A study of wheat production, prices, and income indicates that changes in income reflect primarily changes in prices, and occasionally marked changes in the size of the crop. Occasionally an increase in the United States crop is accompanied by higher prices on account of foreign conditions. Such a coincidence materially affects income, as it did in 1916, 1918, and 1924.

Small crops and small quantities to be sold in the United States, on the other hand, may be accompanied by low prices on account of large foreign supplies or other unfavorable conditions abroad, and on account of a declining or low general price level. Such conditions were true particularly in the years 1930–36. When United States supplies of hard milling quality wheats do not exceed domestic requirements for such wheat, domestic prices advance relative to prices in importing countries. From the spring of 1933 to the spring of 1937 domestic prices rose above an export basis and averaged between 20 and 30 cents higher than they would have averaged had the United State produced large crops and been on an export basis.

O. C. STINE, Chairman, Income Committee.

Dr. JUDD. Mr. Chairman, may I have consent to revise my remarks? I have spoken here somewhat offhand.

The CHAIRMAN. Your statement was perfect. Any witness has that right, of course.

Mr. DEWEY. I am particularly interested in what you have to say with regard to China. Do you think the people, in the first place, are going ahead? Has this war brought, in a terrible way, a certain amount of modernization to the Chinese? They no longer think of the airplane as a dragon, or a tank as some devil wagon. Do you think that it has brought to them the desire for betterment throughout the country, and a better standard of living?

Dr. JUDD. Yes; there is no question about that, sir.

Mr. DEWEY. Let me ask you this question, please. Are they an industrial country?

Dr. JUDD. They were not, sir. They had been developing rapidly, but they had built their industries along the coast cities and Japan seized 85 percent of them in the first 3 months of war. That practically stripped them of industry.

Mr. DEWEY. From here on there is a great deal of opportunity to expand the industry of the whole of China, and are they able to make that expansion by themselves?

Dr. JUDD. No, sir; I don't think they can do it in any foreseeable future without foreign assistance, technical and financial. They openly invite it.

Mr. DEWEY. There have been a great many famines in China, and the development of their agriculture could go ahead a great deal, and all of the products still be consumed in China without much exportable surplus, could they not?

Dr. JUDD. That is right. They haven't begun to produce enough for their own people. They will import wheat, for example, from usall they can get from the sale to us of their silk and hog bristles and tungsten and tung oil.

Mr. DEWEY. Besides those three or four articles you just mentioned, is it understood that there are great quantities of raw materials, minerals, oil, and what not, that have not even been exploited throughout China?

Dr. JUDD. China has adequate coal, she has adequate iron, but as to oil, there have been no oil fields of any size whatsoever discovered by the geologists, or even suggested by them, so far as I know, anywhere in China.

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Mr. DEWEY. What other types of minerals have there been?

Dr. JUDD. Down in the southwest there are a great many things like tungsten, molybdenum, chromium, and magnesium, those more or less rare, critical materials. There are a great many being explored, and quite a bit of silver and copper.

Mr. DEWEY. If we should get into a lighter metals phase of our existence, which seems to be coming, based on chemical developments and treatments, haven't they got rather large resources of those necessary critical metals that you mentioned?

Dr. JUDD. Yes; I think they have. Their great weakness is oil. Mr. DEWEY. In other words, what I am trying to bring out is that China can pay for that which she imports by materials that are not found in our country. Is that true?

Dr. JUDD. That is right. That was my point when I said China's trade complements ours much more than South America's does.

Mr. DEWEY. If we should look toward the Chinese as a possible outlet of our excess production, do you think that it would put us in a favorable position as to the future or not?

Dr. JUDD. Economically or politically, or both?

Mr. DEWEY. Both.

Dr. JUDD. That is exactly what I think it will do. We already have a hold upon the Chinese affection and heart that westerners don't realize, and that sort of hold is more important to the Chinese than it is to us. A Japanese spokesman said in the first Diet that was held after the outbreak of the war, when one of the businessmen of Japan questioned this attack upon China lest America be alienated through Japan's breaking of her treaties with us:

Japan has nothing to fear from America, because Americans have no real morality. What Americans have means so much more to them than what they are that they will always sell to Japan whatever Japan can pay for, and will always buy from Japan whatever Japan has to sell and they want.

That was their estimate of our morality.

The Chinese are inclined to be poor businessmen in this sense; that their affections, their friendships have a great deal to do with their decisions as to where and what they are going to buy and with whom they are going to deal.

Let me tell this story. Well, perhaps I shouldn't.

Mr. DEWEY. Go on.

Dr. JUDD. One day I went into a village where there had been no white man ever seen previously. While I was getting my lunch my load carrier passed the word around that there was an American there, and a Chinese gentleman came down, and he said, "I understand your honorable country is America."

I said, "Yes; my unworthy country is America."

He said, "Ah, the land of 10,000 friends."

I thanked him and told him we were unworthy to receive his notice. He said, "You once had a President named Roosevelt"-he was speaking of Theodore Roosevelt.

I said, "Yes."

He said, "You know, he understood China. He won the heart of the Chinese people to America permanently."

He was speaking of our return of the Boxer indemnity, where for almost the first time in history a nation that had beaten another, in

stead of grinding it down, rubbing the defeat in, by making the defeated nation come up each year and pay tribute, gave the money back to them as a trust fund and said, "Select your best boys and send them to America to learn our ways and skills." China does not forget.

There have been several things like that which have won for America an affection and a confidence and a regard and good will in China that I almost trembled at, because I knew sometimes it wasn't deserved by my people back home. That is why I fear such a thing as to change this act now, when they are fighting for their very existence, as if the sacrifices they have put in in holding up Japan for 6 long years didn't count, would be inevitably interpreted by them as going back on them. It would make Chiang Kai-shek's position harder. Some malcontents are now saying, "Chiang Kai-shek, you are a traitor. You could get peace with Japan if you were willing to compromise. Instead of that, you stick to America. What is America doing?"

Chiang and his wife have held on. I can't believe that we dare trifle with that priceless thing we have-their confidence.

With our economies complementing each other, with the two nations as friends, the Pacific will be pacific. If our two nations aren't friends, then it is going to be tragedy, and the Pacific will become Europeanized, if you wish, in the sense of recurring wars and recurring struggles. Americans came from Europe to get away from that kind of trouble. We have responsibilities for leadership in the Pacific such as we have never had in Europe, and we can lead in the developing of teamwork and cooperation in the Pacific as we can't in Europe.

I am sorry to give such a long answer.

Mr. DEWEY. It is interesting.

Just one more question, and I am through: While we look with, one might say, the moral point of view, and with a sense of our responsibilities, do you feel that we would suffer a great deal from China in the next number of years? In other words, their low labor cost would not enter into anything that would be competitive with our higher rate?

Dr. JUDD. I tried to make that plain earlier, and I want to make it clear again. I cannot see any beginning of competition with us from China, a free China, in 50 years, and by that time I have every confidence that her standard of living, her wage scales, her education standards, her literacy, and so forth, and her transportation will have been elevated to the point where there won't be any such gap.

Mr. DEWEY. Would Chinese pride permit them to accept our engineers and technicians in the development or the adapting of our western civilization to their way of life?

Dr. JUDD. They are begging for it. They go very much-almost blindly, some of them-by Dr. Sun Yat-Sen's Three Principles of the People, his last will and testament, and he urges strongly therein that China has to have friendship with the West to get engineering and technical assistance to develop her own resources, and the capital to help build China up to a position where she can be self-sustaining among the nations of the world, and then he goes ahead and says, "For what should we try to get this independence, that we then can become like Japan?"

He said, "No. The things which make China proud in her history are not what she has done to enslave other peoples, but the way in which she has refused to use her powers for such a purpose."

He said, "Korea stood alongside China for 5,000 years, independent; then Japan became powerful. Korea was enslaved in a few years." Chiang Kai-shek has said the same thing. Some Americans have said, "Maybe China will modernize and be a great menace to us."

He has said repeatedly, "We are fighting Japan because we are opposed to that attitude by any country." There isn't the slightest danger so long as the present leaders of China are supported and given a chance to stay in control, of militarism or imperialism gaining dominance in Chinese thought.

I would trust China at that point more than I would trust America in her present state of militarization-trust her to keep her head. I hope that remark will be understood.

Mr. DEWEY. I am very appreciative of your remarks on that question.

The CHAIRMAN. We thank you, Doctor, for your appearance and your very, very interesting statement.

(Absent.)

Is the Honorable Reid F. Murray here? Without objection, we will return at 10 o'clock tomorrow morning. (Whereupon, the committee adjourned until Friday, April 23, at 10 a. m.)

EXTENSION OF RECIPROCAL TRADE AGREEMENTS ACT

FRIDAY, APRIL 23, 1943

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The committee met at 10 a. m., Hon. Robert L. Doughton (chairman) presiding.

The CHAIRMAN. The first witness on the calendar this morning is Mrs. Margaret F. Stone, National Women's Trade Union League, Washington, D. C. Is Mrs. Stone here? (No response.)

The Chair asks unanimous consent to include in the record some communications which the clerk has. Without objection, they will be incorporated.

(The matters above referred to appear in the record after the last witness.)

The CHAIRMAN. Mrs. Stone does not appear to be present. The next witness is Russell B. Brown, Independent Petroleum Association, Washington, D. C. Is Mr. Brown present? (No response.) Is Mr. Holman present?

Mr. HOLMAN. Present, Mr. Chairman.

The CHAIRMAN. Please give your name, address, and the capacity in which you appear, for the benefit of the record.

STATEMENT OF CHARLES W. HOLMAN, NATIONAL COOPERATIVE MILK PRODUCTS FEDERATION, WASHINGTON, D. C.

Mr. HOLMAN. Mr. Chairman, I am going to make an informal statement. I have no written statement, but I will endeavor to procced with great dispatch, to save the time of the committee. I do not think it will take very long.

The CHAIRMAN. You may proceed.

Mr. HOLMAN. My name is Charles W. Holman, 1731 I Street, Washington, D. C., secretary of the National Cooperative Milk Producers' Federation-an organization of dairy farmers in 41 States representing approximately 70 groups. I would like to file for the record the revised list of the membership of the association.

The CHAIRMAN. Without objection, it will be inserted as part of your remarks.

(The list above referred to is as follows:)

MEMBER ORGANIZATIONS

Arrowhead Cooperative Creamery Association, 224 North 57th Avenue West, Duluth, Minn.

Berrien County (Mich.) Milk Producers' Association, Benton Harbor, Mich. Cedar Rapids Cooperative Dairy Co., 560 Tenth Street SW.. Cedar Rapids, Iowa.