Too Much Wool

When Australia's wool auctions opened last week, world wool producers got a nice lift. Brisk bidding sent quotations as much as 5% higher than the closing prices last June, and about 25% above their early 1952 lows. But Australia's lively market Was not much consolation for U.S. wool growers, who are in what the Agriculture Department calls "a very depressed condition." Annual wool consumption within the U.S. has fallen from the postwar peak of 738 million lbs. in 1946 to 472 million lbs., and price supports on wool have cost U.S. taxpayers $92.2 million in the last decade, the largest loss incurred on any storable commodity.

With 100 million lbs. of surplus wool, almost 40% of the 1952 U.S. clip, already in Government hands, the Commodity Credit Corp. may have to buy up to 40 million more pounds of wool this year. To dispose of this huge surplus, Assistant Secretary of Agriculture John H. Davis last week asked the Tariff Commission to recommend a 7-c--a-lb. additional duty on imported wool. With this protection, Davis hoped that the CCC could avoid any new wool purchases this year, and perhaps rid itself of half its old holdings. Wool growers, who wanted something more like the 16-c- proposed last year, said they were "stunned" by Davis' request. Despite the present 25 1/2-c- wool tariff, imports have been making steady headway in the U.S. wool market, accounting for 71% of domestic consumption last year v. only 60% between 1946 and 1950. The wool men insisted that the additional duty should be at least 12-c-, and possibly 15-c-.

For President Eisenhower, who has authority to raise tariffs whenever domestic support programs are imperiled, the Davis proposal posed a tough problem. To accept it would be backtracking on the Administration's announced program to liberalize U.S. trade policies. To refuse it would be to jeopardize Republican votes in the thinly populated western sheep-raising states, and to aggravate CCC's surplus problems. And if he succumbed to pressure from wool growers to increase the fee from 7-c- to 12-c- or 15-c-, other industries might ask for more protection too.

But is more protection what the wool men really need? High-quality Australian wool, adding in the present tariff, now costs more than the domestic wool (see chart). Furthermore, wool users, who oppose a tariff increase, argue that any boost in domestic wool prices would actually be self-defeating. A rise in wool cloth prices would decrease consumption even further and increase the use of synthetic fibers.

Last week's debate underscored the basic question of whether the policy, imposed by Congress under pressure from the growers, of trying to stimulate domestic production to 360 million lbs. a year still makes economic sense. Since U.S. growers were in trouble producing only two-thirds of that amount, it looked as if it was time to lower the production goals.

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