of course. Senator BINGHAM. What is the difference between an American citizen who happens to live in Porto Rico and one who happens to live in Connecticut? Mr. GRAY. In political rights, no difference at all, if he is an American citizen. Senator BINGHAM. They are American citizens. Mr. GRAY. Not for revenue matters and for tariff matters, according to the decisions which I have given to you, which decisions, I confess, may be overcome by a superior decision of the Supreme Court or of the Congress itself. Senator BINGHAM. But what right have we to take away from the American citizens in Porto Rico any privileges that they now enjoy? Mr. GRAY. I am not seeking to take them away; but I am denying that according to the decisions we have down to date on revenue and tariff matters a Porto Rican is an American citizen, or that the Porto Rican Government is a part of the Federal Government. I say that in revenue matters and in tariff matters the Porto Rican Government is not a part of the Federal Government. Senator BINGHAM. Any more than Massachusetts or Virginia was a part of the British Government in 1770? Mr. GRAY. Well, perhaps not as much as they were a part of the British Government at that time. They were taxed without representation; but the revenue system of the island of Porto Rico is not a part of the revenue system of the Federal Government. The revenue system of the Philippine Islands is not a part of the revenue system of the Federal Government. When you get to Hawaii and Alaska, you are on an entirely different foundation. The Cuban reciprocity treaty comes in this sort of a consideration. I do not know what this committee or what this Congress can do about it. It is a separate instrumentality of Congress in the way of a treaty; but what I have said relative to letting crops and commodities come in duty-free, or at preferential rates, applies also to Cuba. Tobacco and sugar come in from Cuba of an agricultural nature. We raise lots of tobacco and sugar, the growers of which are desperately situated now, largely because of Cuban competition; and Cuba has a preferential rate, a preferential entry into our markets. To end this Cuban situation we advocate terminating that reciprocal trade agreement. A similar conclusion applies to the Philippines, which take in industrial imports 80 per cent from us, and sell to us in farm exports 95 per cent; so that we must advocate in regard to the Philippines that we farmers be not made to compete with the 95 per cent of Philippine exports which are agricultural. Passing on, now, to the milling in bond provision, I shall finish: The House, by amendments from the floor, terminated the privilege of sending flour to Cuba under the preferential trade agreement unless such flour coming in in bond, mostly from Canada, should pay, when exported, a rate of duty equal to the preferential rate to the country to which the flour is being exported. It applies to Cuba, although Cuba is not named in the amendment. Here is the situation: Canadian wheat comes into our mills and is ground in bond. Then this same Canadian wheat has the privilege of the trade preference with Cuba, the reduced rate; and it goes down to Cuba as flour, and supplies the Cuban market very largely to the exclusion, of course, of American wheat and American flour. The House amendment requires this Canadian milled-in-bond flour, when shipped to Cuba, to pay a rate of duty equivalent to the decrease which Cuba has in a reciprocal trade agreement. That should be continued, in our estimation, in the Senate bill. I have concluded. (Mr. Gray submitted the following brief:) BRIEF OF THE AMERICAN FARM BUREAU FEDERATION The American Farm Bureau Federation submitted a lengthy brief to the Ways and Means Committee of the House of Representatives on February 25, 1929 in which various recommendations were made together with an extended analysis of the reasons for these changes. In order to avoid unnecessary repetition of arguments and data, the attention of the Finance Committee is respectfully invited to the information submitted in this brief which is to be found on pages 9765-9783, Vol. XVI, Hearings on Tariff Readjustment, 1929, Ways and Means Committee, House of Representatives. For the information of the committee, however, the recommendations of the American Farm Bureau Federation are summarized as follows: THE FLEXIBLE PROVISION The basic principles of the policy of the American Farm Bureau Federation concerning the flexible provision are set forth in the following resolutions: Resolution of annual convention in 1922: "Resolved, That the American Farm Bureau Federation favors the immediate and thorough investigation by the Tariff Commission of tariff rates on all imports, which the farmers buy, and an immediate reduction of excessive rates to such lower levels as shall only equal the differences in the cost of production here and abroad." Resolution of annual convention in 1923: "We believe that the making of tariff schedules is of such great importance that the United States no longer can afford to permit it to be subjected to political determination. We urge a vigorous, continuous study by the Tariff Commission with added authority to change schedules as changing conditions warrant." Resolution of annual convention in 1925: "We request the Tariff Commission to make a study immediately of the costs of frozen eggs, egg meats, and dried eggs in this country and in China, with a view to increasing the tariff the full 50 per cent allowed under the flexible provisions of the tariff law. Resolution of annual convention in 1927: "We recommend that the flexible provision be changed so that the United States Tariff Commission can be in a position more efficiently to serve agriculture in the cases before it * * * We commend the Tariff Commission for its studious attention to, and fair consideration of, the agricultural cases recently decided and now pending.' Resolution of annual convention in 1928: act. "It is indispensably necessary that flexibility be provided in tariff rates no matter how accurately such rates may be estimated in the writing of the tariff Economic conditions change which require an elasticity which will permit corresponding changes in the rates of duty. There must be continuously in the Federal Government a tariff commission under the administration of which this elasticity can be secured. This commission should be nonpartisan and the members thereof should be appointed for such a term of years as will give continuity in the carrying our of the policies of our tariff laws and will secure eventually scientific and economic revision of tariff rates rather than revision of a political matter, which has been up to the present time too much in evidence. Since the enactment of the flexible provision in the tariff act of 1922, representatives of the American Farm Bureau Federation have participated in 13 cases before the United States Tariff Commission under this provision, involving the following products: Wheat, corn, Swiss cheese, cherries, maple sirup, and maple sugar; butter, milk and cream, flaxseed, fresh tomatoes, canned tomatoes and tomato paste, onions, peppers, eggs and egg products. Participation in these cases has given an opportunity for first-hand observation of the operation of the |