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Mr. LAWSON. That is correct.
Mr. Wolcott. So it would be a permanent injury to our cotton industry to exercise these controls?
Mr. LAWSON. That is correct.
Mr. Wolcott. The next point is, Can we stabilize the price of cotton through an increase in production? I believe that you said you thought we could do that.
Mr. LAWSON. That is correct.
Mr. Wolcott. Now, is it expected we will get more or less production?
Mr. LAWSON. Less production under controls.
Mr. WOLCOTT. That would just be an umbrella question over everything else that you have said.
Mr. COLE. Did I understand you to say that none of your industry was invited to participate in the determination of these regulations?
Mr. LAWSON. That is correct. I would like to say this along that line: that before the watchdog committee, the joint committee, Representative Murray of Tennessee asked Mr. DiSalle this question: I understand you had eight or nine economists who assisted you in preparing this regulation, and he asked him to name them. Mr. DiSalle named some of his assistants in the OPS, and also named the cotton men that came to Washington, and his statement was that these men either were contracted, or assisted in the promulgation of this regulation.
I want to say this, we had no assistance whatsoever in it. We did not know the regulation was coming out until the day that it came out.
Mr. COLE. Have you been in contact with Mr. DiSalle, or his office, since the regulations were issued?
Mr. Lawson. Indirectly.
Mr. COLE. Have you, or any of your industry, been invited into the agency to discuss the regulations with him? Mr. Lawson. Not a single one that I know of.
Mr. COLE. Can you say that you know that they have been apprized of your condition and the condition which you contend has been caused by the regulation?
Mr. Lawson. Yes; they were apprized of that before the regulation came out on March 3.
Mr. COLE. Nothing has been done?
Mr. BETTS. Are you simply for the exemption of cotton from OPS, or do you believe that all price controls should be dropped?
Mr. LAWSON. I think that we ought to wipe the slate clean and start over. As the gentleman before said, there are certain vital things that should probably be controlled or allocated, but I think we ought to clean this thing up and start over.
Mr. Betts. Do you believe that there should be exceptions?
Mr. Lawson. I think that there has been much damage done by these price controls, and I think that the people who are issuing them do not know what they are doing. Mr. Berts. Then you are definitely opposed to price controls.
Mr. Lawson. Yes, except in certain instances of vital materials.
Mr. Betts. You are not simply asking that the cotton industry be exempted; is that right?
Mr. LAWSON. That is correct.
Mr. BROWN. Do you have anything else you desire to file for the record?
Mr. LAWson. No, sir; we do not.
Mr. HALLAHAN. The next witness is Mr. William A. L. Sibley, vice president of the American Cotton Manufacturers Institute.
STATEMENT OF WILLIAM A. L. SIBLEY, ON BEHALF OF THE
AMERICAN COTTON MANUFACTURERS INSTITUTE, ACCOMPANIED BY JAMES L. RANKIN AND CLAUDIUS MURCHISON
Mr. SIBLEY. Mr. Chairman, may I ask Vr. Rankin and Mr. Murchison to sit with me. They helped to prepare this testimony.
Mr. BROWN. Yes.
Mr. Sibley. Vy name is William A. L. Sibley and my place of residence is Union, S. C. I am vice president and treasurer of Monarch Mills in that city and also serve as vice president of the American Cotton Vanufacturers Institute of Charlotte, N. C., in whose behalf I present my testimony today.
This is the central trade association of the primary cotton textile manufacturers of the United States. It is Nation-wide in scope covering all areas of textile manufacture from Maine to Texas and includes within its membership more than 85 percent of the country's spindles.
The industry which I represent employs about 500,000 workers and the annual value of its products currently is about $6 billion. It is paying the American cotton farmers more than $2 billion for the cotton which it will consume this season. The industry is therefore a major factor in the economic life of the country and is the predominant factor in the prosperity of the Southern half of the United States.
It is vital to the Nation's preparedness program, occupying a position in that regard which probably is second only to iron and steel. In serving the needs of the civilian population it ranks next to food and shelter and is exceeded only by them in its importance in the family budget, both from the standpoint of cost and adequate supply.
It is essentially an industry of small enterprises. Its great magnitude does not imply giant corporations, but a great number of relatively small units, a thousand or more, no one of which constitutes more than 4 percent of the total. The average unit must be 'content with a minor fraction of 1 percent of the industry's business. This assures a high degree of business competition and low prices.
Being scattered over many States, production can be developed promptly as need arises if conditions are favorable; but when conditions become unfavorable, the limited resources of each individual and his inability long to endure financial loss or to assume undue risk, force a substantial downward readjustment of production in a way more severe than in the case of large unit industries. At such times there is always acute price weakness and heavy losses.
This is probably the most basic truth with which we have to deal in considering a program of controls over industries which are highly competitive and complicated and which at the same time consist of a great number of relatively small, widely scattered, locally owned units. The OPS program has failed to recognize this, with disastrous results.
The two great purposes to which our Nation has pledged itself-the building of adequate defense against Communist aggression and the containment of the forces of inflation-must not be defeated.
It is our judgment that this success can be more speedily realized and made more certain by the elimination of title IV, the price and wage control section, from the Defense Production Act. We recommend and urge that the Congress and the Administration replace a system of price and wage controls which is negative and injurious in character with a system of inflation controls which reach the source of the evil and which is positive and constructive in its effect on our economy.
Before setting out the basis for our recommendations, I wish to emphasize that we did not oppose the enactment of the present law. Rather, we offered such assistance as we could, hoping that there would emerge a law that was workable and practicable.
During the period of hearings before the committees of Congress we suggested the incorporation of provisions in the law which would avoid the mistakes of 1942–46.
I would like to pause for a moment to give you a first-hand experience under OPA, showing you how it works for scarcity rather than production.
The mills with which I am connected manufacture print cloth. Now, print cloths are a medium light-weight cotton fabric that goes into women's house dresses, children's clothes, and men's shorts and the like. OPA in 1943 and 1944 required the manufacturers to absorb increases, and of course with no relief. As a result, we came to a point where there was no incentive to produce. Production in our plants dropped from three full shifts of 144 hours per week to two shifts of 96 hours, a total reduction of 33 percent. We were saved, fortunately, in 1945 by the Bankhead-Brown amendment which required OPA to give full cost allowance for cotton, not less than parity, to be paid these farmers, with all manufacturing costs, plus a reasonable profit on each major item. This gave the incentive to produce and the industry began again an upward trend of production, and, gentlemen, production is the answer to inflation.
When the 1950 act was signed by the Mobilization Committee of our institute, composed of 16 outstanding industry leaders, promptly offered its services to the heads of many of the Federal agencies including Secretary Sawyer, Chairman Symington, and Price Administrator DiSalle. We submitted to OPS a list of qualified men ready to serve. We were treated courteously but our experience and our abilities were not utilized. Despite the importance of our industry in any preparedness program not one man acquainted with cotton textile manufacturing has been appointed to a policy-making level in OPS or NPA. A few good men who know some features of the textile business were put in lower level jobs in the two agencies; but their positions have not been authoritative at the higher or policy-making levels.
The result has been what you would expect-an uncertain, inept, and harmful series of orders which have made it very difficult for our
industry to operate. This probably would have been true under any agency and with any personnel charged with the administration of title IV of this act.
On December 20, Dr. Valentine sent to a number of textile mills a telegram requesting them to hold the price line. Many in our industry complied with these requests with resulting penalty because wages and other costs increased and those who complied were caught with frozen prices at a low level which carried discrimination in favor of those who refused to comply with the request.
At approximately the same time, we, along with other business groups, were asked to hold the line on prices as of the December 1 level. Believing that we could do it, a group of us representing our industry, visited officials of the Economic Stabilization Agency and offered them the services of our Textile Industry Mobilization Committee in instituting and operating a voluntary price-control program for our industry, provided we were given the necessary status under the law. This offer apparently was received with enthusiasm, but we never heard another word about it. Instead of accepting the industry's offer of cooperation in a voluntary pricing program, OPS subjected us to the series of directives which I am about to describe.
The first was the issuance of the general freeze order, GCPR, effective January 26. Since the prices frozen were not current sales prices but recent delivered prices, the industry for the most part was rolled back to the prices of 3 to 6 months previous despite the great increase in cotton, wages, and other costs which had occurred in the meantime. The order cut across and violated a great body of existing contracts and made new sales at fair prices impossible for the bulk of the industry's goods.
With your permission, I would like to read a paragraph of the regulation, which is section 2, paragraph (c) under "Prohibitions."
After the date of this order, regardless of any contract, or other obligation, you shall not sell, and you shall not buy, in the regular course of business or trade any commodity or service at a price exceeding the ceiling price established by this regulation.
GCPR amendment No. 2 was issued February 23 to become effective February 28. On the day it became effective it was canceled, and amendment No. 5 was issued to become effective March 7. In common with hundreds of other cotton-mill operators my associates and I spent days and days with lawyers and accountants to unravel the meaning of No. 5 which did provide some scattered and uneven relief, veiled in extremely difficult and ambiguous language.
During February the mill situation was made doubly worse by the cotton freeze which closed down the cotton exchanges and stopped the operations of the spot-cotton markets. There was no ceiling on cotton as such, but a separate ceiling on each individual who dealt in cotton. The customary fixing of cotton prices, therefore, for the purpose of advance pricing of cotton goods was made impossible. Bad as it was in February if the freeze had occurred in October 1950 when the cotton crop began to move in its greatest volume, chaos would have resulted and many mills would have closed.
On March 3 OPS issued raw cotton order CPR 8 which established for the first time ceilings on raw cotton with differentials for grade, staple, and location. Mills could not yet make new purchases or fix
cotton prices on preexisting contracts because the exchanges which had been closed since January 26 were not yet open.
On March 6 Mr. DiSalle approved SR i to CPR 8 establishing a uniform cotton ceiling for purpose of futures trading and the exchanges then opened on March 8. However, conditions remained such that normal price fixing and hedging operations in the nearby trading months were impossible.
Despite these difficulties and the confusing provisions of amendment No. 5, the mills maintained their record-breaking production, accepted new orders at peak volume during March, and continued shipments on old orders to take care of their
customers. The reasons for their action were, first, the wholehearted support of the rearmament program and the belief that the strongest weapon against inflation was expanded production; second, repeated and emphatic assurances from OPS that the existing regulations were only temporary, a stopgap, and would speedily be replaced by new orders especially tailored to the needs of the industry; and third, the mills' unqualified adherence to the integrity of contracts.
During March the industry was told that a textile-price order especially designed for cotton textiles was in the making and would shortly emerge. This order was to provide temporary improvement in price making, pending the construction of tailored ceilings. Supposedly, preparatory studies were being inaugurated for these tailored ceilings.
OPS gave greater substance to these reported plans by scheduling a series of high-pressure conferences with the various advisory committees of the industry beginning on March 12. Each of these committees was to come armed with cost studies and recommendations on ceiling procedures. The urgency was described by OPS as so great that several committee requests for more study time were denied, or granted only in part, because of the great necessity for speedy action.
The ensuing weeks passed. Each week we were told by OPS that the order would be out in the next. Often we were assured that it was only a matter of 2 or 3 days.
By the end of March, although nothing had happened, action was being expected momentarily. It was then that the big buyersthe chain stores, the department-store syndicates, the mail-order houses, the jobbers, the converters, the cutting trades-began drawing out of the market in mass. They were now disposed to postpone ali further commitments until new ceiling prices became effective, hoping thereby to benefit from such roll-backs, if any, as might be made. Their own customers in turn adopted the same program and withdrew from the market.
For many weeks OPS took no action. Instead of the long awaited textile price regulation, there appeared on April 25, to become effective on May 28, the Manufacturers' General Price Regulation No. 22, covering practically all of the manufacturing enterprises of America. To our consternation we were included in this order, although we had been specifically told that we would not be. In announcing CPR 22, Mr. DiSalle stated that he would issue a general textile-price regulation similar to CPR 22 almost simultaneously with it. Our industry was not consulted with respect to the provisions of the regulation designed to control us.