should think it would be unfortunate to rob ourselves of t of bargaining with them when they are independent, be might thereby subject American export trade to severe t riers or disadvantages.

Senator VANDENBERG. Are you talking now about the per 1960?

Mr. SAYRE. Yes; and I am also talking about the period f on, when the Filipinos will be independent.

Senator VANDENBERG. Well, they are only politically ind from 1946 to 1960, they are not economically indepenent?

Mr. SAYRE. That is true, with certain qualifications. O when you say "only politically," politically is a great big the situation; and when you say they are not economically in ent until 1960, I should say that they are becoming more a independent with every year from 1940 on.

The CHAIRMAN. Senator Miller wants to ask a question. Senator MILLER. Doctor, you are speaking about the corre imperfections and inequalities in the existing act. As a m fact, those imperfections and inequalities have arisen largel administration of the act or as a result of developments s act was passed?

Mr. SAYRE. Well, the situation was foreseen, sir, at the tim passage of the act, I believe.

Senator MILLER. There wasn't any provision, of course, in t Mr. SAYRE. No; there was no provision in the act, but the a passage in the President's message, and there was a prov believe I am correct in saying, in the act of the Philippine As which accepted the Tydings-McDuffie Act.

Senator MILLER. That was put in there evidently for politic poses in the Philippines, that "whereas" was put in there bec the argument that was running riot in the Philippines then o acceptance of the act, and that "whereas" in reference to the in ties and exceptions was a mere sop, held out to the Philippine wasn't it, as a matter of fact?

Now, let's talk about these inequalities and imperfectionsSenator KING (interposing). May I interrupt?

Senator KING. My recollection is that the Filipinos, when th was under consideration, while they were willing to accept it, theless they believed that there should be other concessions or provisions which would remove what they now denominate equalities or injustices. While they accepted it as the very bes could get, I feel quite confident that many of the Filipinos we quite satisfied with the act.

Senator MILLER. I assume that is true.

Mr. SAYRE. I wonder, Senator, if the answer doesn't lie in wh already said that this bill, S. 1028, is certainly not in fulfillme a legal obligation to the Philippines. It is in fulfillment rather in response to, the sense of fair play and justice of the Ame people. I think that is the true situation.

Senator MILLER. I understand the basis of this act, and I an quarreling with the altruistic attitude that the Government sh take, but you know charity begins at home and I don't want any to be any fairer to me than I am to him.

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Now, in looking over the report of the trade relations between t United States and the Philippines, you have disclosed here that purchased in 1937, $59,453,000 more of exports than they purchas from us, and the balance of trade has been decidedly in their fav since 1928. That is probably to be expected. I also find here on pa 30 of your table that the Philippines, notwithstanding the concessic which we have been granting them, and nothwithstanding the f that we took from them 100 percent of their sugar exports, 99 p cent of their tobacco products-in other words, of the whole to we took 80 percent of their exports, which were marketed in t United States.

During that period of time they bought a total of 58 percent their imports from the United States.

For instance, on cotton goods, of the total amount of cotton goo purchased by the Philippines, they got 44 percent from the Unit States, the greatest cotton-producing country in the world. No what other country supplied that 54 percent; do you know?

Mr. SAYRE. I can answer with a rough approximation, sir; Jap supplied a great quantity.

Senator MILLER. One of our competitors.

And on dairy products, or rather on wheat flour, they boug 38 percent of their imports of wheat from the United States. Wh other countries supplied the rest of that?

Mr. SAYRE. I am unable to answer that offhand. [After consulti with assistant.] Australia and Canada largely, sir, I am advise and you will understand that these are simply rough

Senator MILLER (interposing). I know; and they bought 26 p cent of their dairy products from the United States, and 36 perce of their silk and rayon came from the United States.

Fish and fish products, that you referred to, they bought 30 perce of their exports, or imports, rather.

As a total, they bought all told from us 58 percent of their impo tations, from this country, as against 80 percent of their goods whi we bought from them.

Now, I was interested in the proposition-you said that if this a is not passed and 1946 comes along, and full duties are restored, th we will reduce the Philippine purchasing power to the extent th they cannot trade with us. What will happen to their trade? W they purchase from the other countries as they are now purchasin or what?

Mr. SAYRE. In reply to the first part of your remarks, I think should say that manifestly, as you yourself of course realize, tra is a matter which cannot be confined between each two countri That is, a large part of the trade of the world is triangular a polyangular. In a word, nations seek to buy in the cheapest marke wherever those markets may be, and seek to sell in the markets whe they can get the greatest return, wherever those markets may be.

It is pure chance if country A and country B buy and sell fro each other, or rather desire to buy and sell from each other, goo to the same value. So that the figures which you have pointed o are a very natural, and, I might say, a very normal result of t conditions which surround trade.

Now, coming to the direct question which you put, I think t answer is pretty clear. Taking sugar again, because sugar loor

so large in this picture, sugar constitutes roughly about 38 of the total Philippine exports to the world. If full d assessed against Philippine sugar, following 1946, I think the agree that it will be impossible for the Filipinos to ship the into this country. What is going to happen to the sugar g Senator MILLER. Right there, Doctor, that is true that the agree that, as they say, they can't ship their sugar into this Why can't they ship it into this country? If they are going their place as a nation, why can't they ship their sugar i country, unless they would be prevented by the differential or sugar?

Mr. SAYRE. That is one very serious factor. So, also, one have to go into the costs of production, into a whole multipl factors which I don't want to weary you with here. Suffice it however, that I think there is well nigh universal agreeme the Filipino sugar industry would be unable, if full American are assessed beginning on January 1, 1947, to ship sugar in country. And the reason is because the costs of that Philippi duction, the costs plus duty, would exceed the costs plus duty o sugar-producing areas.

Senator KING. That is because Cuba has a differential?
Mr. SAYRE. Cuban sugar pays 9 cents per pound.

Senator KING. And Java has such cheap labor that they coul to the United States at very much less cost?

Mr. SAYRE. Yes. You will remember that under the Cubar agreement, Cuba pays 9 cents a pound. The duty against foreign countries is 1.87 cents per pound. Senator MILLER. You meant 0.9 cent per pound?

Mr. SAYRE. Yes, I am sorry. I beg your pardon; 0.9 ce: pound for Cuban sugar.

To answer your question, then, Senator, doesn't it seem ma that if the Filipinos are, overnight, as it were, prevented from e ing 38 percent of their total exports, we are going to have disr and economic dislocation of serious proportions in the Islands

Senator MILLER. I grant you that there will be considerable tions and interruptions and all kinds of rows and everything trade wars, but they are buying these other goods from fo countries. Now, what is the differential in the tariff, we wil from Japan, on cotton goods admitted from Japan and cotton from the United States?

Mr. SAYRE. On cotton textiles, sir, because of the inroads of nese exports of cotton textiles to the Philippines, some years ag got together with the Japanese Government and we worked out we called a gentlemen's agreement, limiting and restricting amount of Japanese exports of textile goods to the Philippines. since that time we have followed and kept in force that gentler agreement. So that the amount or quantity of Japanese textile ing shipped into the Philippines has been restricted by this arti arrangement.

Of course, if the Congress passes S. 1028, that gentlemen's a ment will go by the board, and a new arrangement will have t reached.

Again coming back to your question, which is a very real or think the matter boils down to this, as I see it. If the Filipinos

COMPLETE INDEPENDENCE OF PHILIPPINE ISLANDS

5

unable to export their sugar to the United States, and if, as I under stand to be the case, they will be unable to ship their sugar in sub stantial quantities to other countries, they will be unable throug their exports, to build up purchasing power whereby they can bu goods from all these other countries. In other words

Senator MILLER (interposing). How are they buying them now Mr. SAYRE. Through purchasing power built up by their exports Senator MILLER. Through the money gotten from the Unite States.

Mr. SAYRE. And we get their sugar. That is, they sell their suga to the United States and with the proceeds they buy various kind of goods.

Senator KING. Could I interrupt you a moment? I apologize.
Senator MILLER. Yes.

Senator KING. Isn't it a fact that the Filipinos objected to the legislation which practically cut off all their foreign markets and made them tributary to the United States in the exchange of goods and after we passed this bill, under which they got their shall I say independence we encouraged them and it was understood that they were to seek a market because when the full effect of this law cam into effect they would practically lose a great part of their marke here, and therefore we encouraged them; I know that that was par of my preachment and the preachment of some other Senators, w encouraged them to find markets as soon as possible because wher we put the full effect of the law in force, then they will lose a large part of their markets in the United States. And therefore we hav to look with a good deal of equanimity upon their finding markets in other countries so that when we cut them off they won't be alone upor the high seas.

Mr. SAYRE. I am glad you brought out that point, Senator, becaus it is true that after the passage of the act of 1909, from which time we have encouraged them to build up a system of free trade or near free trade between the Philippines and the United States, we have made the Philippine economy dependent upon American markets What Senator King says is perfectly true. For 30 years we have been building up their dependence upon us.

Now we are proposing

Senator MILLER (interposing). May I interrupt just a moment? ] don't understand that we have made their economy dependent upon us purchasing their goods without requiring reciprocal action on their part, purchasing our goods.

Mr. SAYRE. Free trade practically exists between the Philippines and the United States, as inaugurated in 1909.

Senator MILLER. I understand that.

Mr. SAYRE. In other words, Philippine goods come into the Ameri can market free of duty, and American goods go into the Philippine market free of duty. In the case of Philippine coconut oil, cigars scrap tobacco, pearl buttons, suddenly to impose full American duties will very seriously disrupt, if not destroy, those industries. So con versely, with respect to American cigarettes now going into the Philippines, if, in 1946, suddenly 100 percent of the Philippine duties are imposed against American cigarettes, we will probably lose that American export industry.

Senator MILLER. You know what the shipment of pear into this country from the Philippines has done to that inthis country, to the manufacturers of pearl buttons in the it has ruined that whole area, ruined all the factories.

Mr. SAYRE. I suspect some of the stories of competition aggerated.

Senator MILLER. I grant you that that is always true, and this is a lot of excitement here, I believe these boys are scare they are hurt. If they will just give us a hand of coopera not expect too much

I would like to have this answered, if you can. I woul have the Department prepare and file with the committee ment showing the present payments of the United States Philippines, to the Philippine government, in the way of m pended for the maintenance of consular offices, the Army, excise taxes that we collect and send back to the Philipp would just like to know really how philanthropic we have these islands. Not that it is going to be any determining but it would make interesting reading to the American peopl Mr. SAYRE. You don't mean consular establishments, do yo ator?

Senator MILLER. I understood somewhere, by a grapevin probably, that we were maintaining at our expense their c establishments. Is that true or not?

Mr. SAYRE. I don't know what you have reference to. Of the Philippines have no consular establishments.

Senator MILLER. We don't, but I mean maintaining

Mr. SAYRE (interposing). You are not thinking of the High missioner's office?

Senator MILLER. No; the trade offices that the Philippine g ment itself has in other countries. Is this Government payin expense?

Mr. SAYRE. I don't think there are any.

Senator MILLER. I read it the other day.

Mr. SAYRE. Senator, we do have a consul in Manila to re immigration matters.

Senator MILLER. I will talk to you further about that list. just anxious to really get at the amount of money that we are p to the Philippine government.

Mr. SAYRE. If I understand, Senator, what you would like is kind of a tabulation of the coconut oil and sugar excise taxes p the Philippines

Senator MILLER (interposing). We have got that quite w this report, and I want to say this to you, that you have covered pretty well.

Mr. SAYRE. Well, when it comes to the Army expenses, I su the War Department can furnish that.

Senator MILLER. I think probably we can get that. May I one other suggestion, Doctor?

Senator MILLER. There is a very illuminating statement on 46 of this report in reference to the sugar situation. I am goi suggest that that, taking in all of page 46 and the first five lin page 47, be incorporated in the record as part of your stateme