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

Senator VANDENBERG. Are you talking now about the period after 1960 ?

Mr. SAYRE. Yes; and I am also talking about the period from 1946 on, when the Filipinos will be independent.

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

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

The CHAIRMAN. Senator Miller wants to ask a question.

Senator MILLER. Doctor, you are speaking about the correction of imperfections and inequalities in the existing act. As a matter of fact, those imperfections and inequalities have arisen largely in the administration of the act or as a result of developments since the act was passed ?

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

Senator MILLER. There wasn't any provision, of course, in the act ? Mr. SAYRE. No;

there was no provision in the act, but there was a passage in the President's message, and there was a provision, I believe I am correct in saying, in the act of the Philippine Assembly, which accepted the Tydings-McDuffie Act.

Senator MILLER. That was put in there evidently for political purposes in the Philippines, that “whereas” was put in there because of the argument that was running riot in the Philippines then over the acceptance of the act, and that “whereas” in reference to the inequalities and exceptions was a mere sop, held out to the Philippine people, wasn't it, as a matter of fact?

Now, let's talk about these inequalities and imperfections
Senator KING (interposing). May I interrupt?
Senator MILLER. Yes.

Senator King. My recollection is that the Filipinos, when that act was under consideration, while they were willing to accept it, nevertheless they believed that there should be other concessions or other provisions which would remove what they now denominate as inequalities or injustices. While they accepted it as the very best they could get, I feel quite confident that many of the Filipinos were not quite satisfied with the act.

Senator MILLER. I assume that is true.

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

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

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

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

For instance, on cotton goods, of the total amount of cotton goods purchased by the Philippines, they got 44 percent from the United States, the greatest cotton-producing country in the world. Now, what other country supplied that 54

that 54 percent; do you know? Mr. SAYRE. I can answer with a rough approximation, sir; Japan supplied a great quantity.

Senator MILLER. One of our competitors.

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

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

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

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

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

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

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

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

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

so large in this picture, sugar constitutes roughly about 38 percent of the total Philippine exports to the world. If full duties are assessed against Philippine sugar, following 1946, I think the experts agree that it will be impossible for the Filipinos to ship their sugar into this country. What is going to happen to the sugar growers?

Senator MILLER. Right there, Doctor, that is true that the experts agree that, as they say, they can't ship their sugar into this country. Why can't they ship it into this country? If they are going to take their place as a nation, why can't they ship their sugar into this country, unless they would be prevented by the differential on Cuban sugar?

Mr. SAYRE. That is one very serious factor. So, also, one would have to go into the costs of production, into a whole multiplicity of factors which I don't want to weary you with here. Suffice it to say, however, that I think there is well nigh universal agreement that the Filipino sugar industry would be unable, if full American duties are assessed beginning on January 1, 1947, to ship sugar into this country. And the reason is because the costs of that Philippine production, the costs plus duty, would exceed the costs plus duty of other 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 could ship to the United States at very much less cost?

Mr. SAYRE. Yes. You will remember that under the Cuban-trade agreement, Cuba pays 9 cents a pound. The duty against other 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 cent per pound for Cuban sugar.

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

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

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

Of course, if the Congress passes S. 1028, that gentlemen's agreement will go by the board, and a new arrangement will have to be reached.

Again coming back to your question, which is a very real one, I think the matter boils down to this, as I see it. If the Filipinos are unable to export their sugar to the United States, and if, as I understand to be the case, they will be unable to ship their sugar in substantial quantities to other countries, they will be unable through their exports, to build up purchasing power whereby they can buy 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 United States.

Mr. SAYRE. And we get their sugar. That is, they sell their sugar to the United States and with the proceeds they buy various kinds 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 came into effect they would practically lose a great part of their market here, and therefore we encouraged them; I know that that was part of my preachment and the preachment of some other Senators, we encouraged them to find markets as soon as possible because when 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 have 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 upon the high seas.

Mr. SAYRE. I am glad you brought out that point, Senator, because 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? I 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 American 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 conversely, 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 pearl buttons into this country from the Philippines has done to that industry in this country, to the manufacturers of pearl buttons in the Southit has ruined that whole area, ruined all the factories.

Mr. SAYRE. I suspect some of the stories of competition are exaggerated.

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

I would like to have this answered, if you can. I would like to have the Department prepare and file with the committee a statement showing the present payments of the United States to the Philippines, to the Philippine government, in the way of money expended for the maintenance of consular offices, the Army, and the excise taxes that we collect and send back to the Philippines. I would just like to know really how philanthropic we have been to these islands. Not that it is going to be any determining factor, but it would make interesting reading to the American people.

Mr. SAYRE. You don't mean consular establishments, do you, Senator!

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

Mr. SAYRE. I don't know what you have reference to. Of course 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 Commissioner's office!

Senator MILLER. No; the trade offices that the Philippine government itself has in other countries. Is this Government paying that 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 regulate immigration matters.

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

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

Senator MILLER (interposing). We have got that quite well in this report, and I want to say this to you, that you have covered that pretty well. Mr. SAYRE. Well, when it comes to the Army expenses, I

suppose the War Department can furnish that.

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

Mr. SAYRE. Yes.

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

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