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July 30, 1981 EXTENSIONS of REMARKS 18831 EXTENSIONS of REMARKS SECTION 22 TESTIMONY Continued Interference As Provided by Im­ the Congress in 1965

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July 30, 1981 EXTENSIONS of REMARKS 18831 EXTENSIONS of REMARKS SECTION 22 TESTIMONY Continued Interference As Provided by Im­ the Congress in 1965 July 30, 1981 EXTENSIONS OF REMARKS 18831 EXTENSIONS OF REMARKS SECTION 22 TESTIMONY Continued interference as provided by im­ the Congress in 1965. A pro rata share of ports can only do harm to the positive net the national allotment is given to each to­ contribution of the nearly $1.7 billion per bacco farm on the basis of historical produc­ HON. CHARLES ROSE year tobacco provides to the U.S. interna­ tion. There are strict penalties for overmar­ OF NORTH CAROLINA tional balance of payments. In addition to ketings over 10 percent of the allotment and IN THE HOUSE OF REPRESENTATIVES providing nearly 400,000 individuals in the these penalties act to control any excess U.S. with employment, a study by the Uni­ production. Wednesday, July 29, 1981 versity of Pennsylvania's Wharton Applied The decision of tobacco producers to vol­ • Mr. ROSE. Mr. Speaker, on June 24, Research Center in 1979 noted that tobacco untarily accept quotas activates the Federal 1981, the International Trade Commis­ and its ripple effects have generated nearly price support program. Price support levels sion held hearings in its section 22 in­ $22 billion per year in direct industry taxes. are determined according to a formula spec­ Since the first Federal tax on tobacco was ified in law and then each grade of tobacco vestigation on the importation of for­ collected in 1862, tobacco has provided the is assigned a specific support rate in order eign tobacco. U.S. Treasury with over $72 billion in reve­ to reach the legal average support rate. I submit to you my testimony before nues. In the last 10 years, tobacco has gen­ The U.S. Department of Agriculture pro­ the International Trade Commission erally provided the U.S. Treasury with $2.4 vides price supports through the Commodi­ on this important issue: billion per year in revenues. State govern­ ty Credit Corporation by using nonrecourse ments have realized approximately· $56 bil­ loans. The Commodity Credit Corporation STATEMENT BY CONGRESSMAN CHARLIE ROSE lion in revenue due to taxes on cigarettes, REGARDING THE INTERNATIONAL TRADE COM­ makes no direct payments to growers; in­ and local governments have taken in nearly stead producer associations, also known as MISSION SECTION 22 INVESTIGATION ON TO­ $2 billion in the same period. BACCO I feel that the contribution of U.S. pro­ cooperatives, under contract with the Com­ Mr. Chairman, Commissioners of the duced tobacco to the economic well-being of modity Credit Corporation arrange for all International Trade Commission, I would our country is clear. Key to this is the facets of storing and selling the tobacco like to thank you for the opportunity to tes­ manner in which tobacco, like all other com­ under the loan program. tify before you today concerning the section modities operating under a price support When tobacco is sold at auction, that to­ 22 investigation on imported tobacco. I ap­ program, is monitored. While the price sup­ bacco which does not receive a bid exceed­ preciate very much the opportunity to port program under which tobacco operates ing the support rate is consigned to the as­ share with you my observations on the ques­ is not under scrutiny here, I think it is im­ sociation. The producers of the tobacco are tion of whether certain kinds of imported portant, nonetheless, to stress the fact that then paid the loan rate. The association tobacco are "materially interfering with" it is necessary to understand the program, then sells the tobacco at a rate approved by the price support program for tobacco as so as to be able to understand the economic the Commodity Credit Corporation. mandated by Congress and supervised by harm imports are causing this congression­ Receipts from the tobacco sold by the co­ the U.S. Department of Agriculture. ally sanctioned farm program. operatives are used to reimburse the Com­ I think the facts I will outline for you The history of the program is a long one. modity Credit Corporation. The reimburse­ clearly indicate that domestic producers and Beginning in 1933 with the Agricultural Ad­ ment to the Commodity Credit Corporation just as significantly, the Federal Govern­ justment Act which established the princi­ also includes interest charges. If sales gener­ ment, are being adversely affected by the in­ ple of parity prices for tobacco and the ated an excess over the loans plus interest, creased imports of foreign tobacco. It is farmer committee system. When the Agri­ this excess is returned to the producers. If clear from congressional intent that tobacco cultural Adjustment Act of 1933 was ruled there are losses due to the inability to sell is a commodity entitled to the same protec­ unconstitutional by the U.S. Supreme Court certain crops, the losses are charged to the tions enjoyed by all commodities and com­ in 1936, the Agricultural Adjustment Act of Commodity Credit Corporation. modity programs. The tobacco price support 1938 followed. The AAA of 1938 established The tobacco price support program oper­ program, like all other price support pro­ tobacco marketing quotas and provided pen­ ates in what many consider to be a model grams governing commodities is a coopera­ alties for excess production. Since 1940, fashion. The individuals who administer tive effort between producers and the Fed­ quotas have been in effect and the spirit of this program at the U.S. Department of Ag­ eral Government, sanctioned by Congress. cooperation with which they have flour­ riculture have always told me that the to­ The tobacco price support program is a ished is indicative of a clear understanding bacco price support program is one of the program which has worked and continues to between farmers and the Federal Govern­ better commodity programs administeted by work because of the cooperation the farm­ ment. the department. Its level of efficiency is ers have shown with all of the branches of There are basically two components to the well known, and the relatively small losses the Federal Government. The tobacco price Federal price support program for tobacco. which have occurred to the Commodity support program is, however, in jeopardy Marketing quotas which are mandatory for Credit Corporation in the operation of the because of the impact imported tobacco has growers of each class or kind of tobacco op­ tobacco price support program, also speak had and is having on the domestic market. erate in conjunction with price supports of­ well of this particular program. The economic harm generated by growing fered through nonrecourse loans. Producers In 1980 the U.S. Department of Agricul­ imports has escalated greatly in the past have the opportunity through the tobacco ture released figures which showed that out few years. In jeopardy are nearly 260,000 referenda process to accept or reject mar­ of the 13 commodities operating under a family farms and more importantly, a type keting quotas. Two thirds approval is re­ price support program, tobacco ranked 10th of farm existence which is crucial to the ex­ quired for the acceptance of marketing in terms of net losses on commodity inven­ istence of most of our southern states. To­ quotas. Prior to each growing season, the tory and loan operations. This loss repre­ bacco is grown in 20 states, and while most U.S. Department of Agriculture determines sents only 1 percent of the total tobacco of these states have tobacco which is under what the level of national marketing quotas loan volume, an astounding figure. In terms the price support program, all tobacco grow­ shall be. The national quota is best de­ of total losses to the Commodity Credit Cor­ ing areas would feel the repercussions gen­ scribed as a projection of the production poration, tobacco loan losses represent only erated when the price support system and needed to meet both domestic and export 0.3 percent of the Commodity Credit Corpo­ the producers operating under this system demand, at the same time providing for ration's total cumulative loss of $19.1 billion are economically threatened. some amount of carryover stocks. on all commodity loan inventory operations. In areas where tobacco is produced under The U.S. Department of Agriculture Clearly the tobacco price support program quota, or under the price support program, translates the marketing quota into a na­ has been operating much better than most financial institutions rely heavily on the tional allotment. For all kinds of tobacco, of the other commodity loan programs. U.S. Department of Agriculture price sup­ with the exception of flue-cured and burley, Farmers in the flue-cured and burley port program and commodity credit loan the quota is an acreage allotment. Burley areas, the two types of leaf most commonly system, as important criteria in their loan tobacco producers operate under a pound­ imported, have overwhelmingly supported making transactions. age program as authorized by Congress in these self-imposed quotas. For the last 15 As the sixth largest cash crop, tobacco 1971. Flue-cured tobacco operates under an years, farmer agreement to continuance of plays a very important role in our economy. acreage-poundage program established by the price support program has averaged e This "bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor. 18832 EXTENSIONS OF REMARKS July 30, 1981 over 97 percent. The desire to continue a as cigarette scrap, and now classified as ma­ drawback." Drawback provides for a 99 per­ program which the producers and the Con­ chine threshed, have continued to grow. cent duty free entry of all products into the gress feels will work and continues to work Scrap tobacco imports have increased from United States providing certain conditions is high.
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