concur with them fully, sir, in that. I believe you gentlemen are willing and glad to foster American industries if in doing so you do not harm any other interests in this country.

Senator REED. Is it true that the Canadian wheat which is milled in bond in the United States is exported very considerably to Cuba and there displaces an equal quantity of American flour which would otherwise be sold there?

Mr. HELM. In our opinion it does not displace one bushel of American wheat.

The CHAIRMAN. Why doesn't it?

Mr. HELM. I would like not to anticipate the arguments of the other gentlemen, but I will, of course, answer your question as best I

can.

The CHAIRMAN. No. I will leave that to the other witnesses.
Mr. HELM. That is fully covered by the other witnesses.

The CHAIRMAN. I understand each one has been given a certain subject to handle before the committee, and I will leave it until the other witnesses come on.

Senator BINGHAM. Before the witness leaves the stand I would like to make sure I understood him-that if it were not for the 42 cents a bushel duty on wheat, the millers would probably purchase several hundred millions of bushels more of Canadian wheat for consumption in America than they do now?

Mr. HELM. It would open our markets to the entire Canadian crop. How much of it we would use to the exclusion of our own hundreds of millions of bushels, of course, no one can say. It would depend upon quality and price; but all of the wheat of North America, Canada and the United States, would, of course, then be on a price level, for equal quality. We in Minneapolis, for instance, would have access easily to the wheat grown in Saskatchewan and the great wheat producing areas of Canada.

Senator BINGHAM. If that were brought by the millers, there would be just that much less to be sold by the farmers of the United States in America.

Mr. HELM. Yes.

Senator EDGE. And, of course, it would lower the price of the American product.

Mr. HELM. Yes.

Senator BARKLEY. I see that in 1922, from September to December, there were 3,165,000 bushels imported. During 1923 there were 8,900,000; in 1924, from January to April, 6,215,000 bushels; and then the 12 cent additional tariff went on. Next year it was reduced to 679,000, and in 1925, it was 1,308,000. Do you know how much was imported prior to the act of 1922, which put the 30 cent tariff on wheat? These figures do not give the years prior to 1922.

Mr. HELM. No, sir. I can not answer as to quantities.

Senator BARKLEY. I see here that the flour produced in Minneapolis has decreased since 1920 from 17,000,000 barrels to 11,000,000, and that in Buffalo has increased from 5,000,000 to nearly 10,000,000. Mr. HELM. Yes.

Senator BARKLEY. What is the reason for the shift in the produc tion of flour in those two places?

Mr. HELM. We used to be able to export our product from mills in the west and in the interior of the country. The trade has been

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taken from us as Canada has increased her crops and her milling capacity until a mill located at a point like Minneapolis can hardly do any exporting, or very little of the old export business is still held by the mills there. We were obliged to go to Buffalo and build mills if we wanted to hold our export business and take advantage of the milling in bond. We can not bring Canadian wheat down to Minneapolis, or interior points, with long out-of-line hauls, and mill it for export.

Senator BARKLEY. These figures I quote you are not for exports, but for total production of flour at those two places.

Mr. HELM. I did not complete my answer, perhaps. In building mills at Buffalo, of course, we desired to be in a position to take better care of our eastern seaboard domestic business, and much capacity has been moved away from Minneapolis, or abandoned at Minneapolis, as the companies operating out there have built mills in Buffalo. The CHAIRMAN. Is that all?

Mr. HELM. Yes.

Senator THOMAS. I want to ask a question. If the American wheat is inferior to the Canadian wheat, and if the tariff increases the price of American wheat, how can the milling interests produce flour in competition with the Canadian flour and sell it abroad?

Mr. HELM. I did not mean to imply that American wheat was inferior in its flour quality to Canadian wheat. That new country produces a very plump, beautiful kernel of wheat, and much of it averages somewhat better in value, in flour yield, than ours. It does not produce any better quality of flour than certain of our wheats. We have a very great range of quality in our wheats. We have hard spring wheat; we have hard winter wheat; we have a large amount of soft winter wheat, which is used in cracker and pastry manufacture, and does not go into bread consumption. We have a large amount of durum wheat, which has plenty of protein, but of a poor quality for bread making. It goes into other uses. But our choice hard bread wheats are comparable to the aggregate, or the preponderance of wheat grown in Canada.

Senator THOMAS of Oklahoma. What countries offer competition in the wheat and the flour to the American interests?

The CHAIRMAN. Senator Thomas, may I suggest that there are about seven witnesses, and each one is given a subject to handle. When that subject comes up, he is prepared to answer any questions in detail; and that is the way they would like to have their evidence submitted.

Mr. HELM. Thank you very much, gentlemen.

STATEMENT OF FRED J. LINGHAM, LOCKPORT, N. Y., REPRESENTING THE AMERICAN EXPORT MILLERS' PROTECTIVE ASSOCIATION

(The witness was duly sworn by the chairman.)

Mr. LINGHAM. Mr. Chairman, and gentlemen, I am president of the Federal Milling & Elevator Co. (Inc.), of Lockport, N. Y., and secretary and treasurer of the American Export Millers' Protective Association.

I am appearing here as a miller who does no exporting; but, notwithstanding that, we have a very keen interest in the export flour

business of the country, because if the exportation of flour from this country through milling in bond is diverted to Canada, it would naturally throw that much more milling capacity into that country and further demoralize our business.

As to the American Export Millers' Protective Association, it is an association of 175 mills. The large proportion of those mills also do no milling in bond, or no export business, but they have the same interest that we have to continue the exportation through milling in bond.

Senator WATSON. Do you use Canadian wheat at all?

Mr. LINGHAM. We do not now; no, sir. I might say that I am not a paid official of the association. I am simply giving my time to the association for the good of the industry. We are appearing here, of course, in connection with section 311. This section of the bill

Senator EDGE. Section 311 is a proposed amendment provided by the House, apparently changing the present system of milling in bond and exporting to countries with a preferential. Is that the section?

Mr. LINGHAM. Yes.

Senator EDGE. Is that the proposed amendment you are going to discuss?

Mr. LINGHAM. That is the section.

Senator EDGE. If you will, in a few words, outline the difference between the present system and what will be brought about by the amendment, I think we can more intelligently follow your testimony. It is new to some of us.

Mr. LINGHAM. I will try to do that, Senator. This amendment to section 311 provides, in effect, that wheat imported from the foreign country-of course, in effect, from Canada-shall not be exported to Cuba. Cuba is not named, but that is the intent.

Senator EDGE. That is what it means.

Mr. LINGHAM. Yes; that is what it means-without the payment of a duty on the wheat equivalent to about 35 cents a barrel. That is the whole meaning of section 311.

Senator SACKETT. That is what you object to?

Mr. LINGHAM. Yes, sir. That is what we object to, Senator Sackett.

I might explain what manufacturing in bond is. Manufacturing in bond is the bringing into this country of raw material, or partially manufactured goods, into a bonded warehouse, bonded by the Federal Government, and there processing it and forwarding to a foreign country. That is manufacturing in bond.

Why is that needed? It is because, in any country that has a protective tariff, if the results are secured that are aimed at by the protective tariff, the raw material is put above a world level of price. When that is done, of course, the manufactured product could not be exported in competition with countries having the raw material at the lower price.

So, in order to provide for the use of labor and industry in this country, using this country as the country we are considering, it is provided that manufacturing in bond shall be allowed.

As to the Cuban reciprocity treaty, which is directly in connection with this section under discussion, it was signed by representatives of the two countries December 11, 1902. As stated in a proclama

tion by President Roosevelt at the time, it was intended to facilitate their commercial intercourse-that is, Cuba and the United Statesby improving the conditions of trade between the two countries. Article IV of the treaty reads, in effect, that certain articles

being the product of the soil or industry of the United States, imported into Cuba, shall be admitted at a reduced rate of duty.

Schedule B of that article definitely names wheat flour to be admitted at a reduction of 30 per cent, which is about 35 cents per barrel.

The proponents of paragraph 311 have believed that if manufac turing in bond of flour for the Cuban market could be stopped they would get more Cuban business. That is why the bill is brought forward, of course. These millers have, at different times, brought the matter before various Washington bodies, including the Department of State. That department finally made a very careful investigation of the whole situation, and on March 7, 1928, issued a memorandum regarding the treatment accorded by Cuban authorities to flour manufactured in the United States from wheat grown in Canada. In other words, it specifically covered the problem we are now discussing. I will present a copy of that memorandum in full later.

First, the Department of State answered the claim of these millers that the treaty was working injury to their business by pointing out that the treaty between the United States and Cuba definitely read that the products of the soil or industry of the United States imported into Cuba should come in at the preferential of 30 per cent.

Then, answering the claim of these southwestern millers-it is really mostly the southwestern millers that have brought this forward-that their business in Cuba had been declining and had been taken over by mills in the United States located near the Canadian border, this memorandum stated this was by the Department of State, but they, in turn, quoted the Department of Commerce

The Department of Commerce has prepared a statistical table, a copy of which is attached hereto, containing pertinent information for the years 1922 to 1927, inclusive, and from which it appears that the increase during the last three years in the amount of flour shipped to Cuba by the mills in this country near the Canadian border has been accompanied by a much more marked decline in the amount shipped to Cuba by Canadian mills than by mills located in the Central and Southwestern portions of the States.

The department stated, in effect, that in their opinion, if the Cuban treaty had not been effective

Direct shipments from Canada to Cuba would probably have tended to increase.

The memorandum referred to shows flour exports to Cuba through the principal United States ports and from Canada from 1922 to 1927. This memorandum shows that exports via the Gulf to Cuba declined 208,000 barrels from 1902 to 1927, but the memorandum of the Department of State points out that during the same period Canadian exports declined practically the same amount-namely, 179,000 barrels and, as previously quoted, the State Department, after careful study, decided that if the Cuban preferential on flour manufactured in bond from Canadian wheat had not been effective the Canadian mills would have tended to secure an increase in that market.

So that we can understand the reasons for the foregoing, let me picture the situation that exists as to the growing of wheat.

Canada has developed very fast in the last few years as a wheatgrowing country. Her production has reached the point where practically three-quarters of her average wheat crop must be exported. In other words, what she grows over her domestic consumption naturally must be exported, and this wheat is practically all what is known on the continent as premium wheat.

On the other hand, the United States exports only about onequarter of her wheat crop, and frequently less than that, and then her exportable wheat is only of the grades and varieties not demanded by American mills for home consumption.

I will read a short quotation from the Bureau of Railway Economics, in their Bulletin No. 24. They quote from the United States Department of Commerce:

The export wheats of the United States are no longer representative of the crops. Our mills pick, first, the wheats that meet their requirements. It is safe to say that out of an average crop of 800,000,000 bushels of wheat, practically all the best wheat, No. 1 and most of No. 2 premium quality, would be required by the millers of the United States.

They mean, therefore, home consumption.

But there is always a surplus of semihard, semisoft wheat, and low grades, all of which do not meet the requirements of the American mills for home consumption.

They add:

This

The Canadian export wheat is representative of the entire prairie crop. wheat is high in gluten, of good milling quality, with high water absorption, and good milling qualities.

The bulletin also says:

As the United States controls, on the average, less than 25 per cent of the international movement in wheat, it is obvious that the United States is not in a position to control the export price.

There is a limited amount of business done with Cuba by a few Minnesota mills, which have had brands established there for some years, but if present conditions continue, and the matter of premiums increases, as it may very probably, then those mills must gradually lose that market in competiton with Canadian wheat.

Senator SHORTRIDGE. What mills?

Mr. LINGHAM. The Minnesota mills. There are a few Minnesota mills that have a comparatively small business there.

Senator WALSH of Massachusetts. Does the climate of Cuba tend

to make Canadian wheat preferable to domestic wheat?

Mr. LINGHAM. Senator Walsh, I have that very point covered.
Senator SHORTRIDGE. Why not answer it right now?

Mr. LINGHAM. Oh, it does; decidedly.

Senator SHORTRIDGE. That is the way to answer.

Mr. LINGHAM. Ninety-five per cent of the Canadian wheat crop is grown west of the Great Lakes. Some of that flows to the Pacific coast for export. The balance, of course, flows eastward, down the Great Lakes, or by the Canadian railroads east, and as it goes east the mills manufacturing in bond pick that wheat, or some of that wheat, from the stream, make it into flour, and forward it.