and that the needs and wants of the Filipino people are far below the needs and wants of comparable people in the United States, due primarily to the tropical climate as against the temperate climate. Those of us who have been in the Philippines, particularly Mindanao and Luzon, know that the population is greatly scattered, and outside of a few big cities they rely for their sustenance on the land, and living conditions are vastly different than those in the United States. Mr. ELIZALDE. One important point, of course, is not having a winter there.

The CHAIRMAN. Clothing and food and shelter are all three much cheaper?

Mr. ELIZALDE. Yes.

In a great number of our products we have to compete with other tropical countries that have a much lower standard of living than we have, and under such conditions, of course, our wages cannot go up as rapidly as otherwise, because it would put us completely out of proportion in our competition.

In the case of copra, where we sell part of our copra in Europe against competition from India and other countries, it makes it very hard.

I don't think I am going to say very much about coconut oil, because Mr. Craig has made a very good presentation of this part of our problem. I would like to mention, however, that we have about 4,000,000 people in the copra industry. Living out of that industry is about one-fourth of our population, and the excise tax has been working a tremendous hardship on the people of the Philippines, because I would like to mention that it is my opinion that the greatest part of the excise tax has been absorbed by the producer of copra in the Philippines.

Copra at one time used to sell in the Philippine Islands at #16 per 100 kilos. That was before the excise tax. It is selling now at P5 per 100 kilos. So it is quite obvious that the excise tax has been practically taken out of the producers of copra.

And there is one provision in this act that would permit the government to help readjust the copra industry, which I think is a very much needed change at this particular time.

The CHAIRMAN. You mean in the present act?

Mr. ELIZALDE. Yes; in S. 1028.

The CHAIRMAN. Where, if the Philippine producer can show that he is being penalized beyond the point of economic standards, then the Government is authorized to use some of that money to go to his rescue?

Mr. ELIZALDE. Yes. It will be necessary, I think, to save these people from the plight in which they are at this time, to help them indirectly industrially. One must take into consideration that a coconut plantation is not something that can be improvised overnight, and that a man that enters the coconut business has a coconut plantation, and in the Philippines there are about a million and a half acres of land under coconut cultivation, and nearly every plantation is smaller than 10 acres a man has a coconut plantation of 10 acres, let's say. It takes from 5 to 7 years-certainly not less than 5-for those trees to bear fruit, and they become trees of 50 feet in height, and so forth. It is not an easy thing for those people, that work for

7 or 8 or 10 years on these coconuts, to all of a sudden shift over to another more profitable crop, because it is a hard thing to knock down trees of 50 feet, and they are always looking for the future, expecting for the future, and they are really going through a great deal of suffering at this particular time.

I don't think that I have any other points.

The CHAIRMAN. Are there any questions from members of the committee?

If not, we will proceed with the next witness. Vice President Osmena has a short statement which he desires to make. We are very glad to hear from him.

STATEMENT OF HON. SERGIO OSMENA, VICE PRESIDENT OF THE PHILIPPINES-Resumed

Mr. OSMENA. Mr. Chairman, I wish to express to the committee my very deep appreciation of its courtesy in permitting me to present the views of the Philippine Goverment during the second day of the hearing and to appear personally today to make some supplementary remarks. I am also deeply sensible of the privilege extended to me when the committee, because of my illness, allowed my statement of the views of the Philippine Government with reference to S. 1028 to be read by Mr. Razon and gave Mr. Razon the opportunity to reply to the questions addressed to him by members of the committee.

I regret extremely that I was not able to be present at that time and my purpose in appearing today is not to go over the same ground that has already been covered or repeat the points that are embodied in my statement which has been read to the committee. It is my purpose merely to endeavor to contribute to the clarification of the background surrounding the discussion and consideration of this proposed legislation.

In the course of the discussion concerning my statement of the views of the Philippine Government, the inquiry was made as to whether the conformity of the Philippine Government to this bill represented the permanent views of that government. On this point I wish to say categorically that the answer is in the affirmative. It seems to me that certain misconceptions have arisen over the presentation of figures which show that during a 50-year period Philippine purchases of American goods registered a higher percentage of increase than American purchases of Philippine goods and that the volume of American-Philippine trade had increased enormously during the free-trade period with the consequence that the national economy of the Philippines had become highly dependent upon the American market. These figures were cited primarily to indicate the value of this trade, to portray its possibilities and to serve as documentation for the obvious fact that the economic problem involved in the political separation of the Philippines from the United States is one of tremendous proportions. The solution of this problem means reversing a trend that has existed for 30 years; it requires careful analysis of the possibility of finding in the present highly disturbed condition of international trade alternative markets for Philippine products now being sent to the United States; it needs

a scientific and exhaustive study of the period that would be required to readjust the Philippine industries that have been developed under the most favorable conditions during the last generation to a new and, to them, highly unfavorable situation, and of the wisest and most effective methods for accomplishing these objectives.

The Filipino people have always been pleased to recognize that they have derived great benefits from the free admission of Philippine products to the United States. Previous Philippine missions have frankly and openly admitted this fact. An expression of this sentiment has been reiterated and placed in the record of the proceedings of this committee in the cablegram sent by the President of the Philippines. The sense of gratitude of the Filipino people is strengthened by the knowledge that those responsible for the initiation of the free trade policy between the two countries were animated by altruistic motives a high sense of the duty which they felt the United States owed to the Philippines as a trustee of the welfare of the Filipino people.

And the Filipinos further believe that the gratitude they owe to the American people cannot be measured solely by the economic benefits they have received during their political association with the Americans. There must also be included the other benefits-those that concern the intangible and the higher values. America brought to the Philippines the spirit of free institutions and, in accordance with the spirit, she prepared the Filipino people for self-government. She gave to the Filipinos ungrudging assistance in transplanting to Philippine soil the blessings derived from modern science, technology, and culture.

Our country, because of the improvement brought about by public health and sanitation measures, is one of the most healthful spots in the Orient. A modern road system has been built, bridges, piers, wharves, and other port improvements have been constructed; new means of transportation and communication have been introduced. A public school system, patterned after that in the United States, was established and at the inauguration of the Commonwealth in 1935 over 1,000,000 children were enrolled in the elementary grades.

These activities have been continued and in some cases extended and expanded during the 3 years of the Commonwealth regime under the wise and able leadership of President Quezon. Three hundred thousand additional school children are now in the public schools; the public health services are being extended to the rural district; and extensive program of public works construction has been initiated.

It may thus be said with ample justification that during this transition period that immediately precedes the era of full independence, the Filipinos are treading along the same paths they followed in the years of American-Philippine collaboration-paths that they firmly believe will lead to the building up of an enlightened and progressive republic dedicated to the ideals of democracy, justice, and international good will.

The CHAIRMAN. Thank you, Mr. Osmena.

We will now have a statement from Mr. J. S. McDaniel, chairman of the Cordage Institute.

STATEMENT OF J. S. MCDANIEL, CHAIRMAN, CORDAGE INSTITUTE, NEW YORK CITY

Mr. MCDANIEL. My name is J. S. McDaniel, 350 Madison Avenue, New York. I am chairman of the Cordage Institute, and I am here representing the entire hard fiber, cordage, and twine industry of

the United States.

I prepared a statement but, if it is agreeable to the committee. I am going to ask that it be inserted in the body of the record. The CHAIRMAN. We will be glad to do that.

(The statement referred to is as follows:)

Mr. Chairman and members of the committee, the mutuality of interests between the people of the Philippine Islands and the hard fiber cordage and twine industry of the United States is obvious. The United States industry, with factories in 13 States and large distributing agencies and branches in all States, is using, as raw material, hard fiber (abaca) grown on more than 1,000,000 acres of Philippine soil, and providing a living for more than 2,000,000 Filipinos. The Philippines have a virtual monopoly in the growth of this fiber. It is the competition of cheap Filipino labor, converting that raw material and sending the manufactured product to the United States, which concerns us.

So far, at these hearings, the necessities of Philippine economics and the dire results which would ensue if some legislation is not enacted prior to the date of Philippine independence-July 4, 1946-have been stressed by most witnesses.

Little has been said of the economic necessities of America.

It is of the interests of American labor and industry, particularly the industry I appear for the hard fiber cordage and twine industry in the United States that I speak.

In 1930 we took the position before your committee that the destinies of 13,000,000 Filipino people transcended the welfare of any single industry in either the Philippines or the United States. Similarly, the welfare of 2,000,000 Filipino abaca farmers transcends the welfare of a few hundred Philippine cordage and twine factory workers.

Therefore, in this legislation, it is essential and necessary to protect the United States cordage and twine industry which is the best customer of the Philippine abaca grower. We believe this can be accomplished without economic harm to the Philippine cordage and twine industry through the grant, by Congress, as we propose, of a guaranteed absolute quota of 6,000,000 pounds annually, duty free, to the Philippine cordage and twine industry.

We do not appear in opposition to this bill. In that this bill, if amended as we will propose, would grant to our industry some measure of protection, be equitable to the Philippines, and eliminate future uncertainties, we favor it. We must not be understood, however, as favoring it to the exclusion of all other possible proposals. You may develop some better plan. We feel that in any such plan you will protect our interests as well as the interests of others, when you have the facts.

The changes we propose will serve the best interests of the Filipino people as a whole as well as ourselves.

Both Philippine Independence Acts of January 17, 1932, and March 24, 1934, placed a duty-free quota on hard-fiber cordage and twine products coming from the Philippines, which quota was 3,000,000 pounds. Unlimited imports, over the quota, were permitted upon payment of the full existing United States tariff duties.

Those provisions were quickly found inadequate. This would have been so, regardless of the extent of any duty-free quotas. The Tariff Act of 1930 on cordage and twine was not based on cheap Filipino labor. The philosophy, at that time, was not to place tariffs on Philippine products entering the United States while they were a dependency. There were no cordage and twine imports from other oriental countries, such as Japan or China, where the product was made with cheap oriental labor; therefore, the determining factors of the rates established were largely based on costs in Great Britain and Europe.

In 1935, in an effort to correct this situation, bills were introduced to protect the United States hard fiber cordage and twine industry against steadily increas

ing Philippine imports. The philosophy of these bills was based on an absolute quota. The absolute quota in the bills introduced was 5,000,000 pounds per year, 3,000,000 pounds duty free (as provided in the Independence Act), and the balance, 2,000,000 pounds, subject to full duties.

During the hearings, members of the House Committee on Insular Affairs suggested that the Filipinos and the domestic industry confer, endeavor to reach an understanding, and submit their agreement to Congress. This request followed a strong plea by President Quezon and Hon. Manuel Roxas that the provisions of the Tydings-McDuffie Act should not be changed by the United States Congress without the consent of the Filipino people. It was their claim that the Independence Act was a covenant requiring mutual consent for changes. Accordingly, conferences were held between Mr. Quezon, now President of the Philippine Commonwealth, Mr. Roxas, now secretary of finance of the Philippine Commonwealth, myself, and others representing the United States industry. An agreement was reached between the Filipinos and ourselves and a specific bill, covering the agreement and fixing an absolute quota, was presented in both the House and Senate. The United States industry, to get the matter settled, conceded every single point insisted upon by President Quezon. Specifically, the changes granted to satisfy the Filipinos, were as follows:

1. The 5,000,000-pound maximum limit in the original bills was increased to 6,000,000 pounds.

2. The provision for tariff duties over and above 3,000,000 pounds on and after the inauguration of the Philippine Commonwealth was eliminated.

3. The method of allocation of the exports from the islands to the United States was left exclusively to the determination of the President of the Philippine Commonwealth after the inauguration of the Commonwealth.

4. A time limit of 3 years, subject to renewal, was written into the bill, at the request of President Quezon, who, at the time, had not been elected President of the Philippine Commonwealth.

5. Furthermore, it was provided that the extension of the act, by proclamation of the President of the United States, could only be upon acceptance by the President of the Commonwealth of the Philippines. Mr. Quezon stated, at the time, that he would accept a renewal of the act for an indefinite period, on or before the expiration of the first 3 years, if elected.

Congress unanimously passed the Cordage Act, now known as Public, No. 137, Seventy-fourth Congress, and it was approved June 14, 1935. The act is in every detail in accordance with the agreement reached between the Filipinos and the United States industry. On January 26, 1938, President Roosevelt, with the approval of President Quezon, extended the act to May 1, 1941. In the extension of the Cordage Act, the President of the United States and the President of the Commonwealth of the Philippines recognized the agreement and the justice thereof and the economic benefit which would inure to both people by the continuation of the act.

The report of the joint preparatory committee and S. 1028 do not continue the provisions of the Cordage Act of 1935, passed unanimously by Congress, accepted by the Philippines, and extended to 1941 by the President of the United States, with the approval of the President of the Philippine Commonwealth.

The Hon Francis B. Sayre, Assistant Secretary of State, in his statement before your committee the other day said, and I quote from his statement: "The objection to an absolute quota on Philippine cordage is that it conflicts with one of the fundamental principles of our foreign-trade policy. The United States is engaged in an effort of world-wide proportions to liberalize and increase international trade. Discriminatory absolute quotas work in precisely the opposite direction. An absolute cordage quota leveled against an independent Philippines would constitute an unfair discrimination against those islands, inasmuch as no other nation is thus barred from cordage shipments into the United States."

We maintain there is no discrimination in the Cordage Act. The two peoples were in agreement. Especial treatment of Philippine cordage and twine imports into the United States benefits the Philippines and is, therefore, a "preferential" rather than a "discrimination." It could only be for such a reason that the Philippines voluntarily agreed to the act in 1935 and again in 1938.

If this be a "discrimination," it does not, as a matter of fact, interfere with the nondiscriminatory tariff policy in our country. No other nation in the world will demand of the United States that it be discriminated against.

It would seem apparent that to call the Cordage Act an "unfair discrimination against" the Philippines is an erroneous conclusion. Other countries pay full