In extension of my recent verbal instruction as to the necessity for investigation of certain tariff schedules due to depression of currencies in foreign countries, I enclose herewith a list furnished me by the Department of Commerce of industries and localities where there has been actual increase of unemployment or alternatively where it is inevitable that it will increase from importations arising out of this cause unless they can be halted.

You recognize that currencies in thirty countries have now depreciated from 5 to 55%, which has reduced the standards of living in those countries and greatly widened the difference in cost of production between the United States and those localities.

I would therefore be obliged in order to afford all possible relief to unemployment in these communities. I urge this expedition because of this possible retardation of increasing employment of our people. If it shall prove that the differences in cost of production between here and abroad in these industries have altered the basis of the tariff duties, I wish to receive recommendations of the Tariff Commission at the earliest possible moment.

Yours faithfully,
Herbert Hoover

Hon. Robert L. O’Brien
United States Tariff Commission
Washington, D. C.

Investigations involving 229 different articles have been authorized. Work on 110 has been fully completed, while investigations of 119 are still under consideration. Of this latter number, public hearings have been held on 33 articles. Inquiries into 51 of the remaining number of articles have advanced to the point of public hearings or are otherwise nearing completion, leaving only 35 articles awaiting preliminary action.

Of the reports submitted to the President, 2, dealing with 4 articles, have been returned to the Commission for further study. The others have been approved. No changes in duties were made in 50 per cent of the reports. A little over half of the other reports involved deductions; the balance provided for increases.

The cases brought before the Commission are being handled expeditiously. The tables presented herewith reveal that the Commission is disposing of the cases at a rate of one per week. The tables show that some 200 items relating to the strictly flexible provisions of the tariff have either been dealt with, are in the process of hearings or are in the form of applications now before the Commission.

The Tariff Act of 1930 contained 3,221 dutiable items. Of this total 2,171 were unchanged from the 1922 tariff; 890 were increased; and 235 were decreased.

Aside from the work of the Tariff Commission in respect to the flexible clause upon requests by Congress for special surveys relating to imports, the Commission has completed 4 reports dealing with 10 subjects. In addition, a fifth survey of leaf tobacco has been completed by the Commission. This survey was made by the Commission on its own initiative.

It has come to my knowledge that certain persons are selling short in our commodity markets, particularly in wheat. These transactions have been continuous over the past month. I do not refer to the ordinary hedging transactions, which are a sound part of our marketing system. I do not refer to the legitimate grain trade. I refer to a limited number of speculators. I am not expressing any views upon economics of short selling in normal times.

But in these times this activity has a public interest. It has but one purpose and that is to depress prices. It tends to destroy returning public confidence. The intent is to take a profit from the losses of other people. Even though the effect may be temporary it deprives many farmers of their rightful income.

If these gentlemen have that sense of patriotism, which outruns immediate profit, and a desire to see the country recover, they will close up these transactions and desist from their manipulations. The confidence imposed upon me by law as a public official does not permit me to expose their names to the public.

I shall approve the Tariff Bill. This legislation has now been under almost continuous consideration by Congress for nearly fifteen months. It was undertaken as the result of pledges given by the Republican Party at Kansas City. Its declarations embraced these obligations:

“The Republican Party believs that the home market built up under the protective policy belongs to the American farmer, and it pledges its support of legislation which will give this market to him to the full extent of his ability to supply it.

“There are certain industries which cannot now successfully compete with foreign producers because of lower foreign wages and a lower cost of living abroad, and we pledge the next Republican Congress to an examination and where necessary a revision of these schedules to the end that the American labor in these industries may again command the home market, may maintain its standard of living, and may count upon steady employment in its accustomed field.”

Platform promises must not be empty gestures. In my message of April 16, 1929, to the Special Session of Congress I accordingly recommended an increase in agricultural protection; a limited revision of other schedules to take care of the economic changes necessitating increases or decreases since the enactment of the 1922 law, and I further recommended a reorganization both of the Tariff Commission and of the method of executing the flexible provisions.

A statistical estimate of the bill by the Tariff Commission shows that the average duties collected under the 1922 Law were about 13.8% of the value of all imports, both free and dutiable, while if the new law had been applied it would have increased this percentage to about 16%.

This compares with the average level of the tariff under

Under the Underwood law of 1913 the amounts were disturbed by war conditions varying from 6% to 14.8%.

The proportion of imports which will be free of duty under the new law is estimated at from 61 to 63%. This compares with averages under

Under the Underwood law of 1913 disturbed conditions varied the free list from 60% to 73% averaging 66.3%.

The increases in tariff are largely directed to the interest of the farmer. Of the increases, it is stated by the Tariff Commission that 93.73% are upon the products of agricultural origin measured in value, as distinguished from 6.25% upon commodities of strictly non-agricultural origin. The average rate upon agricultural raw materials shows an increase from 38.10% to 48.92% in contrast to dutiable articles of strictly other than agricultural origin which show an average increase of from 31.02% to 34.31%. Compensatory duties have necessarily been given on products manufactured from agricultural raw materials and protective rates added to these in some instances.

The extent of rate revision as indicated by the Tariff Commission is that in value of the total imports the duties upon approximately 22.5% have been increased, and 77.5% were untouched or decreased. By number of the dutiable items mentioned in the bill out of the total of about 3300 there were about 890 increased, 235 decreased, and 2170 untouched. The number of items increased was, therefore, 27% of all dutiable items, and compares with 83% of the number of items which were increased in the 1933 revision.

The Tariff Law is like all other tariff legislation, whether framed primarily upon a protective or revenue basis. It contains many compromises between sectional interests and between different industries. No tariff bill has ever been enacted or ever will be enacted under the present system, that will be perfect. A large portion of the items are always adjusted with good judgment, but it is bound to contain some inequalities and inequitable compromises. There are items upon which duties will prove too high and others upon which duties will prove to be too low.

Certainly no President, with his other duties, can pretend to make that exhaustive determination of the complex facts which surround each of those 3300 items, and which has required the attention of hundreds of men in Congress for nearly a year and a third. That responsibility must rest upon the Congress in a legislative rate revision.

On the administrative side I have insisted, however, that there should be created a new basis for the flexible tariff and it has been incorporated in this law. Thereby the means are established for objective and judicial review of these rates upon principles laid down by the Congress, free from pressures inherent in legislative action. Thus, the outstanding step of this tariff legislation has been the reorganization of the largely inoperative flexible provision of 1922 into a form which should render it possible to secure prompt and scientific adjustment of serious inequities and inequalities which may prove to have been incorporated in the bill.

This new provision has even a larger importance. If a perfect tariff bill were enacted today, the increased rapidity of economic change and the constant shifting of our relations to industries abroad, will create a continuous stream of items which would work hardship upon some segment of the American people except for the provision of this relief. Without a workable flexible provision we would require even more frequent congressional tariff revision than during the past. With it the country should be freed from further general revision for many years to come. Congressional revisions are not only disturbing to business but with all their necessary collateral surroundings in lobbies, log rolling and the activities of group interests, are disturbing to public confidence.

Under the old flexible provisions, the task of adjustment was imposed directly upon the President, and the limitations in the law which circumscribed it were such that action was long delayed and it was largely inoperative, although important benefits were brought to the dairying, flax, glass, and other industries through it.

The new flexible provision established the responsibility for revisions upon a reorganized Tariff Commission, composed of members equally of both parties as a definite rate-making body acting through semi-judicial methods of open hearings and investigation by which items can be taken up one by one upon direction or upon application of aggrieved parties. Recommendations are to be made to the President, he being given authority to promulgate or veto the conclusions of the Commission. Such revision can be accomplished without disturbance to business, as they concern but one item at a time, and the principles laid down assure a protective basis.

The principle of a protective tariff for the benefit of labor, industry, and the farmer is established in the bill by the requirement that the Commission shall adjust the rates so as to cover the differences in cost of production at home and abroad—and it is authorized to increase or decrease the duties by 50% to effect this end. The means and methods of ascertaining such differences by the Commission are provided in such fashion as should expedite prompt and effective action if grievances develop.

When the flexible principle was first written into law in 1922, by tradition and force of habit the old conception of legislative revision was so firmly fixed that the innovation was bound to be used with caution and in a restricted field, even had it not been largely inoperative for other reasons. Now, however, there is a growing and widespread realization that in this highly complicated and intricately organized and rapidly shifting modern economic world, the time has come when a more scientific and businesslike method of tariff revision must be devised. Toward this the new flexible provision takes a long step.

These provisions meet the repeated demands of statesmen and industrial and agricultural leaders over the past 25 years. It complies in full degree with the proposals made 20 years ago by President Roosevelt. It now covers proposals which I urged in 1922.

If, however, by any chance the flexible provisions now made should prove insufficient for effective action, I shall ask for further authority for the Commission, for I believe that public opinion will give whole-hearted support to the carrying out of such a program on a generous scale to the end that we may develop a protective system free from the vices which have characterized every tariff revision in the past.

The complaints from some foreign countries that these duties have been placed unduly high can be remedied, if justified, by proper application to the Tariff Commission.

It is urgent that the uncertainties in the business world which have been added by the long-extended debate of the measure should be ended. They can be ended only by completion of this bill. Meritorious demands for further protection to agriculture and labor which have developed since the tariff of 1922 would not end if this bill fails of enactment. Agitation for legislative tariff revision would necessarily continue before the country. Nothing would contribute to retard business recovery more than this continued agitation.

As I have said, I do not assume the rate structure in this or any other tariff bill is perfect, but I am convinced that the disposal of the whole question is urgent. I believe that the flexible provisions can within reasonable time remedy inequalities; that this provision is a progressive advance and gives great hopes of taking the tariff away from politics, lobbying, and log rolling; that the bill gives protection to agriculture for the market of its products and to several industries in need of protection for the wage of their labor; that with returning normal conditions our foreign trade will continue to expand.

My dear Mr. Tilson:

I have your letter of inquiry as to whether I can see any reason to change the views which I expressed on April 20th last upon the so-called debenture plan introduced by the Senate into the Tariff Bill. I do not.

Some minor alterations have already been made in the plan which do not go to the essential fact that the practical working of it will depress and not elevate prices to the farmer. The plan in the present bill presents an additional objection in that the export subsidies proposed vary within different agricultural products and thus are widely different to different farmers. They vary from about 9% upon the cost of production of rye to apparently near 100% on tobacco. In the latter case growers could apparently afford to raise their product and export it for the subsidy alone.

Since my previous statement the Tariff Commission has estimated the cost of the plan to the Treasury, if put into operation and on the basis of present exports, at about $280,000,000 per annum.

Yours faithfully,
Herbert Hoover

I am deeply impressed with the responsibilities which lie before you. Your fundamental purpose must be to determine the fact and to find solution to a multitude of agricultural problems, among them to more nearly adjust production to need; to create permanent businesses institutions for marketing which, owned and controlled by the farmers shall be so wisely devised and soundly founded and well managed, that they by effecting economies and giving such stability will grow in strength over the years to come. Through these efforts we may establish to the farmer an equal opportunity in our economic system with other industry.

I know there is not thinking farmer who does not realize that all this cannot be accomplished by magic wand or an overnight action. Real institutions are not built that way. If we are to succeed it will be by strengthening the foundations and the initiative which we already have in farm organizations, and building steadily upon them with the constant thought that we are building not for the present only but for next year and the next decade.

In selecting this board I have sought for suggestions from the many scores of farmers’ cooperatives and other organizations and yours were the names most universally commended; you are thus in a sense the representatives of agriculture itself. I congratulate each of you upon the distinction of his colleagues and by your appointment I invest you with responsibility, authority and resources such as I have never been conferred by our government in assistance to any industry.

I am glad the opportunity has come to me as president to contribute in polls and leadership in the improvement of the national capital. This is more than merely the making of a beautiful city, it is the symbol of America. By its dignity and architectural inspiration we stimulate pride in our country, we encourage That elevation of thought and character which comes from great architecture.

My dear Mr. Senator:

On April 12th I received a call from yourself and Senators Capper, Heflin, Norbeck and Randsell, acting as a sub-committee of the Senate Committee on Agriculture, requesting my opinion on the “export debenture plan” for agricultural relief, since it is a complete departure from the principles already debated during the campaign. I informed the committee that I would request an analysis of the plan by the Departments of Agriculture, Treasury and Commerce, and would transmit them to the Committee together with my conclusions after investigation. The Departments have given it earnest consideration and I have just received and studied these reports which I transmit to you herewith.

The principle of this plan as set out in the draft bill of your committee which is before me, is to issue a government debenture to merchants exporting agricultural products in amount of one-half of the tariff on such products—such debentures to be redeemed by presentation for payment of import duties. The assumption is that by creating a scarcity through stimulating exports that the domestic price will rise above world prices to the amount of the debenture—that is, if the debenture on wheat exports is 21c. a bushel, the price of wheat will be 21c. higher in the domestic market than in the world market.

I am aware of the arguments put forward in favor of the plan by some of our agricultural organizations; and the arguments of other farm organizations in opposition to it. The proposers advance it in the utmost good faith and earnest desire to assist in solution of a great problem and I regret deeply that I cannot agree that this provision would bring the results expected. On the contrary I am convinced that it would bring disaster to the American farmer.

The weaknesses of the plan as set forth in the Senate Bill may be summarized as follows:

1. The issue of debentures to export merchants and their redemption in payment of import duties amounts to a direct subsidy from the United States Treasury. If the plan proposed be generally applied it would cost in excess of $200,000,000 a year as it would decrease the Treasury receipts by such an amount.

2. The first result of the plan, if put into operation, would be a gigantic gift from the Government and the public to the dealers and manufacturers and speculators in these commodities. For instance, in the principal export commodities the value of the present volume of stocks in possession of these trades would, if the plan worked, rise by from $200,000,000 to $400,000,000 according to different calculations, without a cent return to the farmer or consumer. Every speculator for a rise in our public markets would receive enormous profits. Conversely, if after this elevation of prices the plan were at any time for any reason withdrawn the trades would suffer a like loss and a long line of bankruptcies must ensue. But in the meantime the trades, out of fear of withdrawal or of reduction in the subsidy, would not engage in normal purchase and distribution. Either exorbitant margins would be required or alternatively the farmer would be compelled to himself hold the nation’s stocks until there was a demand for actual consumption.

3. If the increased price did reflect to the farmer, the plan would stimulate overproduction and thereby increase world supply which would in turn depreciate world prices and consequently decrease the price which the farmer would receive, and thereby defeat the plan. Stimulation of production has been the outstanding experience abroad where export subsidy has been applied. Over production will defeat the plan and then, upon its withdrawal, agriculture would be plunged into a catastrophe of deflation from over expanded production. The farmer’s difficulties today are in some part due to this process after the war.

4. The stimulation of production of certain commodities would disturb the whole basis of diversification in American agriculture, particularly in the cotton and wheat sections where great progress is now being made toward a more stable basis of agriculture.

5. Although it is proposed that the plan should only be installed at the discretion of the Farm Board, yet the tendency of all boards is to use the whole of their authority and more certainly in this case in view of the pressure from those who would not understand its possibility of harm, and emphatically from the interested dealers in the commodity.

6. It is not proposed to pay the debentures of subsidies to the farmers, but to the export merchants, and it seems certain that a large part of it would not be reflected back to the farmer. It offers opportunity for manipulation in the export market none of which would be of advantage to the farmer. The conditions of competitive marketing at home and abroad and the increased risks would absorb a considerable part of its effect into the distribution and manufacturing trades. Moreover, the theoretical benefits would be further diminished by the fact that debentures would sell constantly at a discount, for the reason that persons paying duties on imports would not take the trouble to accumulate the debentures and lose interest upon them unless obtainable at a discount.

7. The provision of such an export subsidy would necessitate a revision of the import tariffs. For instance, an export subsidy of two cents a pound on raw cotton would mean the foreign manufacturers would be receiving cotton at two cents a pound less than the American mmanufacturer and the foreigner could ship his manufactured goods back into the American market with this advantage. As the subsidy in many cases is larger than the freight to foreign ports and back, it raises large opportunities of fraud in return shipment activities.

8. Export bounties are recognized by many nations as one form of dumping. I am advised that a similar action by another nation would be construed as a violation of our own laws. Such laws are in force in the principal countries of our export markets and to protect their own agriculture would probably lead to action which would nullify the subsidy given by us.

9. A further serious question arises again (if the plan did have the effect intended) where the foreign producer of animals would be enabled to purchase feed for less than the American farmer producing the same animals. For instance, the swine growers in Ontario would be able to purchase American corn for less than the American farmers across the border and it would tend to transfer the production of pork products for export to Europe from the United States to Canada. It would have the same and probably even more disastrous effect in dairy products.

10. The plan would require a substantial increase in taxes as no such expenditure or depletion of revenues as this plan implies could be paid from marginal income of the Government more particularly in view of the very large increased expenditures imposed by the naval program, flood control and other branches of farm relief.

Altogether, from the above reasons, it is my belief that the theoretical benefits would not be reflected to the American farmer; that it would create profiteering; that it contains elements which would bring American agriculture to disaster.

The introduction of such a plan would also inevitably confuse and minimize the much more far reaching plan of farm relief, upon the fundamental principles of which there has been general agreement.

Yours faithfully,
Herbert Hoover

I regret to that some farm organizations are again divided on measures of agricultural relief. One primary difficulty in the whole of this last eight years has been the conflict in point of view in the ranks of the agricultural organizations and the farmers themselves.

A definite plan of principles for farm relief was adopted by the Republican Convention at Kansas City. It was the plan of party; it was not then or now the plan of any individual or group; it was necessarily the result of compromise; it represented an effort to get together and secure fundamental beginnings and necessitated the yieldings of views by all of us; it was supported by all elements of the party in the campaign and upon it we have a clear mandate.

Without entering into the merits or demerits of any other suggestion at the present time, I can deplore that divisions in the ranks of the farmers themselves encourage those who oppose all farm relief and can at best only bring great delays and danger of entire failure. If after eight years of agitation and debate on a matter so vital to a large part of our people we are to succeed in putting the question out of politics and on the way to solution under economic guidance, we have need of unity in the ranks of the farmers themselves and the different groups which reflect their views in Congress. No great step in public action can ever succeed without some compromise of views and some sacrifice of opinion.