Handclasps Over Cotton
Last week the country was treated to an amazing sight when the cotton growers of the South and the textile manufacturers of New England clasped hands over their common commodity, sought a common way out of their difficulties. Unanimously they agreed that the steady increase of foreign competition and the steady decrease of foreign and domestic markets for raw cotton and cotton goods spelled approaching ruin for both planters and millers. Unanimously they blamed most of their troubles on AAA's 4.2-c- a Ib. processing tax. And unanimously they set off for the White House to get a political pre-scription for King Cotton.
Enter Senators. President Roosevelt had scarcely returned to his desk from his vacation when he was waited upon by a depressed delegation led by four Cotton Senators--Georgia's George, South Carolina's Smith and Byrnes, Alabama's Bankhead. Gloomily they told the President that unless the New Deal does something new, different and soon for cotton, the South will suffer its worst economic 'blow since the Civil War. They then sketched Cotton's woeful case history:
Normally the U. S. exports half its cotton crop. Exports from Aug. 1, 1934 to March 1, 1935 were down 41%. Domestic consumption is off 22%. The world surplus of U. S. cotton, cut two million bales since AAA began its reduction program in 1933, is still an 8,000,000-bale glut on the market. Of this AAA, which pegged the domestic price at 12-c- through its loans to growers, holds half. And its holdings are rapidly increasing since the domestic market price slipped fy under the peg in March (TIME, March 25).
With the U. S. Government cutting cotton production and supporting cotton prices, foreign acreage has increased 20% in a year. China, Russia, India are all underselling U. S. cotton on the world market, but the stiffest competitor is Brazil. Grown on abandoned coffee plantation acreage and tended by cheap Indian labor, 448,000 bales of cotton were produced by Brazil in 1932-33. This year's output is estimated at 1,591,000 bales. Price: 4 1/2-c- a Ib.
The Cotton Senators were seriously impressed by the news that many British looms were being altered to accommodate short-staple Brazilian cotton, that disused Southern farm and gin machinery and some 800 cotton workers had already migrated to Brazil. And the Senate Finance Committee had been candidly informed by Vice President Russell E. Watson of Johnson & Johnson.(surgical dressings) that his firm was about to open a plant in Brazil to supply South American customers now serviced by its U. S. plants.
Planters' Plan. What made the Cotton Senators' mission a delicate one was the fact that their planting constituents wanted nothing less than to keep the cake of high domestic prices (maintained by AAA's subsidy) and at the same time eat the cake of foreign, low-priced markets. Proposed was a three-point plan which would continue AAA's cotton loans at 12-c-, and thus maintain the domestic peg, but which would put the U. S. bad: in world competition by giving a government bounty of $10 a bale for cotton sold abroad. Already a legislative fact was the plan's keystone, for Georgia's George had inserted an amendment in the $4,880,000,000 relief bill permitting the President to use an unspecified part of that fund, "for the administration of the Agricultural Adjustment Act." Thus the cotton processing tax could be paid directly out of the U. S. Treasury.
Even before the Senators crossed his threshold, President Roosevelt had made up his mind not to use relief money for anything but relief. He told them so, and the conference broke up with the President's promise to take the cotton situation "under advisement."
Enter Governors. Forty-eight hours later a delegation of New England governors, led by Massachusetts' James Michael Curley, arrived in Washington with a load of bad news from the land of looms.
First off, Governor Curley gave a luncheon for the delegation and all New England Congressmen, party lines being dropped for the emergency. Perhaps no gloomier feast was ever held in the capital. Tone was set by the decorations, a pile of merchandise including: a cotton kimono, a pair of cotton step-ins and a framed photograph of Franklin D. Roosevelt--all MADE IN JAPAN. Cotton textile troubles, and what the Government could do about them, furnished the sole topic of conversation.
Three weeks ago the National Industrial Recovery Board issued a twelve-week emergency decree permitting certain branches of the cotton textile industry to cut machine hours and machines in operation by 25%, reduce the work week from 40 to 30 hr. Explained the Cotton Textile Code Authority: "In the face of a steadily declining consumption, increasing inventories and decreasing unfilled orders, the industry has struggled to keep mills running during these critical months. The end, with disastrous consequences for both management and labor, was in sight. The only alternative to complete shutdowns ... was the plan now approved by NIRB." Prime reasons:
1) Since the signing of the cotton textile Code on July 9, 1933, raw cotton has jumped from 6-c-to 11-c- a Ib., to which has been added the 4.2-c- processing tax.
2) Exports have slumped from 375,000,000 sq. yd. in 1932 to 302,000,000 in 1933 to 266,000,000 in 1934, largely because Japan has taken over most of the Philippine and Hawaiian markets, a good share of the South American.
3) Imports, especially from price-cutting Japan, have soared. In January 1935 the U. S. bought 3,341,000 sq. yd. of Japanese cloth, in February 5,744,000--more each month than it bought in three entire preceding years (1931-33). With Japanese manufacture and AAA's processing tax, which textile men claimed amounted to half their wage bill and could not be passed along to the customer, as co-scapegoats, the governors marched over to the White House with their three-point relief proposal.
Textile Plan. Like the Cotton Senators, the Textile governors favored the Government's paying the processing tax out of relief funds--or a general tax, if it had to be paid at all. They further asked for a protective tariff of U. S.-cost-of-production-plus-10% against Japanese and all debtor nations' goods, and that the textile code be revised to permit lower wage and hour standards.
Franklin Roosevelt has more ways than one of quashing special pleaders. In this case he used the familiar strategy practiced on Northwestern governors who sought agricultural price-fixing in 1933. He nodded his head sympathetically for a while, then suddenly interrupted the interview, turned his callers over to a formidable band of experts, including Secretary of Agriculture Wallace. It was Secretary Wallace who wrote the epitaph of last week's interview: "Nothing has been suggested to take the place of the processing tax and until something better is suggested, we are going to stand on it."
As to Japanese competition, the President good-naturedly pooh-poohed the whole thing by remarking that, although the rate of increase of Japanese textile importations was unprecedented, the total for the whole year would not equal seven-tenths of 1% of U. S. production.
Wallace at Atlanta. Although he got rid of the New England governors without much trouble, Secretary Wallace knew that the pressure from manufacturers which had sent them down to Washington was not going to be so easy to dissipate. The textile industry was out to smash the irksome processing tax. That Congress was infected with the agitation was plain last week when Representatives rose and cheered a memorialization from the North Carolina legislature calling for the end of the cotton processing tax. At that point the lean young Secretary of Agriculture prepared for the fight of his life, for he made no secret of his belief that if the cotton processing tax went, his whole domestic allotment program would collapse with it.
Speaking at Atlanta on Jefferson Day, he told cotton growers that while foreign importation of U. S. cotton had indeed decreased 41%, foreign consumption had fallen only 26%. To the textile trade he pointed out that whereas U. S. nonagricultural industry as a whole was operating at 57% of its 1923-25 level, the cotton textile industry's rate so far has not fallen below 87%. He then proceeded to give both planters and millers a lesson in international economics:
"There is no way to evade the truth that trade is a two-way affair, and that to have exports we must accept imports. . . . The controlling factor in our cotton export trade is the amount of American dollars in the hands of foreign nations wanting our cotton. This situation will get worse instead of better unless and until the American people are willing to accept greatly increased quantities of imports. There is no other way that I know of, short of giving our cotton away through ruinous prices or insecure loans, to regain our former volume of cotton exports. . . . I think it is clear that proposals for increasing exports through low prices would not compensate the cotton growing industry for the loss of income that would result to them from discarding or transforming the present program. . . .
"Once the cotton processing tax is removed the end would be in sight for the cotton plan and other farm programs. . . . We believe it is your desire that we shall continue with the cotton program. It is therefore our purpose to carry on."
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