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U. S. CATTLE IMPORTS UNDER THE TRADE
AGREEMENTS WITH CANADA

by

Winfred Keith Burkett

A THESIS
Submitted to the Graduate School of Ndchigan
State College of Agriculture and Applied
Science in partial fulfilment of the
requirements for the degree of

MASTER OF ARTS

Department of Economics

1940

 

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ACKNOWLEDGEMENT

Much credit is due Dr. Harold S. Patton,
Head of the Department of Economics, for his
criticism and suggestions during the develop-

ment of this study.

1.29331

TABLE OF CONTENTS

INTRODUCTION
Chapter I
THE NORTH AMERICAN CATTLE AND BEEF ECONOEH
Cattle Production in the United States
The Western Range
The Corn Belt
The Great Lakes and Appalachian Region
The Cotton Belt
Cattle Production in Canada
Cattle Production in Mexico

The Passing of the United States Beef Surplus

Chapter II
CATTLE TARIFFS AND IMPORTS PRIOR TO 1936
The Emergence of the Cattle Tariff Issue
Free Entry of Cattle With the Underwood Tariff, 1913-1921

The Reimposition of Cattle Duties under the Post-War
Tariff Acts of 1921 and 1922.

Increased Duties Under the Fawley-Smoot Tariff Act of 1930
The Form of Import Duties
The Relation of Cattle Imports to Prices

Sources of Cattle Imports, 1910-1935

Page

21
21

24

24
27
28
29

31

Chapter III

Page

THE NATURE OF THE 1955 TRaDE.aGRy“MENT HITH CANADA AND

THE U. S. CONCESSIONS ON CATTLE 39
The Nature of the Trade Agreements Program 59
Reasons for the U. S. - Canadian Trade Agreements 41
Nature of the 1955 Trade Agreement with Canada 42
Considerations Involved in the Granting of Concessions
on Cattle 43

The Necessity of Concessions on Cattle 43
Partial Dependence of the U. S. on Canadian Cattle 43
Timeliness of Cattle Concessions 44'
Protection of U. S. Cattlemen Against Undue
Foreign Competition 44
Nature of the Concessions on Cattle 45
Chapter IV

CATTLE IMPORTS UNDER THE FIRST U. S. - CAJADIAN TRADE

AGREEMENT, 1936 - 38 . 49
Imports of Concession Class Cattle, 1936-38 51
Character of Cattle Imports 54
Monthly Import Movements 54
Imports by Customs Districts 60

Chapter V

CATTLE CONCESSIONS AND IMPORTS UNDER THE SECOND U. S. -

CANADIAN TRADE AGREEMENT 64
Nature and Scope of the New.Agreement 64
Concessions on Cattle 66
Special Quota.Allotment for Canada 68
Cattle Imports in 1959 and the First Third of 1940 68
Major Causes of Large 1959 Imports 76

Prospects for Future Cattle Imports 79

Chapter VI

Page
RELATIONS OF IMPORTS TO CATTLE PRICES IN THE UNITED STATES 81
Theoretical Effect of a Duty Change on the Price of
the Tariff Item 81
Effect of the Tariff on Price Spreads Prior to 1956 84
Price Spreads Under the U. S. - Canadian Trade Agreements 90
Relative Price Movements in the United States and Canada 93
Cattle Imports are Price Determined Rather Than Price
Determining 105
Chapter VII
SUnMaRY AND APPRAISAL 107
Summary 107
Effects of the Concessions on Cattle, An.Appraisal 111
Imports Help to Stabilize Prices 111
Lower Duties Improve the Farmer's Market 111
Possible Benefits from.a.Protective Tariff on
Beef Cattle are Distinctly Limited 112
Effect of Concessions on Canadian Cattlemen 115
Effect on Consumers 114
The Outlook for U. S. Beef Production 114
APPENDIX 117

BIBLIOSI“ HY 120

Table I.

II.

III.

IV.

V.

VI.

VII.

VIIa.

VIIb.

VIII.

IX.

X.

XII.

XIII.

XIV.

TABLES

Size, Distribution, and Relative Importance
of the Cattle Industry on Farms in the United
States, 1937

Number and Distribution of Cattle in the United
States, 1937

Numbers of Cattle on Farms in Canada, June 1, 1938

Size and Density of Cattle Population of
Important Beef Producing Countries

Cattle Numbers and Foreign Trade in Live
Cattle of Mexico

Foreign Trade of the United States in Cattle
and Beef 1900 - 1939

Total Numbers of People, Cattle, Sheep, and Swine
in the United States, 1870 - 1939

Cattle Duties, 1883 - 1930

Duties on Beef and Veal, 1883 - 1930

U. S. Cattle Imports, Domestic Slaughter, and
U. S. Cattle Prices under Successive Tariff
Acts, 1910 - 1935

Imports of Dutiable Cattle by Country of Origin
and Duty Class under Successive U. S. Tariff

Acts, 1910 - 1939

U. S. and United Kingdom Tariffs and Canadian
Cattle Exports, 1910 - 1939

Duty Changes Affecting Cattle in the 1935
Agreement with Canada

Dutiable Cattle Imports from Canada and Mexico,
1931 — 38

Size and Origin of Total Concession and Non-
Concession Cattle Imports, 1931 - 38

Imports of Concession Cattle by Class and
Origin, 1936 - 38

Page

11

ll

13

19
22

23

25

32

37

46

5O

52

53

Table XV.

XVII.

XVIII.

XIX.

XXII.

XXIII.

XXIV.

XXVI.

XXVII.

XXVIII.

XXIX.

Number, EiJeight, and Value of Imports in the
700 Pound and Over Non-Dairy Class from
Canada and maxico

Monthly Imports of Dutiable Cattle, 1936—38

United States Imports of Dutiable Cattle by
Customs Districts, 1936-38

U. S. Cattle Duties and Quotas under the 1935
and 1938 Agreements with Canada

Size and Origin of Total Concession Cattle
Imports under the First and Second Agreements
with Canada

Percent Each Duty Class is of Total Dutiable
Import Numbers, 1936 - April 1940

Imports of Concession Cattle by Class and
Origin, 1939 - April 1940

Quarterly Imports in the 700 Pound and Over
Non-Dairy Class, 1939 and First Quarter 1940

Monthly Imports of Dutiable Cattle,
1939 - April 1940

Average margin of U. 8. over Canadian Cattle
Prices Under Successive Cattle Duties, 1935-39

Cattle Imports in Relation to Domestic Slaughter
and Cattle Prices, 1910 - march 1940

Calf Imports and U. S. Calf Slaughter Numbers,
1936-39

Dutiable Beef Cattle Imports and U. S. Cattle
Slaughter’Numbers 1936-39

Stocker and Feeder Cattle Shipments at U. S.
Stockyards and Estimated Imports of Stocker
and Feeder Cattle, 1936-39

Canadian Cattle Narketings and Exports to
the United States, 1938-39

Relations of Annual Imports by Duty Class to
Prices of Comparable Cattle at Chicago

Page

55

56

61

67

69

71

71

75

74

91

95

97

97

98

100

102

Figure Ie

II.

III.

IV.

V.

VI.

VII.

VIII.

CHARTS

Net Foreign Trade of the U. S. in the Beef
Equivalent of Cattle, Beef and Veal, 1900-1939

Total Foreign Trade of the U. S. in Cattle
and in Beef and Veal

Trends in Population and in Livestock Numbers
in the Ue Se, 1870 " 1959

Prices of Fat Cattle in the United States and
Canada, 1910 - 1925

Prices of Lean Cattle in the ”United States
and Canada, 1920-25

Prices of Slaughter Steers in the United
States and Canada, 1926 - 1939

Prices of Stocker and Feeder Steers in the
United States and Canada, 1926 - 1939

U. S. Farm Price of Beef Cattle and U. S.
Imports of Dutiable Cattle, 1910 - 1939

Page

14

15

18

85

85

88

89

104

NTRODUCTION

The purpose of this study is primarily to examine the rela-
tion of the U. S. - Canadian Trade Agreements to cattle imports and
to determine, so far as possible, what effect these imports have on
the American beef cattle industry. Especially when a price decline
occurs, cattlemen, like other producers, are apt to view with alarm
any competition which might be curtailed. However, to act on the
assumption that the exclusion of imports is necessarily to the advan-
tage of producers and others may result in a serious error.

While some beef, as well as live cattle, is imported into
the United States this study is limited to live cattle imports. Such
a limitation is not entirely arbitrary because the Trade Agreements
with Canada made no change in the U. S. import regulations for beef
and also because any consideration of tariff protection forthe beef
cattle industry lends its self readily to largely separate examina-
tions of beef and of live cattle imports. The effects of beef imports
and of live cattle inports, especially thin cattle, on the American
cattle and packing industries are distinctly different.

The procedure which seemed most useful was to examine his-
torically and statistically: (l) the nature of the beef cattle industry
of North America and the trend of U. S. trade in cattle and beef; (2)
changes in cattle duties and their effects prior to 1936; and finally
in more detail (3) the U. S. - Canadian Trade Agreements as they affected

cattle imports and the American cattle industry.

CHAPTER I.
THE NORTH ANERICAN CATTLE AND BEEF ECONOMY

In several important respects the cattle and beef industries
of the North American countries — of the United States in the center and
Canada and Nexico on its borders - are essentially complimentary. If
North America be considered as an economic entity in the production and
consumption of beef, the United States, especially the northeastern
states, is the center of consumption, much more beef being consumed than
is produced in this heavily populated area; the mid-west Corn Belt fur-
nishes the concentrated feeds for fattening cattle; the range areas of the
far western United States, of the Prairie Provinces of Canada, and of
northern'Nexico are the breeding grounds and sourCes of supply for lean
cattle. This, of course, is an over simplified statement which may be
amplified by a description of the principal forms of production existing
today in the countries of North America and by a historical examination
of American beef cattle production and trade.

In so vast an area as the North American Continent, or even
that part in which cattle are important, there must be great differences
in such factors as climate, soil resources, competing forms of agricul-
ture, and distance to centers of consumption which influence the character
of the cattle industry. To facilitate this discussion it will be conven-
ient to consider the cattle industry by countries and by principal pro-
duction areas within each country. Even then it must be remembered that
while cattle production differs sufficiently between large areas and has
sufficiently characteristic features within these areas to afford a use-
ful basis of classification, yet every type of production is likely to
occur to some extent within each area. horeover, any classification of

types of production must be to some extent arbitrary.

Cattle Production in the United States

Cattle raising is definitely an important branch of American
agriculture. As indicated in Table I. the gross income from farm sales
of cattle, calves, beef, and veal in 1957 amounted to $1,240,172,000,
or 12.5 percent of the gross farm income. By areas this ranged from
5.9 percent in the South Atlantic States to 21.6 percent in the West
Nerth Central States. In terms of net production in pounds and dollars
the West North Central States take a pronounced lead over the South
Central (chiefly Texas), Western, and East North Central States which
compete closely with each other for second place. Neither the North
Atlantic nor the South Atlantic States have as much as one—third the
net production of any of the other regions.

Of course, by no means all beef and veal is from beef type
animals. Table II shows that 52.8 percent of 1957 cattle numbers in
the United States were classified as dairy cattle. The West Nerth
Central, South Central and western States rank high in total beef
cattle, in percent of all beef cattle in the United States, and in the
preportion of beef cattle to dairy cattle. 0n the other hand the
North Atlantic, South Atlantic and East North Central States show a
predominance of dairy cattle.

While these census regions are convenient for purposes of
statistical comparison, a more appropriate grouping from the stand-
point of economic classification.of the beef cattle industry of the
united States is to be found in the areas commonly designated as the
Western Range, the Corn Belt, the Great Lakes and Appalachian.region,
and the Cotton Belt.

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and Cascade Mountains. Cattle production generally takes the form of
breeding and grazing on an extensive fashion adapted to large areas of
cheap land - including public lands. The southwestern ranges are frequent-
ly able to carry cattle the year around and, besides producing feeders,
furnish a large number of grass fat cattle for slaughter. But in the
northern range states some winter feeding increases the safe carrying

capacity of the range.
Although some lot-fed as well as grass-fat cattle are regularly

shipped from the Western Range states, this area serves principally as a
source supplying lean cattle for the Corn Belt. Since there is no definite
demarcation between stocker and feeder cattle and slaughter cattle, the
immediate destination of range cattle, especially the heavier classes on
the market, is influenced by both the nature of the supply and the rel-
ative demands for feeders and for slaughter cattle. Feeder cattle, more-
over, have classes of their own, the most highly specialized being high
grade calves and yearlings, which generally command a premium.

2. The Corn Belt. On the generally high priced land of the
Corn Belt rather intensive types of agriculture naturally prevail. Here
the fattening of cattle from the Western Range has an important place.
It is estimated, however, that two-thirds of the cattle marketed from
the Corn Belt are native cattle.(l) Beef cattle production in the Corn
Belt includes many forms both intensive and extensive. While numerous
farms on which beef production is a sideline and some on which it is a
main enterprise, notably those producing "baby-beeves", breed their own
stock, yet probably most farmers engaged in fattening high class beef

animals are depenient on the Western Range for their feeders.

 

U) Roscoe R. Snapp, "Beef Cattle, Their Feeding ani Management in the
United States“, p. 82.

6

Thin cattle and feed are the raw materials of the Corn Belt
cattle feeder. His profit is dependent partly on efficiency in obtaining
weight increases, but a pound of gain in the feedlot, especially with older
cattle, may cost more than it sells for. Consequently the cattle feeder'e
profit is strongly influenced by his ”margin", that is, the excess of
price received per hundredweight for his fat cattle over the price paid
per hundredweight for his thin cattle. When cattle prices are low rel-
ative to feed a wider margin is necessary. So the man who finishes cattle
is doubly interested in lower feeder cattle prices. But the rancher whose
finished product is thin cattle is interested in higher prices for his
feeders. Here exists a conflict of interest within the domestic cattle
industry as to the desirability of tariff protection since imports are
largely thin cattle.

3. The Great Lakes find Appalachian Region. This is an area

of generally rolling land becoming mountainous in the East and which

 

throughout has only limited areas of productive tillable land. The less
productive and more remote sections commonly practice extensive methods
such as carrying breeding herds and pasturing young stocker cattle.
Some richer limestone regions grass fatten older cattle for slaughter.
The northeastern and Great Lakes states are particularly adapted to
dual-purpose production. A rather dense population in these regions has
favored the expansion of dairying which has frequently taken dual-purpose
form.

4. Thg CQIlQD Bel]. The South, with the notable exception
of Texas and Oklahoma whose cattle industry is more properly a part of
the southwestern range, has not had a large cattle industry. Southern

cattle generally have a poor reputation because of scrub breeding and

poor care. Cattle production in the South until recently has been under

several handicaps including the fever-tick, exclusive attention to

cotton in most localities, and lack of highly productive pasture and for-

age crops. Now, with the eradication of the fever-tick, better breeding

stock is being introduced. Diversified farming is receiving more atten-

tion, especially in the South Atlantic States as a result of the reduced

cotton market and the official emphasis on soil conservation. Because

of the long growing season and a considerable proportion of land better

adapted to pasture than to cropping, the South may be able eventually to

support a relatively self contained cattle industry of some importance.
Cat P o 13.

Cattle production in Canada is in many respects similar to
that of our northern states. It is characterized by extensive methods
in the West and by more intensive practices in the East. The Prairie
Provinces of Manitoba, Saskatchewan, and Alberta engage in cattle pro-
duction under range, semi-range, and mixed farming conditions. The
Eastern Provinces, especially Ontario and Quebec, feed slaughter cattle,
under mixed farming conditions, both of their own breeding and of Prairie
Province origin.

The distribution of Canadian cattle shown in Table III indi-
cates that only Ontario exceeds the Prairie Provinces in beef cattle
numbers and even then only 24 per cent of her cattle were beef type com-
pared to 44.9 per cent in Alberta. Ontario cattle production most nearly
corresponds to that of our northern North Central States. Cattle fBEdBPB
in Ontario make use of coarse grains and root crops but have little corn
to feed. Manitoba, with 157,000 head of beef cattle in 1938, has been
turning from.wheat to feed grain production and more mixed farming.

Cattle production in the Prairie Provinces is carried on under

both ranching and general farming conditions. In the areas adapted

TABLE III
(a)
Number of Cattle on Farms in Canada, June 1, 1958

(In thousands)

 

Prince New

Edward Neva Bruns- On-
Class Island Scotia pick ggebec tario toba wan
Milk
cows &
year-
lings 58 146 ._142
Beef
cows
yearlings
& steers 17 59 22 105
Total
milk &
beef(b)
animals 75 185 164
Beef
animals
as per-
centage
of total‘b) 22.7 21.1

Sas-

1,225 1.421 474 614

449 157 192

1,528 1,870 651 ___806

15.4 7.8 24.0 24.9 25.8

Mani— katche- A1-

British Total
Colum- Canada
berta big

545 148 4.171
445 118

1,542

990 266 6,515

44.9 44.4 24.4

 

(a) "The Beef Cattle Situation”, April 18, 1959.

(b) Excluding bulls and calves.

to grain.production cattle are generally sold in slaughter condition.
Alberta, with 445,000 head of beef cattle in 1958 - nearly as many as
the other three Western Provinces combined - was an.even.more important
ranching area before wheat production was introduced. The milder winters
of this area gives it a considerable advantage in cattle ranching. "Speak-
ing generally, the semiranch.system of Canada prevails in newer settled
regions east and north of the ranching area of Saskatchewan.and Alberta.
Its counterpart in.the United States is the belt comprising the western
Dakotas and eastern Montana and extending to the Panhandle of Texas."(l)

There are also some distinct differences between the Canadian
industry and our own. Canada has no great feed producing area at all
°comparable to our Corn.Belt. In.place of a fertile valley such as the
Mississippi, a thousand miles of rough, unproductive land, sometimes
described as a granite wilderness, separates the Prairie Provinces from
the general farming and more densely pepulated Eastern.Provinces. Long,
severe winters make’expensive winter feeding necessary in.most areas
and handicap grass fattening. The wide expanses of the Prairie Provinces
and the relatively low per acre feeding value of crops adapted to the
climate of that region makes possible a large sUpply of feeder cattle in
relation to concentrated feeds. Because of this surplus capacity to
produce feeders, and because of the much shorter rail shipment to St. Paul
and Chicago markets as compared to Toronto and Montreal, the natural
outlet for western Canadian cattle is our northertxMississippi Valley.

As in the United States, the population of Canada is growing

more rapidly than the number of cattle. Nevertheless, as indicated in

 

11’ United States Tariff Commission, "The Cattle Industries of the
United States and Canada.“ p. 7.

10

Table IV,. the ratio of cattle to human population is considerably higher
in Canada. The absolute size of Canada's cattle industry, however, is
small in comparison with that of the United States. For 1957 the number
of all cattle in Canada was approximately 15 percent of all cattle in
the United States.
Cattle Production in Mexico

Mexico, as a cattle country, is a land of both promise and
problems. The interior plateaus and southern mountain.va11eys are well
adapted to cattle production. The climate is for the most part mild
permitting a ten to twelve month grazing season. But drought frequently
causes serious trouble in respect to both feed and water supply in north-
ern.Mexico. In the low coastal regions fever-ticks and other insects are
troublesome. Mexican cattle are generally of low quality, and fever-
ticks enterfere with the introduction of well bred stock from the out-
side. Besides these more or less natural obstacles, political disturb—
ances have further checked the Mexican cattle industry. Between.1902
and 1921, largely as a result of revolution, political unrest, and out-
law raiding, Mexican cattle numbers were reduced from 5,142,500 to
2,565,000. Although they had increased to 10,085,000 by 1950 there
are indications that northern.Nexican herds are again being reduced
partly because of political uncertainty.

Lacking feed to finish many cattle and being remote from
any other market for thin cattle most of Mexico's cattle surplus has
entered the United States. Cattle imported from Mexico are generally
small, angular, and undesirable from the standpoint of both the butcher
and the Corn Belt feeder. For the most part Mexican cattle have gone

to our southwestern.ranges to replenish breeding herds or to be grass

11
TABLE IV

Size and Density of Cattle Pepulat op of Important
Beef-Producing Countries a

 

 

 

 

 

 

 

Country Area Pepulation Number When CCEttle Cattle
(sq. mi.) of esti- per per
_____ catgle mated sg;_mi. capita
United States 2,625,000 127,521,000 66,821,000 1959 18 0.52
Canada 5,467,000 10,577,000 8,841,000 1957 5 0.85
Mexico 767,000 16,525,000 10,085,000 1950 15 0.61
TABLE‘V.
Cattle Numbers and Foreign.T§ade in.Live Cattle
of Mexico(8
Cattle Foreign Trade in.Live Cattle Beef
Year p0pulation. Egports _' Imports imports
To from from
1_ 1. United States Total ___U. S. U. S.
1902 5,142,500 -- 166,500 --— --
Av. 1910—14 -—- 540,000 -—- 7,500 ---
1921 2,565,000 15,900 -- 158,200 ---
1950 10,085,000 175,000 175,100 --- 572
1954 M 55,800 --— —-- 296
1958 -— 285,500 --- —--- ~-
1959 -—- 478,565(b) .... ...... ---_

 

(a) Roscoe R. Snapp, "Beef Cattle, Their Feeding and Management in.the
Corn.Belt States", p. 49.

(b) "Foreign.Cr0ps and Markets" V01. 40. N0. 6. (February 10, 1940) p. 160.

12

fattened and slaughtered for consumption by the poorer classes of the
population in the southwestern states and California.
T Pas 0 U 8 St E e S

Hardly more than a glance at Table VI and Figure I is necessary
to show that, since the turn of the century, our net foreign trade in
beef and veal, including the beef equivalent of live animals, has under-
gone a tremendous change. From a 764,715,000 pound net export balance
in 1904 this trade has shifted to a 424,707,000 net import balance in
1959. Until 1905 the United States not only produced enough beef for
its own consumption but was also the world's greatest exporter of cattle
and beef. In 1905 our position as leading exporter passed to Argentina.
From 1904 our net exports declined rapidly until, by 1915, U. S. cattle
and beef imports exceeded exports. Only in the years of 1916 and 1919
as a result of the World War stimulation has any considerable net ex-
port balance been reestablished.

Table VI and Figure II show how this change in net trade has
come about. Both live cattle and total beef exports rapidly declined
from a total net export balance of 755,491,000 pounds in 1906 to only
7,581,000 pounds in 1912. With the removal of the duties on cattle
and beef in 1915 imports rapidly increased and provided a net import
balance of 461,271,000 by 1914. For the next four years a net export
balance was reestablished. During this World War period shipments

both into and out of the United States greatly increased.(l) In fact,

 

(1) It should be noted that thru most of the 1900 to 1959 period our
exports have been largely in the form of beef while live cattle have
predominated in our imports. This is because conditions for fatten-
ing and slaughtering are highly favorable in this country and be-
cause imports have come from adjoining countries, while exports
have been shipped considerable distances abroad.

 

 

 

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l6

imports of live cattle to a large extent made possible our eXportB of
beef. At this time, with cattle on the free list in the tariffs of the
United States and Canada, the Nerth American cattle industry functions
ed as an economic entity in supplying both the home market and in export-
ing to feed both Europeans and the U. S. and Canadian armies abroad.

Following the close of the war a net import balance was re-
established. This remained low in the early twenties'but increased to
a height of 521,588,000 pounds in 1929. This was followed by another
period of low not imports in the early thirties lasting until 1955 when
not imports increased to 254,274,000 pounds and remained relatively high
until, in 1959, they reached the peak of 424,704,000 pounds.

Clearly the United States has shifted from.an export surplus
of cattle and beef to a situation where not enough cattle are produced
to supply the domestic market. The explanation of this transition is
to be found in the evolution of American agriculture which accompanied
the settlement and development of the country — an evolution character-
istic of new countries. Typically, as the population becomes more
dense, extensive types of agriculture give way to more intensive farms.
There are also characteristic general relationships between.human pOpula—
tion.and animal numbersgl) Sparsely settled regions tend to have a high
ratio of animals to human population but low animal numbers per unit of
area. Densely populated regions tend to have many animals per unit of
area but a lower ratio of animals to peOple.

However, all animals do not fare alike in this adjustment.

Certain animals tend to increase proportionately while others decrease.

 

(l) Erich W. Zimmerman, "WOrld Resources and Industries", pp. 508-311.

17

Dairy cattle and hogs, which yield a considerable product per unit of
land, tend to increase relatively to beef cattle and sheep.

A brief examination of the history of cattle production in
America reveals conditions causing a rapid decline in the per capita
production of beef cattle even though cattle prices were rising. The
cattle industry was especially prominent in.the later frontier days be-'
cause the Far West was so much better adapted to extensive grazing than
to other types of land use. But with the passing of the frontier more
intensive forms of farming began to crowd beef cattle and to grow in
relative importance; grain farming began to displace cattle ranching in
the eastern plains states; homesteaders occupied parts and interfered
with the effective use of larger areas of the Western Ranges. Meanwhile,
as population density increased in the eastern states, dairy cattle
were displacing beef animals on general farms.

Figure III shows the numbers of the principal food producing
farm animals and the papulation of the United States from 1870 to 1959.
Economic historians generally place the passing of the American frontier
at about 1890. It is evident inJFigure III that the trend in cattle
numbers, especially cattle other than milk cows, like the trend in sheep
numbers, parted company with the pOpulation trend approximately with the
passing of the frontier.
I While the human population continued a fairly steady climb
upward from 75,995,000 in 1900 to 130,215,000 in 1958, the number of
cattle other than dairy cows remained fairly constant aside from cycli-
cal changes,increasing only from approximately 60 million in 1890 to
70 million in the early thirties. At the same time the number of dairy
cattle over two years of age increased from 15,000,000 in 1890 to

25,095,000 in 1959, an increase of 67 percent. If to dairy cows were
added the dairy heifers (which the census includes in "cattle other than

 

 

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19

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2O

dairy cattle") then beef cattle numbers would show a declining trend
while the increase in. dairy cattle would be even more marked.

Thus, while there was an increasing domestic market for beef,
the beef cattle industry made little growth because of the greater
adaptability of such lines of production as grain, dairy, and hogs
to more intensive production on high priced land. South America and
Australia replaced the United States on.Eur0pe's beef markets because
rising production costs in this country and increased domestic demand
raised our beef prices relative to those in the younger countries.
Such factors as the establishment of American.owned packing plants in
the South American countries and the removal of United States duties

on cattle and beef facilitated this change to a not import basis.

21

CHAPTER II,

CATTLE TARIFFS AND IMPORTS PRIOR TO 1936

T C T r

In the previous chapter it was noted that the United States
had a large export balance in cattle and beef until about the close of
the first decade of the twentieth century. As may be seen in Table VII a,
the United States has had cattle duties in force since 1883. However,
as long as the United States maintained a substantial export surplus of
cattle and beef the import duties were of little significance to U. S.
oattlemen as far as their effect on the domestic price was concerned.
Cattle would not have been exported from the United States unless
domestic prices were below those on outside markets, and if this were
the price situation the United States market would attract few imports.
The United States price was relatively low because of a large domestic
supply which an import duty certainly would not curtail.

With the change to a not import basis in the cattle and beef
trade at the beginning of the second decade, the cattle tariff question
took on new significance because an import duty might now affect the
supply and consequently the price of cattle and beef. It was now a
pertinent question whether the tariff policy should aim at higher prices
to producers or lower costs to consumers. This was a period of rising
prices, and peeple were complaining of the high cost of living. Even
traditional advocates of the protective tariff were on the defensive.
The Payne-Aldrich Act of 1909 lowered some duties including a one-half
cent reduction on fresh beef and veal, but it did not change the duty

on live cattle. In 1910 a reciprocal trade agreement was drawn up

22

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23

TABLE VII b

Duties on Beef and.Veal, 1883 - 1930

 

T., ' {.1 T: ;:: g .. . .-- . .. R; ; . .
1883 Beef l¢ per pound
1890 Beef 2d per pound
1894 Fresh.beef 20 percent ad
valorem
1897 Fresh beef and veal 2¢ per pound
1909 Fresh beef and veal 1£¢ per pound
1913 Fresh beef and veal Free
1921 Fresh or frozen beef and veal 2¢ per pound
1922 Fresh beef and veal 3i a pound

1930 Fresh beef and veal 6¢ a.pound

 

24

between the United States and Canada which included free entry of
Canadian cattle and beef into the United States. This agreement,
however, never became effective because of Canada's failure to approve

it.

When.the Democrats, traditionally the lower tariff party,
came into office in 1913 the Underwood Tariff was enacted which generally
reduced import duties. Partly because of consumer complaints against
high beef prices and in recognition of our partial dependence on outside
sources for cattle and beef, both cattle and beef were placed on the
free list, as had been provided in the Reciprocity Pact with Canada.

is may be seen in Table VIII cattle imports more than doubled
fron:323,986 head in 1912 to 736,937 head in 1913. Throughout the 1913
to 1920 period, in which the Underwood Act was effective high cattle
prices prevailed and imports continued to be large. There was, however,
considerable variation within this period. These variations were due
largely to liquidations of Mexican herds in 1913.15 and of Canadian herds
in 1919, Although imports were relatively large during the we: period
cattlemen were too prosperous to become concerned about this competition.

R C D
U P -W T 9

After the World War, as protection against sea raiders was
no longer necessary, shipping distance again became less important so
that South America and Australia regained their places in the European
meat market; the/War-time price level in the United States was being
deflated; prices of farm products declined more rapidly than farm costs;

the average price of native beef cattle at Chicago fell from $15.50 in

25

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1919 to $8.20 in 1921(1); cattlemen, who had generally borrowed heavily
to permit war time expansion, were in distress; liquidation of both
United States and Canadian herds built for War—time demand added to the
problem. Under these conditions, and with the protectionist party once
more in office, the Emergency Tariff Act was passed in 1921 and the
Fordney-flcCumber Tariff the following year.

The Emergency Act, hastily prepared, levied a 30 per cent
ad valorem import tax on all cattle not specially exempted. The 1922
Act, attempting to make some compensation for the lower per pound value
of thin cattle, placed a duty of one and oneohalf cents a pound on
cattle under 1,050 pounds in weight and a duty of two cents a pound on
cattle weighing 1,050 pounds or more. On the lighter class of cattle
this duty had an ad valorem equivalent varying from 43.7 per cent in
the low price year of 1922 to 18 per cent with the high cattle prices
of 1929. it the same time the ad valorem equivalent for the heavier
class varied from 57.8 per cent to 22.6 per cent.

With such a change in the ratio of the import duty to the
value of cattle it is not surprising that imports of dutiable cattle

ranged from 136,961 head in 1923 to 517,150 head in 1928.

I -s
Tgnjgg Ag; 9; 12:9 _

By 1930 the second postawar depression was being felt, and
international trade barriers were rapidly growing. cattlemen, as well
as other farmers, were again experiencing a price decline more rapid

than that of the general price level; cattlemen were again alarmed at

imports or willing to grasp at any straw in their emergency.

 

(1) fiThe Chicago Daily Drovers Journal, “Year Book of Figures”, 1939, p. 39.

 

 

28

The Halley-Smoot Act of 1930, which topped a long list of high
tariff acts for the United States, provided a duty of two and one-half
cents a pound on cattle under 700 pounds and three cents a pound on those
weighing 700 pounds or more. Changing the dividing point weight from
1,050 to 700 pounds partially recognized the tendency toward feeding
and marketing lighter weight cattle and partially increased the effect
of the duty by making the higher rate applicable to a weight class in-
cluding a greater part of all dutiable imports.

Under the 1930 Act, as under the previous tariff, changes in
the United States prices for cattle caused marked variations in the
effectiveness of the import duties. For the last half of 1930, in which
the Hewley-Smoot duties were applicable, the ad valorem equivalent of
the duty on light cattle was 39.6 per cent, but with the low prices of
1934 it amounted to 88.8 per cent. At the same time the ad valorem
equivalent of the duty on the heavier class increased from 33.5 per cent
to 66.7 per cent.

Again, as under the 1922.Act, imports of dutiable cattle showed
marked variations from year to year under the same specific duties.

In 1930 imports were 226,273 head as compared to 410,656 head in the
previous year; they continued the decline to the extreme low point of
57,679 head in l934,but in 1935 they made the considerable increase to
364,623 head which closely approached the number imported in 1929 under
the Pordney-McCumber duty rates. In 1935 cattle prices had sharply
increased partly because of increased consumer buying power but largely
because of the tremendous effect of the 1934 drought in reducing the
domestic cattle supply.

T F I e

As Table VII shows, United States duties on cattle imports

29

have taken several forms. Simplest of these is a flat ad valorem tax
on all dutiable imports. Because of the considerable difference in the
per pound value of thin and fat cattle it was found desirable to apply
a lower rate to thin cattle. In the earlier attempts to make this
distinction cattle were divided on an age basis, but this was later
discarded for it was more difficult to establish than a division on the
basis of weight. The duty class division on the basis of per head value
as provided in the Act of 1897 was also found undesirable since it tend-
ed to encourage fraud in order to obtain the lower duty classification.

The ad valorem type of duty gives flexibility in application
to cattle differing in value because of class, grade, quality and other
factors, but its flexibility, applied to changing cattle prices is
objectionable from the protectionist standpoint; it does not afford
the maximum benefit to producers when prices are low or to consumers
when prices are high. As was noted in the preceding sections, a specific
duty is most effective in excluding imports when prices are low. The
application of different rates to different classes of cattle makes
some allowance for value differences due to the character of the cattle.

R o C t P e

Examination of Table VIII reveals a close relationship between
cattle imports and cattle prices in the United States. Before the 1913
fict placed cattle on the free list, imports had increased from 208,820
in 1910 to 323,986 head in 1912 as the average farm price of cattle
rose from $4.78 to $5.12.

Rising cattle prices in the United States undoubtedly contri-
buted to the marked increase in import numbers which followed removal
of the duty on cattle in 1913. Imports continued relatively high under

the duty free entry and War-time prices up to and including 1920.

30

However, several influences operated during the 1913-1920 period to
obscure the effect of United States prices on imports. Some of the more
important of these influences were: Liquidation of Mexican herds from
1913 to 1915 followed by inability of Mexico to export; the inflated
general price level in the United States from 1916 to 1920; the unusual
war-time EurOpean outlet for Canadian exports of beef; and the post-war
liquidation of Canadian herds in 1919.

The drop in the average farm price of cattle from $8.42 in
1920 to 85.50 in 1921 greatly heightened the effect of the Emergency
Tariff of 1921 so that dutiable cattle imports fell from 379,114 in 1920
to 194,871 in 1921. Since after the‘har the United States no longer
exported large quantities of beef the need for cattle imports corres-
pondingly declined. Imports increased to 236,000 head in 1922 partly
in anticipation of the higher duties of the Fordney-McCumber Act whose
provisions were known a considerable time in advance of its effective
date of September 21. Cattle imports continued low through 1924. In
1925 and.l926 they had shown some increase with the moderate price in-
creases of those years. In the 1927-29 period, with distinctly higher
cattle prices prevailing in the United States, cattle imports averaged
more than double those of the lower price years under the Emergency Tariff
and the still prevailing Fordney-EcCumber Tariff.

Again in 1930 falling United States cattle prices heightened
the effect of an increased cattle tariff so that dutiable cattle imports
decreased from 410,656 head in 1929 to 226,273 head in 1930. With
further severe price declines, cattle imports under the Hawley-Smoot
Tariff fell to the extreme low of 57,679 head in 1934. With.the rise
in the average farm price of cattle from $3.88 in 1934 to $6.21 in 1935

cattle imports increased from 57,679 to 364,623 head.

31

Thus, it is evident that under a specific duty the price of
cattle in the United States is a strong influence on the size of cattle
imports. While this tendency of imports to follow United States prices
does notgreclude the possibility of imports affecting cattle prices in
the United States, the three-way relationship between the tariff on
cattle, the movements of cattle prices in the United States, and the
size of cattle imports does show that imports were not the cause of the
major changes in cattle prices and that the tariff on cattle has not
materially altered these price movements. The small size of cattle
imports relative to the total United States supply as shown in Table VIII
indicates mainly why this should have been true. Only in 1913-15 have
total imports constituted more than three per cent of the total domestic
slaughter of cattle and calves, and in the years of low cattle prices
in the United States imports have seldom equalled one per cent of the
total United States slaughter. The possible effect of imports on prices
in the United States will be examined in more detail in Chapter VI.

30 o C r -

Because of the cost of transportation from.more distant cattle
surplus countries, Canada and Mexico have been practically the only
sources of competition for United States cattlemen on the domestic market
for live cattle. The very few dutiable cattle from other sources have
been principally of West Indies origin. A few head are imported duty
free from the Virgin Islands of the United States. Other duty free cattle
have been generally registered purebred breeding stock principally from
the United Kingdom and Canada. In this consideration of imports only
dutiable cattle are included save when otherwise specified, and because

other sources than Canada and Mexico are insignificant only these two

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35
countries will be considered.

Table II shows that from 1910 to 1912 Mexico was the source of
practically all United States imports of live cattle and that Mexico con-
tinued through 1914 to be the largest contributor to United States imports.
0n the other hand, Canada's share of the total United States imports,
beginning in 1913, steadily increased until they constituted 92.0 per
cent in 1924. After that Hexico's share of the total gradually increased
to practically 50 per cent in 1929 and 80 per cent of the January 1 to
June 17 period of 1930 in which the 1922 Tariff still applied. With the
higher rates of the 1930 Tariff Act, Canada's share of United States
imports decreased as United States prices declined until the extreme low
of 1.6 per cent was reached in 1933. With the higher prices of 1935
which followed the 1934 drought and emergency slaughter of United States
Cattle, Canada's contribution increased to 30.9 per cent.

With the weight division at 1,050 pounds under the 1922 Act,
imports of the heavier class made but a small part of the total; of these
Canada was the more important source both in absolute numbers and in pro-
portion to her total exports to the United States. “eduction of the
weight division to 700 pounds under the Act of 1930 gave this heavier
class a larger part of the total dutiable imports. Under this classifi-
cation.Canada continued to be the more important source of heavier cattle.

In the 1910-1935 period two important factors stand out as
influencing the relative size of Canadian and Mexican cattle exports to
the United States. One of these has been political conditions in Mexico
and the other the relative treatment accorded Canadian cattle hy the
United States and by the United Kingdom. A state of disturbance existed

in.Uexico from 1910 to 1928 and was especially severe from 1913 to 1917.

36

Civil war and outlaw looting at this time severely crippled the Mexican
cattle industry.(1) As the United States is by far the most important
outlet for Mexican cattle, the large Mexican exports to the United States
from 1913 to 1915 followed by the decline to the low point of 1924 re-
presents first the liquidation of Mexican herds and then the inability

to export because of decimated herds. Export duties imposed by the
Mexican government to aid in rehabilitating the cattle industry acted

as a further check on exports.

When the United States prices were deflated following the
Ucrld.flar, sticc in 1921 imported 138,200 head compared to exports of
13,900, Relatively high cattle prices in Mexico caused her to import
cattle from our Southwest to restock depleted Mexican ranges, and many
of our southwestern ranchers transferred their herds across the border.
Mexican cattle herds were not sufficiently rebuilt to supply anything
like their former exports until the late twenties. Drought and exchange
rates'have also influenced the movements of Mexican cattle to the United
Statea.(2)

Canada, unlike Mexico, has had an important alternative eXport
market. As shown in Table X.the relative treatment accorded Canadian
cattle by the United States and Great Britain has strongly influenced
the flow of these exports. Prior to the loss of the United States' net
export balance and the removal of the United States duty on cattle (1915)

Canada exported over ten times as many live cattle to Great Britain as

 

(1) *Foreign Crops and Markets", Vol. 39, No. 9. (August 26, 1939),
Do 1790

(2) Ibid, p. 175.

37

TABLE I

U, S. and United Kingdom Tariffs
and Canadian Cattle Exports, 1910 - 1959(3)

 

 

 

Tariffs and agreements Mumps: of £2111: exported Percent
T U K, TQ p, s T ta1(b) to U. s.
(14 a Q
1910 (Rates of 1897 prevailing) 140,424 3,595 144,120 2.5
1913 Underwood Tariff (free) 9,878 180,383 190,251 94.8
1915 1,572 179,015 180,588 ‘ 99.2
1920 320 235,542 235,952 99.9
1921 Emergency Tariff 33,053 135,257 158,310 80.4
1922 Fordney—HcCumber Tariff 18,475 189,760 208,235 91.1
1923 British Embargo Removed 57,672 96,873 154,545 62.7
1925 110,858 85,748 197,515 43.9
1929 150,103 150,103 100.0
1930 5,400 19,483 24,883 78.3
1931 Hawley-Smoot Tariff 27,149 9,159 35,308 25.2
1932 Ottawa Agreements 16,568 9,010 25,578 35.2
1934 53,852 5,341 50,193 10.5
1935 5,704 102,934 109,538 93.9
1935 U. s. - Canadian Agreement 38,495 191,149 229,544 83.2
1939 Second U, s. - Canadian 4,274 201,055 205,339 97.9

______észssmsni_

 

(a) Ifrom Canada's "Annual Harket Review” 1939. p. 13 and data furnished
by the Department of Agriculture, Marketing Service, Ottawa, Canada.

(b) Net including small numbers to other countries,

38

to the United States.

With the removal of the United States duty on cattle the United
States became the chief outlet for Canadian cattle. The Tariffs of 1921
and 1922 caused more Canadian cattle to turn toward Great Britain although
the United States was still the chief market, When the British Embargo,
which had required the slaughter of imported cattle practically on arrival
and thus prevented their sale as feeders, was removed in 1923 the United
Kingdom became the more important outlet. But by 1929 high prices in the
United States attracted all of Canada's cattle exports to this country in
spite of the unfavorable import duties. In the early thirties low United
States prices, the severe Hawley-Smoot Tariff and the more favorable
United Kingdom treatment reduced the percentage of Canada's exports sent
to the United States to a low of ten per cent in 1934. In 1935 with the
same import treatment prevailing but with high United States prices the
United States share of Canada's total cattle exports was 93.9 per cent.
Under the Trade Agreements with Canada that percentage has remained high.

While Table I shows a close relationship of United States and
United Kingdom import regulations to the direction in which Canadian cattle
exports moved, it is well to remember that the more severe United States
tariffs were imposed at times when low U. S. cattle prices made this market
unattractive to imports.

Although the combined effect of high United States tariffs,
low U. S, prices, and favorable United Kingdom treatment of Canadian
cattle has at times turned Canadian cattle exports away from the United
States, the number sent to Great Britain has seldom been large. The
response of Canadian exports indicates that, under any save extreme con-

ditions, the United States is the more favorable market for Canadian cattle,

39
CHAPTER III.

THE NATURE OF THE 1935 TRADE AGREEMENT

WITH CANADA AND THE U. S. CONCESSIONS ON CATTLE

Na t T A ee t P o

lorld depression during the early thirties brought about a
drastic reduction in United States exports which had been sustained dur-
ing the twenties by the vast volume of American loans and investments
abroad. Between 1928 and 1932 the total value of exports from the United
States fell from 85,283,938 to 81,413,397, a 73.3 per cent decline.
Agricultural exports of the United States were reduced from $1,847,087
to $589,650, a decline of 68.1 per cent. Although exports had decreased
in volume, this fall in the total value of agricultural exports was to
a large extent due to lower prices, The quantity index of 44 principal
agricultural export commodities was 85 in 1932 as compared to 117 in
1928, a 27.2 per cent reduction in.volume as compared to the 68.1 per cent
fall in value.(1) Shrunken markets for farm exports and decreased pur—
chasing power in the nonpagricultural exporting industries both contributed
to the drastic decline in farm prices.

In the face of this severe reduction in the foreign trade of
the United States several alternatives were conceivably cpen to the
Roosevelt Administration. A laisses-faire policy of allowing deflation
to run its course in a manner which seemed likely to ruin many producers,
if not whole industries, and which overlooked the influence of economic
nationalism on international trade, did not seem acceptable. The apposite

policy of economic isolation involved almost inconceivable shifts in the

 

(1) ”Agricultural Statistics“, 1939, pp. 428-431.

40

use of productive factors in order to change from production for export

to production entirely for home consumption, and even if such a trans-
ference were accomplished it would mean a materially lower standard of
living, The Government might have adopted a modern mercantilistic policy
of restricting imports while seeking to expand exports by such means as
credit extension to foreign countries, export subsidies, and bilateral
clearing arrangements, but these are either extremely costly or provocative
of retaliatory restrictions,

Instead of these alternatives the Government adopted "a policy
of reciprocal-trade concessions under which export recovery might be
sought, not by artificial stimulants or threats, but by bringing about
the gradual lowering of trade barriers abroad in return for carefully
considered concessions on our own part. Such a policy recognizes the
mutual advantages of foreign trade and aims to bring about an increase
in the total volume of trade instead of the mere diversion of a diminish-
ed volume.’(1) With this in.view Congress passed the Trade Agreements
Act of June 1934, as an.amendment to the Tariff Act of 1930, authorizing
'the President, for a period of 3 years, to enter into trade agreements
with foreign countries.....so that foreign markets will be made available
to those branches of American production which require and are capable of
developing such cutlets, by affording corresponding market opportunities
for foreign products in the United States.“ The Trade Agreements Act
empowered the President to grant reductions up to 50 per cent of existing
tariff rates but did not permit the transfer of dutiable items to the

{PBC list.

In all the trade agreements, save that with Cuba, the so-called

 

(1) H. S. Patton, ”The Midwest and the Trade-Agreements Program”, p. 24.

41

“unconditional most-favored-nation provision” applies, which provides

that each party give to the other automatically and unconditionally the
benefit of the lowest rates accorded other nations, "The principle of
generalizing concessions and of equality of treatment....tends not only

to lessen international commercial friction, but also brings out a pro-
gressive widening of the scope and range of trade concessions and to increase

(1)

total trade instead of merely diverting it into narrower channels."

 

It was natural that trade between the United States and Canada
should receive early attention under the Trade Agreements Act. Since the
World War, Canada has been the largest single source of the United States
imports. She has been second only to Great Britain as a market for American
exports, and in 1929 Canada occupied first place among our export markets.
Trade between the United States and Canada had been on the increase in the
twenties prior to the depression during which the United States adopted the
high Hawley-Smoot Tariff in 1930 and Canada invoked retaliatory measures.

Under the combined influence of low prices and increased import
duties in both countries the total value of U. S. imports from Canada de-
creased from a $427,300,000 annual average for 1927-1931 to $174,100,000
in 1932, a loss of 59.3 per cent. By 1935 they had recovered to only
$286,100,000. United States exports to Canada had fallen from a.$709,400,000
annual average for 1927-1931 to $197,900,000 for 1933, a 72.1 per cent
decline, and they had recovered to only $308,200,000 for 1935 when the

(2)

first U. S.-Canadian Trade Agreement was negotiated.

 

(1) lbidr, pp. 25 - 27.

(2) John.L. Stewart, 'Agriculture in the New Canadian Trade Agreements’,
croreign.1gricu1ture", Vol. II, No. 12 (December 1938) pp. 585-585.

42

N 9 T A C a

In this first Agreement with Canada the United States gained
tariff reductions on 767 items which in 1929 comprised more than three-
quarters of the total dutiable exports to Canada from this country.
These concessions included about 125 agricultural, horticultural, and
related products which in 1929-30 accounted for $50,000,000 in our export
trade to Canada. But in 1934-35 these items had shrunk to $15,000,000 in
value.

Canada had been Operating under a three schedule tariff. The
lowest of these was the British Preferential which applied to countries
of the Empire. The intermediate schedule applied to designated products
from countries with which Canada had commercial treaties. The highest
.rates were those of the general tariff, and it was these that applied to
products from the United States. Henceforth, under the Agreement the
United States was to be given rates on the above 767 items as low as those
applicable to the most-favored non-British country under Canada's inter-
mediate tariff. On some three dozen fruit, vegetable, and nut items
Canada reduced her duties below the intermediate rates. Canada also
agreed to reduce her customs valuations on many classes of fruits and
vegetables which had been assessed for ad valorem duties at considerably
above invoice values.

These concessions the United States gained in part merely by
retaining on our free list such items as pulpwood, newsprint, certain
furs and fish, etc. and by a binding against increase of the 10 per cent
duty on certain special foodstuffs. Tariff reductions were made by the
United States on commodities which in 1929 made up about one-sixth of

our total imports from Canada, or about three fifths of the dutiable

43

imports. These concessions include, besides certain lumber, fish, leather,
minerals, chemicals, and whiskey, about twenty agricultural products such

as cattle, dairy products, chickens, horses, and several vegetable products.

CQL: 0‘ :. Cg: IQ'O 'e g ,1; G .141; 0' C01 ' -'e.- e, C-
1.. T N C ' C . As was noted in

Chapter II the United States is normally the chief outlet for Canada's
cattle exports. The cost of shipping cattle to Great Britain, the chief
alternative outlet, is much greater than the cost of moving cattle to

the U. S. markets. While imports of live cattle from Canada are a small
part of the total U, 8. supply they are of considerable importance to

the smaller Canadian cattle industry, making up approximately 20 per cent
of the total Canadian marketings (excluding calves) when exports approach
200,000 head.

With Canadian cattle exports to the United States at the ex.
tremely low figure of 1,825 head in 1954 and with prices low relative to
the high cost of shipping to the United Kingdom, Canadian cattlemen were
in extreme need of an outlet. Consequently concessions by the United
States on cattle were necessary in order to obtain concessions from Canada
for U. S. exports.

2. WWW. It was
noted in Chapter I. that the United States has for several years produced
less beef than its peOple consumed. It was also mentioned that there was
considerable conflict of interest between ranchers and mid-west cattle
feeders on the matter of the tariff on lean cattle. While Canadian im-
ports are not an important source of supply for feeders as compared to
our domestic production, whatever effect they might have on feeder cattle

prices is as much to the gain of cattle feeders as to the loss of ranchers.

44

Also a rather special demand exists for lean Canadian cattle on the part
of some cattle feeders in our northern North Central States.

'3. .Einslin9§§_2£_2altlsugeneesslens. Late 1935 when the first
U. S. - Canadian Trade Agreement was drawn up seemed a particularly favor-
able time for making concessions on cattle imports. The 1934 drought and
emergency slaughter of cattle had reduced cattle numbers by about 10,000,000
head and curtailed Corn Belt feed supplies. In 1935, as a result of in~
creasing consumer purchasing power and reduced domestic cattle numbers,
the average price of beef steers at Chicago rose to $10.35 as compared to
$6.75 the previous year.(1) A large feed supply was available in the
Corn Belt in 1935, but the number of feeder cattle was limited. With the
high prices prevailing in 1935 Canadian cattlemen once more found the
United States a favorable market and Canadian cattle exports to the United
States increased from 1,825 in 1934 to 112,720 in 1935. This combination
of high domestic prices and a return to some dependence on outside cattle
supplies made conditions favorable for limited concessions on cattle.

4. Wormw-
.2311112!» While the Trade Agreements Program recognized the necessity
of giving in.order to obtain concessions, it also recognized the interests
of domestic producers. In general, undue competition for domestic pro-
ducers was avoided by limiting concessions to those items of which the
United States normally had a domestic deficit, by selecting those items
for which the treaty country was the principal foreign supplier, and
by the three year limit to the life of an agreement. In the Trade Agree-

ment with Canada U. S. cattlemen were given additional safeguards including

 

(1) The Chicago Daily Drovers Journal, ”Year Book of Figures", p. 39,

45

selected concession classes, limited duty reductions on concession classes,
and tariff quota provisions.
C o Cat

In determining the form which the United States concessions
on cattle should take the most important considerations were the attain-
ment of certain minimum.benefits for Canadian cattlemen with adequate
protection for U. S. cattlemen. It has already been shown that these
aims were not irreconcilable. However, Mexican cattle imports constituted
a problem. Since there was laid down in the Trade Agreements Act the
policy of extending the concessions of each trade agreement “.....to
like products from all other countries which extend their lowest rates
to the United States and which do not otherwise descriminate against

.(1)

American comerce, the concessions granted Canada were also available
to other countries of which Mexico, because of location, was the only one
of importance. In order to insure for Canadian cattlemen the major
benefits of the lower duties and to protect U. S. cattlemen, the con-
cessions were arranged to apply to weight classes in which Canada was the
larger contributor and to leave unchanged the duty on that class of
cattle which made up the bulk of Mexican exports.

Consequently new duty classes were devised. The “under 700
pound't class of the 1930 Tariff was divided into two classes: one for
calves under 175 pounds; and one for cattle weighing 175 pounds and over.
The light weight, or calf class, was given a concession rate of 1% cents
a pound while for the 175 to 700 pound class, which included the bulk of

cattle imports from Mexico, the 1930 Tariff duty of 2% cents was retained.

The I"100 pound and over” class, to which Mexico contributed only a small

 

(l) H. S. Patton, op. cit., p. 28.

46

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47

proportion of the total, was divided into two categories: (1) cattle
weighing 700 pounds and over, other than dairy cows, were given a con-
cession duty of 2¢ a pound as compared to the old duty of 3d a pound;

(2) dairy cows weighing 700 pounds and over, of which Mexico normally
contributed none, were reduced from the old rate of 3d a pound to the
concession rate of l£¢ a pound. This was a 50 per cent reduction - the
maximum permitted under the Trade Agreements Act. This separate tariff
treatment of dairy cows was in recognition of the fact that dairymen are
not normally cattle producers but milk producers. Our northeastern dairy-
men, whose more intensive herds are not self replacing, had a special
interest in reduced duties on dairy cows at this time because some 858,000
cows had been lost in an intensive Bang's disease and tuberculosis eradi-
cation campaign in the year ending July 1935.

As a further protection to domestic cattlemen, quotas were
specified for the concession classes. Tariff quotas, a limitation of
imports which can come in at the concession rate in a specified period,
as distinguished from global quotas, an absolute limitation.to imports
within the specified period, were a new feature in.United States tariff
making. Any cattle imported in excess of the number set as the quota
were subject, not to the concession rate of duty, but to the higher rate
as provided in the 1930 Tariff. Under the 1935 Agreement the total con-
cessiontxuota.on cattle and calves other than dairy cows was limited to
l per cent of the average annual total number of cattle (including calves)
slaughtered in the United States during 1928-1932. Of this 1 per cent
the calf quota made up one-fourth (51,933 head) and the 700 pound and
over non-dairy cow quota made up three-fourths (155,799 head). Dairy

cows weighing 700 pounds and over were given a concession quota of

48

20,000 head, a fraction of l per cent of the number of heifers coming

into milk production annually in the United States.

49

CHAPTER IV,
CATTLE IMPORTS UNDER THE FIRST

U. S.-CANADIAN TRADE AGREEMENT, 1936-38

As shown in Table XII, total dutiable cattle imports, which
had increased markedly in reSponse to higher U. S. cattle prices following
the 1934 drought, made a further small increase under the reduced rates
in 1936. In 193? higher prices for cattle again prevailed in the United
States following the 1936 drought, and dutiable cattle imports were
approximately 25 per cent larger than in 1936. In 1938 a somewhat more
normal domestic supply situation and reduced domestic purchasing power
made the United States a less attractive market. Thus, although imports
were already large in 1935 relative to the earlier years under the 1930
Tariff, total dutiable cattle imports averaged 438,614 head annually in
the 1936-38 period as compared to 133,078 head in the 1931-35 period.

The change in the relative importance of weight classes follow-
ing the 1935 Agreement is quite noticeable. Since there was no separate
class for calves prior to 1936, the only comparison that can be made as
to the relative importance of weight classes in the 1931-35 and 1936-38
periods is one between.imports of dutiable cattle under 700 pounds and
imports of dutiable cattle weighing 700 pounds and over. Table XII shows
that, save for 1935 when imports from Canada were increasing, practically
all dutiable cattle imports during 1931-35 were in the under 700 pound
class. When cattle weighing 700 pounds and over were given concession
rates beginning January 1, 1936,even with distinct quota limits this
class increased from an average of 5.3 per cent of total dutiable cattle

imports in 1931-35 to 36.8 per cent for 1936-38.

50

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51
Im Co 0 s o C C 93 -3

Table XIII shows that total concession class imports averaged
approximately 50 per cent of all dutiable cattle imports in the 1936-38
period. Of these Canada contributed from 71.3 to 90.4 per cent and
Mexico from 9.6 to 28.7 per cent. Non-concession class cattle, averag-
ing approximately one-half of the total dutiable cattle imports, were,
of course, made up entirely of 175 to 699 pound cattle. Mexico furnished
from 77.2 to 96 per cent of these non-concession class cattle while Canada
supplied only 3.8 to 22.5 per cent.

Table XIV shows the absolute and relative contributions of
Canada and Hexico to each of the concession classes. In the calf class
imports from Canada made up from 95.7 to 98.5 per cent of the total; in
the 700 pound and over non-dairy class 60.3 to 86.4 per cent were Canadian;
and from 99.9 to 100 per cent of the 700 pound and over dairy cow class
was from Canada. Thus, it is evident that Canada was the chief bene-
ficiary of the concessions. However, in 1938 the prOportion of conces-
sion class cattle imports coming from Mexico increased to 39.7 per cent
as compared to 13.6 per cent in 1937. “This was due to an absolute in-
crease in imports from Mexico and absolute decrease in imports from
Canada. While Canadian cattle imports were falling off because of lower
U. S. cattle prices in 1938 imports of Mexican cattle were increasing
because of the Mexican Government's land policy and the falling dollar
value of the peso.

In 1936 imports of the two concession classes for slaughter
cattle exceeded their reapective quotas only slightly; in 1937 they
considerably over-ran the quotes; and in 1938 the quotes were unfilled.
Failure to fill the quotes for these two classes in 1938 was due to

decreased imports of Canadian cattle; imports from Mexico in these

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53

TABLE XIV

Imports of Concession Cattle by Class and Origin, 1935.5g(a)

 

 

 

Year From Canadg From Mexico. Total from
Number' Percent Number Percent all countries
of total, of total
Cattle weighing less than 175 pounds - (51,933 quota)
1936* 55,695 97.2 1,615 2.8 57,314
1937 80,792 98.5 1,259 1.5 82,052
1938 45,645 95.7 2,026 4.3 47,708
Cattle weighing
700 lbs. each and over, other than dairy cows - (155,799 quota)
1936 136,533 85.9 22,190 14.0 158,873
1937 157,468 86.4 24,792 13.6 182,333
1938 75,529 60.3 49,770 39.7 125,346
Cattle weighing
700 lbs. each and over - for dairy purposes - (20,000 quota)
1936 6,686 99.9 0 0 6,689
1937 6,724 100.0 0 0 6,724
7,442 99.9 0 _0 7,445

1938

 

(a) Calculated from data furnished by the United States Department of

igriculture, Foreign Agricultural Service.

54

classes increased.
Cbggggtgn g: Cattlg Imports

Since Mexico's share of the 700 pound and over non-dairy
imports increased to 39.7 per cent in 1938 it is of interest to note
some characteristics of these imports. Table XV shows that Mexico's
exports to the United States in this class averaged in weight only a
little over the 700 pound class division point and were over 200 pounds
lighter than the Canadian average for the class. While Mexican cattle
are generally exported at weights under 700 pounds,the lower duty on
the heavier class prompted persons moving the cattle into the United
States to try to get their cattle Just over the weight line into the
lower duty class.

The average per hundredweight value of cattle imports from
Canada and from Mexico for the 700 pound and over non-dairy class, shown
ianable XV, is revealing as to the quality of cattle imports from the
two countries. The average point of origin value of imports from Mexico
in this class is less than the duty applicable to cattle weighing from
175 to 699 pounds. Mexican cattle are of low average value because they
are generally thin, and due to their poor quality they do not rank high
in the estimation of either the cattle feeder or the butcher. Canadian
cattle, on the other hand, are generally of fairly good beef breeding
and carry enough flesh to go as slaughter cattle or heavy feeders.

“931011 Impgzt Movements

Since there are distinct differences in the characteristics
of the various duty classes, and even within the duty classes as divided
according to country of origin, it will be more relevant to examine the
monthly distribution of imports in each class individually rather than

imports as a whole. Table XVI shows this seasonal distribution of imports.

55

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59
In 1936 and 1937 calf imports show a distinct peak in the late Spring

and summer months with a tapering off in both the early and late months
of the year. In 1938 this summer peak was less marked and the heaviest
receipts occurred in April. There is evidence of the effect of the quote
in the relatively heavier imports of the first half of the year. This
tendency appears most markedly in 1937 when the quote was filled in June
and exceeded for the year by 30,019 head. The 1936 quota had been
filled in August and exceeded for the year by only 5,381 head. This
tendency toward a summer peak in calf imports, especially from Canada,
would seem to be due to the timing of the calving season, and,since veal
calves are a by-product of dairyingnthe calving season will be influ-
enced more by considerations relating to milk production than by those
pertaining to veal production or marketing.

With the 175 to 699 pound non-concession class, Canadian
imports show a distinct tendency toward very low numbers in the first
months of the year and a gradual increase in the summer toward a definite
peak in the fall months. Mexican imports of this class show a nearly
apposite tendency toward heavy marketings in the late winter and in the
spring months with a decided decline in mid-summer and some increase in
the fall months. The combined effect of seasonal imports from the two
countries is to give the total imports for this class one peak period
in the first half of the year and another in the second half with a
marked low point in the summer and a less marked low point in mid-winter.
However, because of the different character of the cattle of the two
countries as well as the wide separation of their destinations, it may
be doubted that total imports of this class have much significance.

The respective seasonal peaks from the two countries is probably best

explained by the effect of their climates on pastures. It should be

60

noted that neither concessions nor quotas apply to this class.

Hardly any seasonal character can be attributed to imports of
cattle weighing 700 pounds or over other than dairy cows. Here the
quota seems to have played an important part. In 1936 and 1937 imports
from both Canada and Mexico were relatively heavier for the first 6 and
8 months. The 1936 quote was filled in October and exceeded for the
year by only 3,074. In 1937 the annual quota was filled in August and
over run by 26,634 head. In 1938, when imports did not reach the quota
limit, the heaviest entries were in October and November, the normal
marketing time for most range areas. A somewhat smaller peak in 1938
imports occurred in March and April, probably representing fed cattle
from.Canada and early spring grass cattle from Mexico.

Imports of dairy cows show no very marked seasonal variations,
but they seem to be somewhat smaller in the late winter and early spring
months than during the rest of the year.

WW
- Table XVII lists total imports of dutiable cattle for 1936 to
1938 by customs districts. It is evident that the Buffalo, New York,
St. Lawrence, Vermont, and Maine and New Hampshire districts receive the
bulk of imports, in the order named, for the eastern states. The Minnesota,
Dakota, Michigan, and Chicago districts receive most of a correspondingly
large number for the north central states. Washington receives the only
large number in the Northwest but Oregon and the “ontana and Idaho
districts have at times received considerable numbers. In the Southwest
Arizona, ElPaso and San Antonio take most of the imports from Mexico.
The numbers entering these three southwestern districts are considerably
greater than those entering the principal districts of either the north

central or northeastern states.

61
TABLE XVII,
United States Imports of Dutiable

Cattle by Customs Districts, 1936-1938(a)

 

Customs districts

Yeag_ended December 31

 

1936., .1937 1938

lumbar ”m: Plumber
Maine and New Hampshire 1,978 1,254 927
Vermont 8,604 6,759 5,435
Massachusetts 86 89 193
St. Lawrence 10,764 12,517 7,488
Buffalo 55 ,982 62,676 23 ,734
New York 24,137 49,760 29,813
Philadelphia 22 294 0
Pittsburgh 0 O 0
Maryland 649 73 135
Galveston 0 0 0
San Antonio 35,766 23,594 42,066
El Paso 45,793 85,252 135,834
San Diego 718 4,335 2,495
Arizona 71,612 84,015 104,733
Los Angeles 4,177 0 0
San-Francisco 504 0 0
Oregon 4,399 3,327 179
Washington 34,098 25,896 12,624
Alaska 0 0 4
Montana and Idaho 1,669 12,064 2,832
Dakota 28 .282 25,701 3,860
Minnesota 50,133 77,087 46,019
Duluth and Superior ' 304 563 60
Michigan 8,164 14,223 3,886
Chicago 4,794 3,068 , 508
Ohio 0 0 46
St. Louis 1,638 1,075 0
Omaha 2,303 0 21
Colorado 535 497 734
Virgin Islands ___1,QQ§ .____§§§ .___JU21

399,113 494,945 424,330

 

(a) Data furnished by the United States Department of Agriculture,
Office of Foreign Agricultural Relations.

62

Quantitative information regarding the destination of imports
by duty classes or by market class and grade was not available for any
considerable part of the 1936 to 1938 period, but the above data as to
total annual imports of dutiable cattle by customs districts may be
interpreted in the light of what was said in Chapter I regarding the
character of the beef industry in different areas. Since eastern Canada
is a mixed farming area and our northeastern states are a heavily popup
lated beef deficit region, it would be expected that entries there would
be principally calves and cattle for immediate slaughter, and that this
would be the chief destination of dairy cattle imports.

Cattle entering the customs districts of the north central
states, with.the possible exception of Hichigan, are probably moving
from.the Prairie Provinces of Canada to the consuming centers or to the
feed lots of the north central states. Consequently it would be expected
that the bulk of these entries are range cattle selling as heavy feeders
or as medium grade slaughter cattle. Michigan, both because of its
accessability from Ontario and because of the character of its agri-
culture and its heavy population, would likely receive more slaughter
cattle, calves, and dairy cows in preportion to feeder cattle than would
the north central states in general.

Washington, the only northwestern state and the only state,
other than California, west of the Mississippi which is on a deficit
basis in.beef production,(1) would naturally receive cattle and calves-
for slaughter from the surplus regions of western Canada.

Imports received in the southwestern districts would, of course,
be from Mexico and bound for our southwestern ranges for restocking

purposes or for grass fattening before slaughter, although some are for

 

(l) H. W. Vaughn, "Types and Market Classes of Livestock," p. 81.

63

immediate slaughter. Probably low income Mexican families in the South-
west are an important part of the market for the beef from these animals.
A study covering cattle imports by duty classes for the first
seven months of 1936 tends to confirm for that period the interpretations
Just made as to the probable destination of imports from 1936 to 1938.(1)
For the first seven months of 1936 imports of calves from Canada into the
eastern states were approximately 10 times those entering the north
central states and 20 times the number of calves entering the western
states from Canada. Canadian cattle weighing 700 pounds and overqother
than dairy cows, entered the north central states in numbers nearly 4
times as great as in the eastern states and over 5 times as great as in
the western states. Canadian dairy cows entering the eastern states
numbered 2,936 while 295 entered the western states and only 10 entered

the north central states districts.

 

(1) H. S. Patton, "The Canadian Trade agreement and the American Cattle
Industry... pp. 16 - lg.

64
CTL'LPTELR V.

CATTLE CONCESSIONS AND ILFORTS

UNDER THE SECOND U. S. - CANADIAN TRADE AGREEMENT

On November 17, 1938 a new trade agreement was signed with
Canada to become effective January 1, 1939 for an additional term of
three years.(1) The first agreement had been generally considered
highly satisfactory. Under it U. S. exports to Canada had increased
from.an annual average value of $303,000,000 during 1934-35 to $430,000,000
during 1936-1937, a 42 per cent increase. Likewise, United States imr
ports from.Canada rose from.an average of $257,000,000 during 1934-35 to
$386,000,000 during 1936-37, or 50 per cent.(2)

This increase in trade between the pro-agreement and agreement
periods was most marked in products on which the 1936 Agreement had low-
ered barriers. "Canada's imports of such goods from.the United States
rose from.about $120,000,000 in 1935 to about $215,000,000 in 1937, an
increase of 80 per cent.....Similarly,.... between 1935 and 1937 there
was an increase of nearly 87 per cent in the value of the imports of
articles on which the duties had been reduced (by the United States)."(3)

Nature and Scope of the New Agreement

The 1938 Agreement is more inclusive than its predecessor. A

major new concession to the United States is the removal of the Canadian

 

(l) Concurrently the AnglOeAmerican Trade Agreement was signed by the
United States and the United Kingdom.and by the latter in behalf of
Newfoundland and the British Colonial Empire. This is primarily an
"agricultural agreement" since the United Kingdom is the most im-
portant market for U. S. farm exports. The concessions granted to
the United States are chiefly on agricultural items while those granted
by the United States are on British manufactured goods.

(2) The Department of State, Press Releases, Vol. XIX : No. 477, Supplemen;
B, "The New Trade Agreement with Canada." p. 2. '

(3) Ibid., p, 3.

65

special 3 per cent import tax from items named in Canada's list for
other concessions. In addition to this 3 per cent reduction and the
binding of old rates against increase, the United States secured duty
decreases beyond those of the 1935 Agreement on items making up
$80,000,000 of exhorts to Canada for 1937. Among the major items on
which Canada made additional concessions are fruits and vegetables, fish-
ery products, paper products, wood manufactures, chemicals, iron and
steel products, aircraft, and textiles. In the aggregate Canada gave
concessions in the form of duty reductions, or of bindings of 1935 rates
against increase, or bindin: of free entry on articles which Canada imp
ported from the United States to the extent of $358,000,000 in 1937,

or 73 per cent of our exports to Canada. This figure represents the
cumulative scope of the 1935 and 1938 Agreements.

The concessions made by the United States, as compared to rates
prior to 1936, cover commodities imported from Canada in 1937 to the
value of $121,000,000, or 77 per cent of all dutiable imports from Canada.
Of this total, duty reductions beyond those of the 1935 Agreement were
made on items imported from Canada in 1937 to the value of $73,OOO,OOO.(1)
Among the concessions made by the United States beyond those of the 1935
Agreement are those on live cattle, hogs and pork, cheese, eggs, grains
other than wheat, grain by-products, maple sugar, potatoes, fishery pro-
ducts, several minerals, paper, furs, and Christmas trees. 0f the total
dutiable commodities on which the United States lowered duties (as come
pared to 1935 rates) or bound against increase, 37 per cent, as measured

by value of imports from Canada in 1937, are agricultural products and

 

(l) Ibido’ pp. 4 - 50

66

63 per cent non-agricultural. Duty reductions and guarantees against
increase together cover 83 per cent of all our imports from Canada as
of 1937.

Concessions on Cattle

 

It may be recalled from.Chapter IV that the majority of cattle
imports in the heavy non-dairy class and in the calf class came from
Canada. Although the quotas for these classes were over run in 1936
and 1937 due to the scarcity and high prices of beef cattle in the United
States, these imports in 1938 had fallen below the quotes.

The new.Agreement further reduced the duty on non-dairy cattle
weighing 700 pounds and over from 2 cents to 1% cents per pound. This
nukes a total reduction of 50 per cent from the 3 cents per pound.
Hawley-Smoot rate. The quote on this class was raised from 155,799 to
225,000 head, approximately 1 1/8 per cent of the average annual slaughter
of cattle and calves in the united States. With a view to preventing
concentrated pressure of imports on the market the number was limited
to 60,000 for any one quarter of the year.

No further reduction was made in the duty on calves, but the
weight limit was raised from.l75 to 200 pounds and the quota increased
from.51,933 to 100,000 head. Canadians had conplained, not unreasonably,
that 175 pounds was too light a weight at which to ship good calves.

The new quote is approximately 1 per cent of the annual U. S. calf
slaughter.

The 1935 Agreement had made the maximum.duty reduction (50
per cent) for dairy cows over 700 pounds. .As the 20,000 quota had never
been approached by actual imports in the 1936-38 period, the new.Agree-

ment drOpped this limitation.

67

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68

Special Quota Allotment for Canada

The 1938 Agreement provided that the Government of Canada
might, after consultation with the Government of the United States,
request allocation of the quote on heavy cattle; the allocation to be
based on the preportions of total imports supplied by foreign countries
in past years.

In the first quarter of 1939 imports from Mexico in the heavy
non-dairy class increased to 27,089.head, or 45 per cent of the quarterly
quota. Consequently Canada requested an allocation, and the quote was
divided on the basis of cattle imports in 1936 and 1937. As of April 1
the quota number were allocated between Canada and "all other countries"
with the effect of reducing Mexico's share in the United States imports
of this class of cattle to 13.8 per cent of the quarterly quotas. This
gave Canada a quarterly quota of 51,720 head with 8,280 left to other
countries (Mexico). On an annual basis Canada's allotment of 86.2 per
cent of the quota amounts to 193,950 head with 32,050 remaining to other
countries. The same allocation of monthly and quarterly quotas has been
renewed for 1940.

Cattle Imports in 1939 and the First Third of 1940

 

Table XIX shows that total dutiable cattle imports increased
from 424,022 head in 1938 to 753,570 in 1959, the largest on record.
The proportion of concession class to total dutiable cattle imports in-
creased from 42.5 to 46.7 per cent, still below the 55.8 per cent for
1936 and 54.8 per cent for 1937. Likewise Canada's share of the conces-
sion class imports increased from 71.3 per cent in 1938 to 74.8 per cent
in 1939, still below her 89.2 per cent for 1936 and 90.4 per cent for

1937.

69

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70

Comparing the first four months of 1940 with the same period
of 1939 it is evident that total dutiable imports are lower. In the
first quarter of 1940 dutiable cattle imports were 46 per cent below
those of the same period in 1939. Canada filled only 38 per cent of her
first quarter allocation of heavy cattle. Dutiable cattle imports from
Mexico in the first quarter of 1940 amounted to only 119,561 head, a
46 per cent decrease from the first three months of 1939. The proportion
of concession class imports has increased slightly, but Canada's share
of the concession class imports is slightly less than for the first four
months of 1939. Canada's proportionate contribution is less principally
because imports for Canada for the first part of 1940 are so far below
her quota.

Table XX shows that with the great increase in total dutiable
imports in 1939, 53.3 per cent of the total were in the 200 to 699 pound
non-concession class. Nearly all of these came from.Mexico. Even this
large proportion of the total dutiable cattle imports was below the 57.5
per cent of 1938. The calf class in 1939 showed the greatest relative
gain over the previous year, partially due to raising the weight limit
from.l75 to 200 pound and partially due to increased imports from Canada
with the rise in U. S. prices.(l)

A comparison of Table XXI with Table XIV of Chapter IV shows
that Mexico’s share of imports in the calf class increased from 4.3 per
cent in 1938 to 28.9 per cent in 1939; the increased weight limit appar-

ently permitting very light Mexican stockers and feeders to enter as

 

(1) Since Canada's exports to the United States of 200 to 699 pound non-
concession cattle are negligible, increased imports from Canada tend
to swell the size of the calf and heavy non-dairy classes. Dairy cow
imports, as would be expected, show little relation to beef cattle
imports or to U. S. beef cattle prices.

71

TABLE xx,

Percent Each Duty Class is of Total ( )
Dutiable Import Numbers, 1936 - April 1940 a

 

Under 175 to 700 lbs. and over other 700 lbs. and over
Ygg; 175 IDE- 592 lbs. thgg dgizy gggs dairy cogs

 

Under First U. 3.-Canadian Agreement

1936 14.4 44.2 39.8 1.7
1937 16.5 45.2 36.8 1.4
1938 11.3 57.5 29.6' 1.8
Under Second U. S.-Canadian Agreement
(Under (200 to
200 lbs.) 899 lbs.)
1939 15.3 53.3 30.3 1.1
1939 11.8 62.2 25.4 0.5
Jan.-April
1940 14.8 59.8 24.7 0.7

 

(a) Calculated from data.furnished by the United States Department of
Rgriculture, Foreign Agricultural Service.

TABLE xxx,

Imports of Concession Cattle by Class and Origin, 1939 - April 1940(3)

 

 

 

Fzgm angdg Erog:y§xico
Year Percent . Percent Total from
Number of total ‘ Number of_total all gountzieg
Cattle Weighing less than 200 pounds - (1939 quota 100,000)
1939 81,832 71.1 33,259 28.9 115,092
Jan.-April 1939 23,612 50.1 23,525 49.9 47,138
Jan.~April 1940 17,303 48.2 18,570 51.8 35,873

Cattle weighing 700 pounds each and over, other than dairy cows - (1939
quota 225,000)

1939 172,753 75.8 55,232 24.2 228,001
Jan.-Apri1 1939 65,347 64.4 36,090 35.6 101,443
Jan.-April 1940 35,442 59.1 24,540 40.9 59,982
Cattle weighing 700 pounds each and over - for dairy purposes - (quota removed)
1939 8,570 99.6 0 0 8,603
Jan.-April 1939 2,047 98.4 0 0 2,080
Jan.-April 1940 1,578 100.0 0 0 1,578

 

(a) Calculated from data furnished by the United States Department of
Agriculture, Foreign Agricultural Service.

72
calves; Canada's calf entries are mostly vealers. 0n the other hand,
Mexico's contribution to the 700 pound and over non-dairy class de-
creased from 39.7 per cent to 24.2 per cent, reflecting the effect of
allocated quotas for this class and the increased numbers of imports
from Canada.

Quotas were frequently exceeded in 1939 chiefly as a result
of large imports from Mexico. In the calf class the unallocated 100,000
head quota was filled in August, and 15,092 paid the 2% cent non-conces-
sion duty. Although imports of Canadian calves numbered 81,832 as com?
pared to 45,645 in 1938, they were approximately the same as in 1937.
Calves from.Mexico in 1939 numbered 33,259 as compared to only 2,062 in
1938, the highest previous year.

In the 700 pound and over non-dairy class imports from.Mexico
increased so markedly in January and February relative to previous years
that the previously mentioned allocation provision was invoked. As shown
in Table XXII, under this allocation imports from.Mexico were smaller
in succeeding quarters, but still they exceeded her share of the quota
in all save the second quarter of 1939 and paid the full 1930 duty of
3 cents per pound on the over run. Canada, on the other hand, did not
quite fill her allotment for the second and third quartet: of 1939. In
the last quarter of 1939 Canada supplied 68.8 per cent of her allotment,
and for the first quarter of 1940 only 37.6 per cent.

Mbnthly imports shown in Table XXIII are not markedly different
in distribution from those of the 1936-38 period save for one class.
Imports in the 700 pound and over non-dairy class definitely show the

effect of the newly adopted quarterly quotas. Throughout the five quarters

73

TABLE XXII,

Quarterly Imports in the 700 Pound and ( )
Over Nonpdairy Class, 1939 and First Quarter 1940 a

 

 

 

Quarter Fzgm Canada From Mexico A11 gountries
Percent of Percent of Percent
Number allotment Numbe: allgtggnt Number of QRQLfi
(quarterly quota 60,000)
Jano-April
1939 34,932 27,873 82,811 104.7
Allocated
quota (51,720) (8,280)
May-June
1939 51,450 99.5 8,910 107.6 60,360 100.6
July-Sept.
1939 50,798 98.2 7,779 93.9 58,577 97.8
061. .‘Dec 0
1939 35,573 68.8 10,870 128.9 46,263 77.1
Jan.-Aprill ‘ '
1940 19,434 37.6 15,267 184.4 34,708 57.8

 

(a) Calculated from data furnished by the United States Department of
Agriculture, Foreign Agricultural Service.

74

 

 

 

 

 

 

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76

for which data are available total imports and imports from each country
in this class have, with a single exception, been largest in the first
month and smallest in the third month. When conditions are favorable
for importing,the quota limits are approached early, and numbers entering
later in the quota period are sharply reduced. In the first quarter of
1940, when imports from Mexico were 184.4 per cent of her allotment,
nearly all entered the first month. In the same three month period, when
imports from Canada reached only 37.6 per cent of her allotment, monthly
imports from that country showed no great variation.
Major Causes of the Large 1939 Imports

An adequate explanation of the large dutiable cattle imports
in 1939 is not difficult to find. However, the effect of the 1938 con-
cessions is easily overestimated. The maximum increase that could be
attributed to the 1938 concessions is the 48,067 increase in the calf
quota plus 66,862 head in the heavy non—dairy class which entered at
the concession rate in excess of the previous quota of 155,799 head.
Thus, the total number entering in 1939 at rates lower than would have
applied under the 1935 Agreement was 114,929 head. This leaves 214,619
of the total 329,548 increase of dutiable cattle imports in 1939 over
1938 which must have paid rates unreduced by the 1938 Agreements.(l) But
not even all of this 114,929 head can be attributed to the new concessions
because in 1938 the quotas were not filled.

The major causes of relatively large dutiable cattle imports

in 1939 must be explained in terms of higher U. 3. prices and a combination

 

(1) Save for 1,158 dairy cows, these 214,619 head paid 1930 rates.

twill. 850i.‘
‘ I . \I 9':
.

77

of circumstances encouraging cattlemen in northern Mexico_to export. In
1939 the average farm price of beef cattle was $6.87 as compared to $6.28
in 1938.(l) The average price of beef cattle at Chicago was $9.80 in
1939 against $9.50 in 1938. The 1939 increases in stock and feeder
cattle prices were more marked; this class of cattle averaged $8.70 in
1939 as compared to $7.85 the previous year.(2) This was the highest
yearly average for stockers and feeders since 1929.

In response to higher prices in the United States, Canadian
exports to this country increased more than 100 per cent over 1938, but
they still tended to stay within the quota limits. Although imports
from Mexico increased in both calf and heavy non-dairy classes, and ex-
ceeded their allotment in the latter, yet their greatest increase was
in the 200 to 699 pound non-concession class; here there was a rise from
234,030 head in 1938 to 390,074 in 1939. Imports from Mexico in this
one non-concession class constituted 51.9 per cent of the total dutiable
cattle imports in 1939.

Besides higher cattle prices in the United States and the quota
limited effects of lower United States imports duties, at least three
other factors favored the movement of Mexican cattle across her northern
border. One of these was a drought on the cattle ranges of northern
Mexico. Less obvious but very real causes were a favorable exchange situ-

(3)

ation and uncertainty concerning the Mexican Government's land policy.

 

(1) "Foreign Crops and Markets", Vol. 40, No. 21, (May 25, 1940) p. 690.

(2) The Chicago Daily Drovers Journal, "Year Book of Figures", 1939.
PD. 44 and 480

(3) 'Northern Mexican Cattle Herds Reduced', "Foreign Crops:and Markets",
Vol. 39, No. 9 (August 26, 1939) p. 176.

78
The Mexican peso, which had stood at approximately 28 cents in terms
the U. S. dollar, declined tozapproximately 20 cents by June 1938 where
it remained through 1939”! In the first five months of 1940 the peso
had further declined to about 17 cents.(2) It is difficult to judge the
extent to which the Mexican Government's land policy is responsible for
larger cattle movements from.that country. The policy under the Agrarian
laws of expropriating large holdings fer subdivision and use by the poorer
classes, has apparently caused some liquidation of large herds as estates
have been broken up, as homesteading interfered with normal range use,
and because of uncertainty as to the future. "Approximately 28 per cent
of all Mexican cattle shipments to the United States in 1938 came from
the State of Chihuahua, and it is stated authoritatively that 60 per cent
of the shipments from.Chihuahua were from.American owned ranches".(3) This
movement of cattle from Mexico continued in spite of eXport duties levied
by the Mexican Government and appeals to decrease exports for fear of a
temporary beef shortage in Mexico.

Sharply reduced U. S. imports of dutiable cattle in the early
months of 1940 reflect natural develOpments from.the conditions which
caused unusually large imports in 1939. The highly attractive U. S. cattle
prices of 1939 were not wholly maintained; Canadian cattlemen show a dis-
position to hold back cattle to rebuild their herds; and the 1938-39 li-

quidation of beican herds seems to have reduced that country's supply of

 

(l) "Statistical.Abstract of the United States", 1939, p. 289, and
"Federal Reserve Bulletin", July 1940, p. 739.

(2) The Canadian dollar also declined from.approximate1y 100 cents in
August 1939 to 91 cents in September and finally to 81 cents by may 1940.

(3) "Foreign Crepsand Markets", 0p. cit., p. 179.

79

.marketable cattle. A heavy wartime demand by the United Kingdom for meat
from.countries of the Empire has further helped to lower U. S. imports of
cattle.

Prospects for Future Cattle Imports

 

A normal outlook from the supply side is for somewhat decreased
cattle imports over the next few years as production in the United States
recovers from the 1934 and 1936 droughts. A marked increase in consumer
demand, however, could sustain relatively high imports. The outlook for
1940 and possibly 1941 is more definite. As observed in the section above,
reaction from.the conditions making for large imports in 1939 is already
reflected in markedly reduced imports in the first quarter of 1940. Much
of this reaction is likely to be felt for several months.

Cattle numbers in both Canada and northern Mexico are low as in-
dicated by the following quotations from."Foreign Crops and.Markets".(l)
Unusually large shipments of live cattle to the United States in late 1938
and early 1939 tended to reduce the number of marketable cattle on northern
hexican ranges." "Current numbers of beef cattle in Canada are now smaller
than at any time since 1919. Drought conditions of 1934 and 1936 encouraged
the reduction of herds, particularly in the western Provinces. As to the
United States, lower feed costs prevailing in 1938 and 1939 as a result of
higher crop yields has stimulated interest in rebuilding herds, especially
in western Canada. It is anticipated, therefore, that there will be less
selling pressure evident among Canadian stockmen during 1940. Moreover,
an improvement in Canadian consumer demand also is expected to restrict
the export movement". The U. S. Consul at winnipeg reports that receipts

of heavy non-dairy cattle from Canada will not exceed 150,000 of the allotted

 

(1) Vol. 39, No. 9, (August 26, 1939) p. 175, and Vol. 40, No. 6, (February
10» 1940) p. 161.

80

193,950 head. Besides Canada's domestic supply and demand situation which
is tending to reduce cattle exports,the war has increased Great Britain's
dependence on Canadian meat supplies.

It has been seen that a number of circumstances contributed to
the unusually high imports of dutiable cattle in 1939. Among these the
1938 concessions were a minor factor. A normal outlook for the next several
months is for dutiable cattle imports to be considerably below those of
1937 and 1939. Nor is there any present indication of large imports in

the next few years.

1‘. .¥.. “.‘wf fuelwl.
\ in. .1

81
CHhPTER VI.
RELATIONS 0F IMPORTS T0 CRTTLE PRICES
IN THE UNITED STATES

Cattlemen are principally concerned with imports because of the
effect this competition may have on the prices received by cattle producers
in the United States. It is proposed here to examine the actual relations
between cattle imports, particularly under the U. S. - Canadian Trade Agree-
ments, and prices of beef cattle in the United States.

Within the 1910 - 1939 period six changes have been made in the
cattle tariff: In 1913 cattle were placed on the free list; in 1921 and
1922 moderate import duties were reestablished; the Hawley-Smoot Tariff
of 1930 included the highest U. S. import duties on cattle; the 1935 U. S.-
Canadian Agreement made some reductions; and the 1938 Agreement with Canada

further moderated the 1930 rates. These variations in the tariff treat-
ment of cattle offer an unusual opportunity for examining the relations of
duties and imports to cattle prices in the United States.

A brief theoretical consideration of the possible effects of
tariff changes on the price of the tariff item.will be helpful in the in-
terpretation of the statistical data to follow.

Theoretical Effect of a Duty Change on the Price of 8 Tariff Item

Ordinarily a dutiable commodity will not continue to be imported
in any considerable quantity unless its price in the importing country is
above its price in the exporting country by approximately the equivalent of
transportation and duty charges.

The occurrence of such a price spread, or margin of importing

country price over exporting country price,1s of its self no assurance that

82
the tariff duty has raised the importing country's price. The spread
may have come about through (1) a price rise in the importing country,
(2) through a price decline in the exporting county, or (3) through
some combination of the two.

1. A price rise in the importing country may occur under two sets
of conditions:

(a) If imports, prior to the increase in the duty, have con-
stituted a substantial part of the supply in the duty-laying country,
and if the new duty is high enough to markedly reduce imports, then
(assuming demand is unchanged) the reduced supply is likely to be re-
flected in rising domestic prices until the spread equals the new duty
plus transportation. At this point imports will come in over the tariff
wall and, if in sufficient volume, will tend to check the rise in domes-
tic prices.

(b) Even though imports excluded through a rise in duty may
have been an insignificant part of the duty-laying country's total supply,
a rise in the domestic price may occur as a result of a relatively
greater increase in domestic demand (due to population growth or to higher
per capita incomes) than in domestic production of the tariff item. If
this price rise is sufficient to equalize the increase in duty, imports
may be resumed. This was the case in the United States in the late
twenties and again beginning in 1935.

2. Importation may be resumed following an increase in duty, not be-
cause of higher prices in the importing country but because of lower
prices in the exporting country. This is likely to occur when the latter

has been dependent on the markets of the former country as an outlet for

83

a substantial part of its production, and when this surplus cannot

be readily diverted to other foreign markets, absor ed by the home
market, or production be promptly curtailed. Such essentially is the
position of the Canadian cattle industry relative to the United States
market. Under these circumstances prices may fall to the point where
buyers in the duty raising country may find it advantageous to import
over the increased duty.

If the duty increase occurs at a time when domestic prices
are falling (as under depression conditions) the advalorem equivalent
of the duty may be so raised as to virtually exclude imports. In this
case the price spread may be less than the duty, and, although domestic
producers may have nearly complete possession of the home market, the
tariff. is ineffective in raising or maintaining the domestic price
relative to its former level. Thiswwas the situation in the early twen-
ties and early thirties at and following the enactment of the Emergency,
Fordney-McCumber, and Hawley-Smoot Tariffs.

Reducing the duty on an item tends to affect its price in es-
sentially the opposite of the ways just named. .A narrower price spread
may be due to (1) lower domestic prices, (2) higher prices in theemport-
ing country, or (3) some combination of the two.

1. Lower domestic prices may be the result of two conditions:

(a) A large increase in imports relative to the domestic
market.

(b) If imports are small relative to the total domestic supply,
the domestic demand may weaken (as in depression conditions) or the do-

mestic supply increase if it has been abnormally low. This was the

84
situation on the U. S. cattle markets in 1936 and 1938 when U. S. prices
were somewhat weaker than those of 1935 and 1937 and domestic supplies
of marketable cattle somewhat recovered from the preceeding droughts.

2. Prices may rise in the exporting country. This is especially
likely to occur if the exporting industry is small relative to the im-
porting market. Such was the situation in Canada when the U. S. con-
cessions on cattle became effective.

Where the grades to be compared are not identical nor entirely
constant, as in the case of cattle, the actual price difference between
the two countries is of little significance as an indication of the ef-
fect of the import duty, but the variations which occur in this spread
as the duty is changed are indicative of the tariff's influence. Conse-
quently it is on these changes that attention will be focused.

Effect of the Tariff on Price Spreads Prior to 1936.

Between about 1910, when the United States was shifting to a
net import basis in the cattle and beef trade,and January 1, 1936, when
the first Trade Agreement with Canada became effective, cattle duties
had been subject to the first four of the changes noted at the beginning
of this chapter.

An examination of the effect ofthese duty changes on the price
spread through this quarter century will be of considerable interest in
interpreting price movements under the Trade Agreements with Canada.

Observations on the 1910-1925 period, illustrated in Figures
(1)

IV and V, are drawn largely from Edminster's study. Considering first

 

(1) Lynn Ramsay Edminster, ”The Cattle Industry and the Tariff", (1926)
pp. 116 - 133.

 

85

TABLE IV
Prices of Fat Cattle in the United States and Canada, 1910-1925.
(Based on quotations for native beef steers at Chicago,
and best butcher cattle at Toronto)
(From Edminster, "The Cattle Industry and the Tariff". p. 117)

 

 

 

 

 

 

Dollars per Dollars
100 lbs. ,4 .3 ,6, I per lgg lbs.
20 U 3 71
Q2 38 EH
F ' - 7. “
15 9-4 to NW - 9403 L4 3f 15
:5-6 V K} i;; 1311
a o I 8C A a o
ecc> ‘,« (”at {f‘ f4 Erna
10 I I i I A AVA
Z?“ _/ 10
ff"? "" ‘J Dhfi . -. .
M '1 “7"" F |‘\ ’1 ‘uw’ \J"\‘" V
-—’ I l \J |
I I
' l I |
l I I
J 1 n

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1910 11 12 13 14 15 18 17 18 19 20 21 22 23 24 1925

United States ..... Canada

TABLE V

Prices of Lean Cattle in the United States and Canada, 1920-25
(Based on stocker and Feeder Quotations at Chicago and Winnipeg)
(From.Edminster, op. cit., p. 118)

 

 

 

 

 

 

 

 

 

 

 

Dollars per Dollars per
100 lbs. 100 lbs.
20 20
53
a: «p
8 s 8 a
15 1. . +,q 15
0:9 0
a: N d: 4;
t: 9 E‘
10 ii 536 10
at Ea
I
5 ,el : 5
A ,NA—VrNN—ea Canada
I
I
u i
l l

 

1920 21

N
N

23 24 1925

 

 
 

w
a
‘

 

 

1.1m

:+

0'»

86

Figure IV, it is evident that the spread between prices of native beef
steers at Chicagoeand best butcher cattle at Toronto, amounting to

about $1.00 to $1.50 during 1910-12, practically disappeared with the
removal in 1913 of the U. S. duty on cattle.w1th the imposition of the
Emergency Tariff of 30 per cent in 1921 a distinct margin immediately
reappeared and increased slightly with the higher duties of the 1922
Tariff. Figure V indicates that the spread between Chicago and Winnipeg
stocker and feeder cattle prices also widened with the reimposition of
the cattle tariff in the early twenties.

In each case it was the Canadian price which appeared to vary
most following changes in the tariff. With the removal of the duty on
cattle in 1913, the Canadian price rose sharply to close the spread
while the U. 3. price continued fairly stable prior to the ~ steep war
time rise. In 1921, following application of the Emergency Tariff,
cattle prices in the United States continued their moderate decline, but
Canadian cattle prices fell precipitately. Thus, as would be expected
from the relative size of the cattle industries in the two countries,
and from.Canada's marked dependence on the U. S. market, it appeared to
be Canadian prices rather than U. 8. prices that were most affected by
the changing U. S. cattle tariff treatment.

Adminster reached the further conclusions that "in no special
branch of the trade.......are imports really formidable in comparison
with domestic production", and "the number of cattle imported from Canada
or even available for importation is so small compared with the domestic
production that restriction of the trade, or even complete prohibition,

(1)

could not now have much effect in the domestic market".

 

'(l) Edminster, op. cit., p. 126 - 128.

 

 

87

His comparison of St. Paul and.Chicago prices failed to show that
heavier seasonal supplies of imported cattle on the St. Paul market had
any effect on the price equilibrium between the two markets.

The comparison of 1910-1925 spreads between U. S. and Canadian
prices is continued in Figures VI and VII for the 1926-1959 period.(1)
At first appearance the behavior of the price spreads in Figures VI and
VII is rather confusing - almost the opposite of what might have been
expected. Although the margin of the Chicago price for slaughter steers
over the Toronto price increased at the time the Hawley-Smoot Tariff be-
came effective, this increase seems to have been largely seasonal. The
spread between U. S. and Canadian prices, instead of widening under the
higher duties, continued a declining trend until it almost disappeared in
1934. Later in 1934 and in 193 , still under the Hawley-Smoot duties,
this price spread increased until it averaged $4.84 in 1935 as compared to
only $1.26 in 1933. The spread between feeder cattle prices at Chicago
and Winnipeg exhbited the same general movements.

The reason for this peculiar behavior of the price spread is
that the combined effect of extremely low prices and high U. S. cattle
duties in the early thirties caused cattle imports from Canada to prac-
tically cease and thereby break any definite relation between tariff
duties and price spreads. Although Canadian prices were still below U.
S. prices,the spread was materially less than under the more moderate
Fordney-McCumber rates in the late twenties. For a spread to have been
maintained equal to the U. 8. import duties,Canadians firould have had to

virtually give their cattle away in some months. As cattle prices abruptly

 

(1) No direct comparison of these charts with Figures IV and V can be
made because the classes of cattle used are not identical.

 

an. . .1. range :1... . .. a. ....,....... v nu.~ .l..t-~...iudd~‘—.4|l 4H1... !.I.Iluv. .T-.~

a! \..‘..—£.l|.....r.lfiuv.'i: I “‘1 i x

‘

P. .

 

tees H some
ease. seem

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L..

....

flee cacoho
a _

lll!‘

N.
~.

.,~. . ‘
-:¢AH apes n_
amen ea» so» was

4. .es..
HQ

 

 

 

 

 

 

 

,. I
.
‘ It I. v. c In. .
. r11 Iii... I . a... Pr; 3 _ . f. A ..... . b . v 2) . .
If. . o .. I: r) iull .7..- . ‘4‘ . 1n. ...F4qu/. urf ..u

 

II- 1‘ 0 J In ,. t. ..r.. <.lll'.bt

"a

‘I

 

 

90

rose in the United States, partly because of increased consumer income in
1935 but largely because of reduced cattle supplies following the severe

1934 drought, the increased duty was fully reflected in the price spread,
and imports of Canadian cattle were resumed.

Price movements in the two countries for the life of the Hawley-
Smoot Tariff in themselves offer little evidence of how prices in each
country were affected by the higher duties. Under depression conditions
cattle prices in the United States continued to fall in spite of the
"protective" tariff. Although during the low price period the spread was
much less than the import duty, it may be assumed that had there been no
duty the spread between comparable grades would have approximated trans-
portation costs. Since the extremely sharp rise in U. S. cattle prices
occurring in 1934 and 1985 was under exactly the same duties as the im-
mediately preceeding depression prices, the tariff can not be given any
credit for this increase in U. S. prices. However, had the duty been
less, the U. 3. prices would not have climbed so high before the spread
equalled the duty and imports provided whatever price checking influence
they might have; and Canadian prices would probably have risen farther.

Price Spreads Under the U. S. — Canadian Trade Agreements.

In considering first how the cattle concessions affected the
price spread for slaughter steers, the basis of price comparison should
be noted. The Chicago prices include all weights from 750 to 1800 pounds
and thus definitely fall within the heavy tariff class. The Canadian
prices are for good butcher steers up to 1,050 pounds. Since there would
be extremely few good butcher steers under 700 pounds, these prices also

apply to cattle of the heavy Weight duty class. For the reason that the

 

 

91

the 1930 rates were not fully reflected in the spread until 1935, we have
only that year against which to measure the influence of the concessions
in effect between January 1, 1936 and December 31, 1938. Table XXIV
shows that the average price spread for butcher steers was $4.84 for 1935
under the $3.00 per hundred weight duty, $3.99 under the $2.00 per hun-
dred duty of 1936 to 1938, and $3.26 with the $1.50 per hundred duty in
1939. Thus, it is evident that the spread between U. S. and Canadian
cattle prices of this group decreased with the concessions.

There seems to be a relation between the annual price spread
and the extent to which the quota is filled.(1) In 1936, when the price
spread for heavy non-dairy cattle was $3.78, the quota was only slightly
exceeded; in 1937 when average spread was $5.01, the quota was filled in
August and exceeded for the year by 17 per cent; and in 1938, with an
average spread of $3.65, the quota was unfilled. Thus, in 1937, when
the spread between U. S. and Canadian prices increased over that of 1936
and 1938 by an amount about one—third greater than the concession appli-
cable to the quota, Canada's shipments alone slightly exceeded the entire
quota. So great an increase in the price spread could hardly be expected
to be maintained over a longer period.

The spread between average stocker and feeder prices at Chicago
and good stocker and feeder steer prices at Winnipeg is shown in Table
XXIV and Figure VII. About all that can be said of this is that apparently

the average prices used are so heavily weighted by cattle under 700 pounds

(1) It would be expected that until the concession quota is filled, Canadian
prices will tend to lag behind U. S. prices by not more than the con-
cession rate plus shipping costs, but after the quota is filled sub-
stantial imports will not be resumed until a new price spread equal
to the non-concession rate is established. The continuance of imports
after the quota is filled is dependent on higher U. S. prices or
lower Canadian prices.

 

 

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manages one mooana deaconoo .mopaoo aoop weapon you owooano pm mooanm manpooa omshobw one mooaam .m .9 Adv

.momancaa no whoopm hocomw was quOOPm doom you momoho>o
manpaoa one mooanm noacmqoo .omoOHAO as manages mooanm Aocoom one noxoopm omwhobm mum mooaam .m .D hov

.oaqoaoa pm
amazon omo.a on a: museum Hosanna uoom now mooanm owwnobw manages on» one mooanm meadonwo .owooano pm
amazon ooma 0» one .mpnmaos aao whoopm moon weapon mo mooanm omonobs asuooow manages one mooaam .m .D Apv

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no phosphomon usacsnoo on» no commaahsm mooanm noaosqoo Amv moo coo ma .mn .mm .mnma .tmonsmHh mo Moom
know: .aosHSOh m.no>onn maasn owsoaso onp_aonu mooanm .m .D Aav "spec waasoaaom on» Sony covoasoawo flog

 

am.o om.a ob.n on.a a oo.n mm.n on.a mnma
pooaoonm4.qoacoqso I .m «D unooom goons

00.0 om.a no.n oo.m a 00.9 mm.n oo.m mnnmnma

owmhopa

mm.o aa.n mo.m mama

aa.o om.w ao.m mama

ea.o a om.a no.9 oo.m a oo.n mm.n oo.m mama

poosoonma coauoooo n .m .D pmaam nouns

 

 

m¢.o om.m me.n om.m a oo.n am.¢ oo.n mama
yuanwa poosmumoaawmwaocsb
coonmm moaum mesa pnoasa coonam moanm mpsc whoosa umoaam moanm mesa pnoaaa
Auvmobamo aoob onmnocoom Apvmaoopm hopawswam use»

 

Advmnma I mama .moapsn oaupoo obammooosm Hocnp mooanm mappoo :oaownoo hobo .m AD no anHME ommnobd
.bHMHanMdH

.u-v—. mil.“

93

(for which no concession was made) as to obscure any effect which duty
reduction may have had on the price of stockers and feeders weighing
700 pounds and over.

The comparison of average monthly prices of native veal calves
at Chicago with prices of good to choice veal calves at Toronto reveals
little regarding the effect of the calf concessions. It may be seen in
Table XXIV that the Toronto price increased 63 cents (from.46 cents below
to 17 cents above) relative to the Chicago price when the $1.00 per hun-
dred weight concession took effect in 1936. But the Toronto price de-

creased relative to the Chicago price in each following year until in 1939

{an

the U. S. advantage was 61 cents.or 15 cents more than in 1935. The ex-
tent to which the annual calf quota was filled does not seem to bear any
consistent relation to the changing price spread. It is possible that
the relative prices for good to choice vealers and for average vealers may
have changed sufficiently in one or both of the markets to bring about
this changing spread. Or it may be that the market areas for veal calves
are sufficiently limited to make vealer prices on different markets less
closely related than the prices of older cattle.
Relative Price movements in the United States and Canada

Having seen that the concessions granted to Canada by the Trade
Agreements decreased the spread between prices in the two countries for
at least one duty class, it is important to ascertain next, so far as
possible, whether this narrowed spread was brought about by reduced prices
to domestic producers, by higher prices to Canadians, or by some combina-

tion of the two. It will be recalled that previous U. S. duty changes,

94
when affecting price spreads, had done so by influencing Canadian prices
by about the amount of the duty change while U. S. prices seemed little
affected by the change in duty.

Because of the irregularity of cattle prices in both countries,
an examination of price movements at the time that concession rates
were applied is not too revealing. Apparently at the time the first
Agreement became effective (January 1, 1936) U. 8. prices of slaughter
cattle had been declining from.the early 1935 post-drought peak and this

decline continued at about the same rate for six months after the effec-

 

tive date of the concessions. Canadian cattle prices, which had also

been declining, leveled off as the concession rates became effective and

r To.“
I

before U. S. prices had reached bottom. at the time the 1938 concessions
took effect (January 1, 1939) U. S. slaughter cattle prices were rather
stable and continued on about the same level for a few months after the
concessions had become effective. Canadian prices continued to rise for
the first few months of 1939 to bring about the further reduction in
price spread between the two countries.

A strong inference as to what price movements were responsible
for any narrowing of the spread under the Trade Agreement rates may be
drawn by comparing imports from Canada to total Canadian marketings and
total dutiable cattle imports to the total U. 3. supply. Table XXV shows
that total annual dutiable cattle imports (including calves) under the
U. S. - Canadian Agreements in the year of highest imports (1939) reached
only 3.2 per cent of the annual U. S. slaughter of cattle and calves. In
the year of second largest import numbers this proportion was only 2 per

cent. In view of the small part which imports constitute of the total

95

TABLE XXV

Cattle Imports in Relation to Domestic Slaughter and
Cattle Prices, 1910 - March 1940.

 

Dutiable cattle .Annual U. S. Per cent dutiable Average farm

 

Year imports (a) slaughter cattle are of U. price of beef
(b) S. slaughter cattle (a)__
(number) (number)

1910 208,820 21,057,000 4.78
1911 250,272 20,672,000 4.46
1912 525,986 20,214,000 5.12
1913 736,937 19,244,000 5.90
1914 727,891 18,605,000 6.25
1915 552,489 18,955,000 6.00
1916 295,647 20,421,000 6.47
1917 547,510 25,115,000 8.17
1918 552,601 24,579,000 9.44
1919 642,595 25,228,000 9.59
1920 579,114 21,951,000 9.42
1921 194,871 20,822,000 5.50
1922 256,000 22,558,000 5.45
1925 156,961 25,610,000 5.58
1924 141,985 24,554,000 5.55
1925 172,910 24,540,000 0.7 6.25
1926 211,598 24,155,000 0.9 6.45
1927 456,204 21,891,000 2.0 7.25
1928 517,150 19,679,000 2.6 9.12
1929 410,656 19,444,000 2.1 9.15
1950 226,275 19,771,000 1.1 7.46
1951 85,570 20,061,000 0.4 5.51
1952 95,407 19,812,000 0.5 4.07
1955 65,529 21,488,000 0.5 5.65
1954 57,679 24,947,000 0.2 5.88
1955 564,625 24,551,000 1.5 6.21
1956 599,115 26,251,000 1.5 5.85
1957 494,945 25,520,000 2.0 6.96
1958 424,022 25,860,000 1.8 6.28
1959 755,570 25,785,000 (c) 5.2 6.87
Jan-Mar

1959 275,826 6.85
Jan-Mar

1940 150,446 6.59

 

 

IE) "From Foreign Crops and.Markets", Vol. 38, No. 6, (February 11), p. 84
and Vol. 40, No. 21 (may 25, 1940) p. 690. -

(b) Sum of totals for cattle and calves slaughtered from “Agricultural
Statistics", 1939. p. 318.

(0) Not official; estimated on basis of federally inspected slaughter.

96
domestic slaughter it would be unreasonable to assume that cattle imports
materially affected cattle prices in the United States.

Consideration of separate classes, so far as the data permit,

indicates that in no particular class of cattle do imports constitute a
serious menace to U. S. prices. Table XXVI shows that only in 1939 have
imports of calves exceeded 1 per cent of the U. S. calf slaughter. Table
XXVII indicates that total imports of non-dairy cattle weighing 200 pounds
and over were only 2.1 to 4.3 per cent of the annual U. S. cattle slaughter
(excluding calves). When it is recalled that over one-half of these im-
ported cattle weighed less than 700 pounds each, it is evident that their

relative importance in pounds is considerably less than is shown by the

(1)

percentages in terms of numbers.

Data regarding the relation of imports of stockers and feeders
to the total U. S. supply of like cattle permit only a very indirect
approach for this class. The figures presented in Table XXVIII involve

several very rough estimates which for the most part seem to over em-

(2)

phasize imports relative to the total U. 3. supply. It may be seen

(1) It should be noted that nearly all of the 200 to 699 pound class are
stockers and feeders as are also a considerable part of the heavier
class. While all will eventually be slaughtered, these cattle which
will first be fattened in the U. S. or used in breeding herds do not
constitute the same competition for all U. S. cattlemen as do cattle
imported ready for immediate slaughter.

(2) Stocker and feeder shipments at public stockyards of course do not in-
clude local transfers of feeders nor shipments direct from range to
buyer. For the purpose of total feeder cattle imports the total of the
175 or 200 pound to 669 pound class is added to one-half of the over-
700 pound non-dairy cow class. This is an extremely rough estimate
and one that probably too inclusive. All of these cattle have already
been included in Table XXVII in the comparison of imports with total
U. S. slaughter numbers. Consequently both the import figures and
the domestic figures tend to exaggerate the importance of stocker and
feeder imports relative to the total domestic supply.

 

Eti.n 3

97
TABLE XXVI
Calf Imports and U. S. Calf Slaughter Numbers, 1936 — 1939

 

 

 

 

Calves slaughtered in U.S. Per cent imports are of
(a) U. S. slaughter
Year In wholesale Total Calves imp In wholesale Total
establishments ported (b) establishments
1936 7,442,000 10,138,000 57,314 0.8 0.6
1937 8,746,000 10,081,000 82,052 0.9 0.8
1938 7,055,000 9,117,000 47,708 0.7 0.5
1939 " (c) ” (c) 115,092 1.6 1.3

 

(a)
(b)

(9)

"Agricultural Statistics", 1939. p. 318.

From data furnished by the United States Department of Agriculture,
Foreign Agricultural Service.

Because 1939 slaughter figures are not available, 1939 imports are
compared to 1938 slaughter numbers.

TABLE XXVII

Dutiable Beef Cattle Imports and U. S. Cattle Slaughter Numbers, 1936-1939

 

 

 

 

Cattle slaughtered in U.S. Dutiable Per cent imports are of
Year (a) Cattle over U. S. slaughter

In wholesale Total 200 lbs. ex- In wholesale Total

establishments cluding dairy establishments

cows (b)

1936 13,424,000 16,093,000 335,110 2.5 2.1
1937 12,682,000 15,239,000 406,170 3.2 2.7
1938 12,226,000 14,743,000 369,177 3.0 2.5
1939 " (c) ” (c) 629,875 5.2 4.3

 

(a)
(b)

(0)

"Agricultural Statistics", 1939. p. 318.

From data furnished by the United States Department of Agriculture,
Foreign Agricultural Service.

Because 1939 slaughter figures are not available, 1939 imports are
compared to 1938 slaughter numbers.

 

98

TABLE XXVIII

Stocker and Feeder Cattle Shipments at U. S. Stockyards and
Estimated Imports of Stocker and Feeder Cattle 1936 - 1939.

 

 

 

 

 

Estimated imports of Per cent imports are of
Stocker stocker & feeder cattle shipments
Year and feeder Total Middle weight Total Non—con- Concession
shipments non-conces- imports cession class imp
(a) sion class class ports
imports
1936 3,207,000 255,673 176,237 7.9 5.8 2.1
1937 3,471,000 325,004 223,837 9.4 6.4 3.0
1938 3,615,000 308,504 243,831 8.5 6.7 1.8
1939 " (c) 525,874 401,874 14.2 11.1 3.1

 

(a) Total of stocker and feeder cattle shipments and stocker and feeder
calf shipments from VAgricultural Statistics," 1939. p. 313.
Stocker and feeder calves are heavier than the tariff classifica-
tion for calves (under 175 and 200 pounds).

(b) Total estimated imports of stocker and feeder cattle was arrived at
by adding total imports in the 175 or 200 to 699 pound class to one-
half of total imports in the 700 pound and over non-dairy class.

(c) Shipments for 1939 are not available; 1939 estimated import figure
is compared to 1938 shipments.

99‘

in Table XXVIII, that with these figures, imported feeders would make (4i- ‘
up from.7.9 to 14.2 per cent of U. S. stocker and feeder shiphénts, but 2
by far the larger part of these imported feeders belong to the riddle.

weight non-concession class. Furthermore nearly all of these middle

weight cattle come from Mexico and tend to constitute a class offering
little competition to the bulk of either U. S. or Canadian grown feeders.
The reason for this is the already mentioned tendency for Hexican imports

to be made up of cattle of low quality which do not find favor with Corn
Belt cattle feeders and which for the most part go as stockers or feeders

on the southwestern range or to a rather special market for cheap beef.

Neither does there appear to be any reason to believe that on

 

any particular market where imported cattlezare more numerous as at St.
Paul, will prices be consistently depressed relative to prices elsewhere.
Except in an area entirely isolated from other domestic regions (and none
sucn exists) unusually low prices would tend to attract buyers, and dis-
courage sellers so that the price decline would be widely diffused through
the importing country. While such an interrelationship of markets cannot
be assumed to be perfect, especially on a day to day basis, Edminster's
comparison of St. Paul and Chicago prices for 1921-24 showed, no tendency
for changed volume of imports to affect the spread between St. Paul and
Chicago prices.(l)
0n the other hand, Canada's exports to the United States, as
shown in Table XXIX, are a significant part of Canada's total marketings.

In 1939, when imports from Canada were high but still within her allocated

quota in the heavy non-dairy class, Canada's shipments of cattle to the

 

(1) Edminster, op. cit., pp. 133 - 135.

 

iii"...

 

100

TABLE XXIX

Canadian Cattle Marketings and Exports to the
United States, 1938 - 1939. (a)

 

Percent exports to U.S.

 

 

 

Calves Beef Cattle are of Canadian marketings
Year Total EXported Total net Exported Calves Cattle
marketings to U.S. marketings to U.S.
1938 748,321 45,645 943,599 84,676 6.1 9.0
1939 795,402 81,832 1,026,753 183,982 10.3 17.9

 

(a) Calculated from the Canadian Department of Agriculture,
Marketing Service, "Twentieth Annual Marketing Review",
Po 6.

 

 

101
United States amounted to 17.9 per cent of Canada's net cattle marketings.(l)
Since the average weight of cattle inmorts from Canada was 996 pounds,
the 17.9 per cent probably does not over emphasize the importance of the
U. 8. market to Canadian Cattlemen.(2) Calf imports from Canada in 1939
amounted to 10.3 per cent of Canada's total calf marketings, while total
U. S. calf imports were only 1.6 per cent of the number slaughtered in
U. S. wholesale establishments.

Thus, it is evident that cattle prices in the United States
could not have been materially affected by total imports, much less by
concession imports. It appears that the narrowing price spread occurring
under the cattle concessions of the U. S. - Canadian Agreements must have
been due to rising Canadian cattle prices rather than to lower cattle
prices in the United States, just as in previous years it was the Canadian
rather than U. S. prices that showed the greatest reaction to changes in

the U. S. cattle tariff.

 

(1) The most nearly comparable figure representing the relative importance
of imports of this class of cattle to the U. S. supply is the 5.2
per cent which dutiable cattle over 200 pounds (other than dairy cows)
constitute of the U. S. cattle slaughter in wholesale establishments.
As already explained on page 96, the numerical comparison exaggerates
the importance of imports.

(2) In evaluating the relative importance to U. S. and Canadian cattle-
men of the cattle concessions it is interesting to note that Canada's
allocated quote in the heavy non-dairy class is approximately 20 per
cent of Canada's 1939 cattle marketings, but the total quota for the
class is only about 15 per cent of the U. S. cattle slaughter.

 

 

 

102

TABLE XXX

Relation of Annual Imports by Duty Class
to Prices of Comparable Cattle at Chicago. (a)

 

 

 

Price of Price Imports of Price of Imports of
Year native Calf of 175 or 200 native 700 1b. and
veal imports feeders to 699 1b. beef over beef
calves cattle cattle cattle
1936 8.35 57,314 6.40 176,237 8.85 158,873
1937 9.35 82,052 7.95 223,837 11.65 182,333
1938 9.50 47,708 7.85 243,831 9.50 125,346
1939 9.75 115,092 8.70 401,874 . 9.80 228,001

 

(a) Import data furnished by the United States Department of.Agriculture,
Foreign Agricultural Service. Prices from the Chicago Daily Drovers
Journal, "Year Book of Figures", 1939. pp. 40, 48, and 39.

 

103

Cattle Imports are Price Determined rather than Price Determining
The question as to whether increased cattle imports have caused

the marked declines which have at times occurred in U. S. cattle prices
can be simply and definitely answered. Figure)flIIand Table XXV show that,
since the United States has been on an import basis for live cattle,
cattle prices and dutiable cattle imports have shown a positive correla-
tion - a marked tendency to increase and decrease simultaneously. Changes
in cattle duties have only modified the effect of U. 3. prices on imports;
cattle tariff changes have neither determined the major trends in U. g.

cattle prices nor the reaction of imports to these prices.

 

when cattle were freelisted in 1915 the nunber of dutiable cattle “Fm-v
imports increased from 323,986 in 1912 to 736,937 head in 1913, but at the 9
same time the average farm price of beef cattle had risen from.$5.12 to
$5.90, and already in 1912 before the duty was removed cattle imports were
on the uptrend in response to rising U. S. prices. Throughout the war
years and the pre-deflation post-war years both cattle prices and cattle
imports remained relatively high, although changing conditions in the ex-
porting countries caused some variation.
The cattle duties of 1921 and 1922 became effective at a time
when both U. S. cattle prices and dutiable cattle imports had already begun
a decline. The Tariff Acts of 1921 and 1922 served to further discourage
cattle imports, but cattle prices continued low through thelearly twenties.
In the muddle twenties U. S. cattle prices began to recover as the post-war
liquidation passed and domestic purhcasing power improved. Cattle prices

in the United States continued to rise until in 1928-29 they were comparable

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105
to the war prices. As cattle prices rose so did imports of dutiable
cattle until they too were comparable to war-time figures.

In 1930, with the effects of thesacond post—war'depression be-
ginning to be felt, the average farm price of beef cattle had fallen to
£7.46 from the 1929 price of $9.15. Simultaneously dutiable cattle im-
ports decreased from 410,656 to 226,273 head under the combined effect of
lower prices and the Hawley-Smoot Tariff effective JUne 17, 1930. Under
this tariff both cattle imports and cattle prices continued to fall until
the farm price of beef cattle averaged $3.63 in 1953 and cattle imports
fell to only 57,679 head in 1934. But in 1955, still under the same tariff
duties, the price of beef cattle rose to $6.21 and imports responded to
564,625 head. The United States had again become an attractive market
due to the severe effect of the 1934 drought on the domestic cattle in-
dustry and the partial recovery of domestic purchasing power.

The concession rates of the 1955 Agreement with Canada, becoming
effective January 1, 1956, achieved only a slight increase in 1956 cattle
imports over those of 1935; the price had declined from $6.21 in 1935 to
$5.85 in 1956. In 1937 the 1955 conditions were repeated on a somewhat
lesser scale and with a corresponding effect on cattle prices and cattle
imports. By 1958 the domestic cattle supply was stronger and domestic
purchasing power weaker. As a result both U. S. cattle prices and duti-
able cattle imports were lower. The record 1939 import number of
753,570 head reflects higher U. S. cattle prices (especially for feeder
cattle) and a combination of circumstances causing heavy liquidation of
herds in northern Mexico. Decreased imports early in 1940 are in reaction

to the 1939 conditions.

 

 

 

106

Throughout this 1910-1940 period it is evident that U. S. prices
have been the chief consistent determining influence affecting the:1ze
of cattle imports. It is further evident that neither the tariff on
cattle nor the size of cattle imports has been the determining influence
on U. S. cattle prices. Cattle imports have been price determined rather

than price determining.

 

 

107

CHAPTER VII

Sunmary and Appraisal

 

Having examined cattle imports under the Canadian Trade Agree-
ments in some detail against the background of a survey of North.Ameri-
can beef production, United States cattle tariff history, and general
considerations of the Trade Agreements program, an attempt will now be
made to summarize the findings and to evaluate the cattle tariff policy
as embodied in the Agreements.

Summary

1. Geographically the beef cattle industries of the United
States, Canada, and Mexico constitute a natural continental entity. In
some important respects they are complementary: Canada and Mexico have
considerable resources for producing lean cattle, while the United
States has the finishing feeds and the greater concentrations of popula-
tion (consuming centers).

2. Following the passing of the American frontier about 1890,
the extensive forms of U. S. cattle production tended to give way to
more intensive land uses such as grain farming and dairying. As the
population of the United States was rapidly growing at the same time,
the result was higher domestic cattle prices and change to a net im~
port basis in the cattle and beef trade at the beginning of the second
decade of this century.

3. Although the United States had maintained import duties on
cattle prior to the change to an import basis, the appearance of sub-

stantial import numbers gave the cattle tariff question new emphasis.

 

 

108

In the Underwood Tariff of l9l3 the duties on cattle and beef were re-
moved, and, under the influence of war-time prices, imports of cattle
continued large relative to previous years. During the war U. 3. ex-
ports of beef, facilitated by imports of lean cattle, again reached
considerable prOportions.

4. Following the war and subsidence of U. S. beef exports, both
U. S. cattle prices and cattle imports sharply declined. During this
decline cattle and beef were again made dutiable in the Tariff Acts of
1921 and 1922. Under these tariffs both U. S. cattle prices and cattle
imports remained low through the early twenties. In the second half of
the twenties, as the post-war beef cattle liquidation passed and as
domestic consumer purchasing power increased, the U. S. price of beef
cattle rose until it almost equalled the war prices. In response to
these prices cattle imports also increased to near war-time numbers.

5. As the depression after 1929 began to affect prices in the
united States, cattle imports likewise began to decline. The Hawley-
Smoot Tariff Act of 1950 raised the cattle duties to a point where their
advalorem equivalent was such as to practically prohibit imports. In
spite of this virtual monopoly of the domestic market, prices paid
U. S. cattlemen continued to fall until about 1934. As a result of im-
proving domestic purchasing power in 1955 and more especially because
of severely reduced domestic supplies of marketable cattle following the
great 1954 drought, U. S. cattle prices and cattle imports increased
markedly in 1935.

6. Late in 1935 the first U. S. - Canadian Trade Agreement

was concluded as an important step in the prOgram.of resuming normal

 

109

trade relations by a process of reciprocal lowering of the barriers

which had so disastrously developed in the twenties and early thirties.

As Canada was the second most important market for U. S.exports this
this agreement was highly desirable. Because Canadian cattlemen were
heavily dependent‘on the U. 3. market, some concessions by the United
States on cattle were necessary. The interests of U. S. cattlemen
were carefully safeguarded, however, by lindting the number eligible
for entry each year at the reduced rate of duty to approximately 1 per
cent of the annual U. S. slaughter. The concession rates applied
only to classes of which Canada was the chief suppliers.

7. Under the concession rates of the 1955.Agreement (effective
January 1, 1936) dutiable imports in 1936 and 1938 did not greatly
exceed those of 1935, but with the higher prices of 1937 imports con-

siderably increased. Of total dutiable cattle imports in the 1936-38

period, approximately 50 per cent were in the middle weight non-conces-

sion duty class and paid full 1930 duty rates, as also did cattle enter-

ing the concession classes in excess of the respective quotas.

8. As the three year life of the 1955 Agreement approached an
end, in recognition of mutual benefits, the United States and Canada
signed the 1938 Agreement to become effective January 1, 1959. Since
the new Agreement went farther than the first one, the United States,
among other concessions, further reduced the duty on non-dairy cattle
over 700 pounds and raised the tariff quota limits both on this class

and on claves; the combined quotas, however, being equal to less than

2 per cent.of domestic slaughter. This Agreement also contained a pro-

-vision for allocating the quota for heavy non-dairy cattle between

Canada and other countries.

I-

110

9. In 1959 dutiable cattle imports reached the highest number
on record but were still only slightly over 5 per cent of the total
domestic supply. Only a small part of the increase over 1938 imports
could be attributed to the 1938 concessions. Increased imports were
due to higher U. S. prices, favorable exchange rates (especially with
Mexico), and disturbed conditions in Mexico. Imports in the early
months of 1940 show a marked decline, and imports are expected to remain I
lower for some time.

10. While comparison of U. S. and Canadian prices shows the spread

to have narrowed (relative to the 1955 spread) under the reduced duties

 

 

- r"..-

of the Agreements,it appears that this has been due to higher Canadian ..__h_.
cattle prices rather than lower prices to U. S. cattlemen; as under pre-
vious duty changes it was Canadian cattle prices rather than U. 3.
prices that were chiefly affected. Why this should be so is evident in
the fact that Canada's cattle exports to the United States are a much
larger part of her total marketings, than total cattle imports are of
the total U. S. supply. Not only are total imports an unimportant part
of the domestic supply, but in no particular class of cattle nor on any
particular markets imported cattle constitute serious competition for

U. S. cattlemen. Throughout the whole 1910-1940 period it is evident
that U. S. cattle imports have been price determined rather than price
determining. U. S. import duties on cattle have influenced but not
determined the volume of imports which have been governed primarily

by U. S. prices, and.which by their entry may have served to restrain

excessive price advances.

111

Effects of the Concessions on Cattle, an Appraisal I g

The appraisal of any tariff policy has almost endless rami-
fications, many of which permit little factual analysis. However,
there are some major points relative to the U. S. concessions on cattle
and their broader implications which may be properly considered.

In Chapter Vlit was shown that concession class imports or
even total dutiable cattle imports constitute very little competition
for domestic producers. To those U. S. cattlemen who obtain stocker

and feeder cattle from Canada these concessions are a direct benefit.

 

Imports Help_to Stabilize Prices. Because cattle imports

 

 

reapond so markedly to U. S. cattle price movements, they should tend
to constitute a stabilizing influence on U. S. cattle production and
somewhat lessen the extreme cycles in production and price which have
contributed to periodic distress in the cattle industry. True, any
tendency toward decreasing the extremes of these cycles would mean less
extreme price peaks as well as slumps, but high prices are scant comfort
for producers with little marketable stock, and monOpoly of the home
market is a doubtful boon when prices are extremely low.

Lower Duties Imppove the Farmers market. International trade
is not a one way affair. As experience with high tariffs in the twenties
and early thirties bears witness,we cannot continuously export without
importing. Domestic purchasing power is the most important factor in-
fluencing U. 3. beef cattle prices. The great reduction in foreign
trade in the early thirties directly, through decreased employment in
the normally exporting industries, and indirectly, through the effect

of these on other industries, exerted a considerable depressing influence

112

on domestic demands. Since Canada is the second most important market
for U. S. exports it: as highly important to reestablish normal trade
relations with her.

Most cattlemen are also producers of such normally exported
commodities as wheat, corn, and hogs. In order to retain outside mark-
kets for these commodities farmers are definitely interested in reducing
trade barriers. The gains which increased trade makes available to
farmers and cattlemen through increased domestic purchasing power and
wider markets for the farm exoort commodities considerably outweigh the very

limited competitive effects of moderately increased cattle imports under

 

the Trade Agreements concessions. ..___,

Possible Benefits from a Protective Tariff on Beef Cattle are

Distinctly Limited. while cattle imports, especially in the concession

 

limits, have had little influence on prices to domestic producers, it

may be asked whether the exclusion of cattle imports would not in the
long run, especially as the population increases, materially raise prices
to domestic producers. The possibilities of such a benefit are dis-
tinctly limited. The occurrence of increased prices would tend to in-
crease domestic production which would eventually limit the price advance.
A second factor operates to check increasing cattle prices and would
operate even though domestic production were not increased. This is the
availability of food substitutes for beef. As scarcity tended to force
beef prices upward lower income families would have to turn to cheaper
meats and to meat substitutes. Lore over, many of these substitutes such
as pork, WhiCh is Still at least potentially on an export basis, and the

cereals cannot have their domestic price raised by an import duty. Thus

113

consumers would lose and producers not materially benefit. The basic
competition which more intesive types of agriculture are providing for
beef cattle tends to indicate that the long run effect of a prohibitive
import duty on cattle with an increasing population would be more toward
a decreased per capita consumption of beef than toward an increase in
domestic beef production.

But, as a matter of fact, a domestic demand increase in the" I
form of a greater pOpulation relative to the domestic cattle supply
does not appear likely. The rate of population growth in the United

States has rapidly declined in the last two decades.and we seem to be

 

approaching a stationary population. On the other hand, beef production -'-——v
in the United States,1uhich seemed to be declining both relative to the
population and in absolute volume about 1910, has since shown some in—

crease.

Effect of the Concessions on Canadian Cattlemen. Reference has

 

been made in different places in the preceeding chapters to the conditions
which would make the U. S. cattle concessions a distinct benefit to
Canadian cattlemen. Not only is the United States by far the most acces-
sible export market for Canadian live cattle, but the U. S.cattle feeding
areas are also closer to Canada's Prairie Province ranches than are the
limited cattle feedingereas of the Eastern Provinces.

By means of selected concession classes and allocated quotas
Canada has received the chief benefit of the U. S. cattle concessions.
While the concession quotas are quite small relative to U. S. cattle
production, the smaller size of the Canadian cattle industry makes these

concession numbers an important part of Canada's total cattle marketings.

114

Relative price movements in the United States and Canada indicate that
lower U. S. duties have meant higher prices to Canadian cattlemen.

Effect on Consumers. Since imports have been too small re-

 

lative to domestic production to constitute an important influence on
domestic prices, they cannot have materially benefitted consumers.
However, to the extent that imports have or may have a stabilizing in-
fluence on U. 3. beef supplies and cattle prices they will tend to
protect consumers against extreme beef shortages. If increasing prod-
duction costs should materially decrease domestic production per capita,

lower income consumers, including farmers, would have to reduce their

 

beef consumption unless a supplemental supply were available in the
form of imports. To the extent that imported stockers and feeders re-
duce domestic production costs consumers will benefit as they would by
an increased supply of finished cattle or of beef.

Consumers, which includes all producers, also have a distinct
interest in the broader aspects of tariff policy. A national policy of
protection, or self-sufficiency, even if it were possible to achieve
equal protection for all products, would inevitably result in a lower
real income or standard of living as productive effort had to be di-
verted from.the more efficient enterpriSes in order to produce domesti-
cally goodsformerly obtained by exchange.

The Outlook for U. 8. Beef Production.

There is reason to believe that the position of the domestic
beef cattle industry has been considerably strengthened in the last two
decades. hhny of the conditions detrimental to beef production follow-

ing the passing of the American frontier have been substantially altered

115

in recent years. Principally these have come about through changes in
land use which have been accelerated recently by government programs
such as the A. A. A.

Improved range management has increased the carrying capacity
of remaining range areas. Devastating drought has culminated several
years of struggling dry-land grain farming, especially in the tier of
states from the Dakotas to Oklahoma and some of their western neighbors;
it is likely that grazing animals will have a larger part in the agri-
culture of these states in the future.

The importance of livestock on farms in the United States has
been growing for several years as a means of increasing the per acre
income. Recently the Cotton Belt has had to turn more toward general
farming because of a reduced export market for its principal crop. A
growing appreciation of the possibilities of roughage farming, together
with the government benefit payments for maintaining soil fertility, is
tending to increase the importance of roughage consuming livestock in
the general farming areas of the United States. while dairying may make
the most rapid growth, beef cattle are also likely to share in the ad-
justment.

The place of beef cattle as a part of general farming is fur—
ther strengthened by changing market demands and by improved methods of
production. Lighter weight cattle are preferred by the market and their
production is better adapted to farm conditions. The younger marketing
age permits a greater per acre beef production because younger animals
make more efficient use of feed and because a greater proportion of the

animals carried are marketable each year.

116

Thus, while domestic beef cattle production may not make any
considerable absolute increase, its position has been materially imr
proved in recent years. The apparent approach to a stationary popula-
tion in the United States makes probable a lesser trend toward inten-
sive agriculture and consequently tends to strengthen the future place

of beef production in the nation's agriculture.

 

 

117

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00.0 05.0 00.0 00.00 00.0 00.00 50.0 00.0 0000000
00.0 00.00 05.0 00.00 00.5 00.00 00.0 00.0 000800000
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BIBLIOGRAPHY

 

Official Publications
A. United States
Department of Agriculture
Agricultural Statistics, annual.
Foreign Agriculture, issued monthly by the Bureau of

Agricultural Economics. See especially December
1938 issue.

Foreign Crops and Markets, issued weekly by the Office
of Foreign.Agricultural Relations. Issues of 1939
to June 1940.

The Livestock Situation, issued monthly by the Bureau of
Agricultural Economics to June 19, 1939.

The Beef Cattle Situation, issued monthly by the Bureau of
Agricultural Economics beginning July 19, 1939.

Agricultural Outlook Charts, 1940,_Beef Cattle. Bureau of
Agricultural Economics.

Department of State

The Hid-Nest and the TradeeAgreements Program, Commercial
Policy Series, No. 27 by H. S. Patton. 1936.

The Canadian Trade Agreement and the American Cattle
Industry, by B. S. Patton. (Multigraphed memorandum).

The New Trade Agreement with Canada, Press Releases, Vol.
XIX : No. 477, Supplement B, Publication 1253.

Department of Commerce

Foreign Commerce and Navigation of the United States, annual
publication of the Bureau of Foreign and Domestic Commerce.

Statistical abstract of the United States, annual publication
of the Bureau of the Census.

Monthly Summary of Foreign Commerce of the United States,
issued by the Bureau of Foreign and Domestic Commerce.

15.11.30.201} ‘ '

m?

 

121

U. S. Tariff Commission
Cattle and Beef in the United States, 1922.
The Cattle Industries of the United States and Canada, 1925.

The Emergency Tariff and Its Effect on mmtton, Wool, Pork,
and Miscellaneous Meats. 1922.

Canada

Dominion Bureau of Statistics I
The Canada Year Book, annual

Department of Agriculture
Annual Karket Review

Live Stock Market Review, weekly.

 

Unofficial Publications

Books

Bunce, Arthur C. Economic Nationalism and the Farmer.
Ames, Iowa: Collegiate Press, Inc., 1938. IX and 332 pp.

Carver, Thomas Nixon. Principles of Rural Economics.
pp. 90-114. Boston: Ginn and Company, 1911.

Edminster, Lynn Ramsay. The Cattle Industry and the Tariff.
New York: The Macmillan Company, 1926. XV and 331 pp.

 

Snapp, Roscoe R. Beef Cattle, Their Feeding_and anagement
in the Corn Belt States. Part I. 3d. ed. New York:
John Wiley and Sons, Inc., 1929.

 

Taussig, Frank William. Some.Aspects of the Tariff Question.
Part I. Cambridge: Harvard University Press, 1929.

 

Thomson, Frederick Lundy. Agricultural Prices. Chapter XVI.
New'York: McGrawéHill Book Company, Inc., 1936.

 

Vaughn, H. N. Types and Market Classes of Livestock. pp 19-167.
17th ed. Columbus, Ohio: R. G..Adams and Company, 1937.

 

Zimmermann, Erich W. World Resources and Industries. Chapter
XVIII. New York: Harper and Brothers Publishers, 1933.

 

B.

C.

D.

 

 

 

Bulletins
Voorhies, Edwin C., and Koughan, A. B. Econonucs Aspects
of the Beef Cattle Industry. University of California
Bulletin 461. Berkeley, California, 1928.
Alexander, C. K. The Tariffs on Pork and mutton. Tariff
Research Committee, Madison, Wisconsin, 1934.
Annual Reviews

Drovers Journal Yearbooks, published by the Chicago Daily
Drovers Journal.

Journal Articles

Black, John D. "Analysis of Tariff Duties". Journal of
Farm Economics, XII (January 1930), pp. 80-106.

Drummond, H. M. "Trade and Trade Agreements between Canada,
the United States and Great Britain". Journal of Farm
Economics, XX (August, 1938), pp. 590-604.

Hibbard, B. H. "Who Pays the Tariff Duties?" Journal of
Farm Economics, XIII (October 1931), pp. 547-553.

Lattimer, J. E. "British Empire Trade.Agreements in Relation
to Trade in Farm.Products between Canada and the United
States." Journal of Farm Economics, XXI (February 1939),
pp. 380-385.

Patton, H. S. "Reciprocity with Canada. The Canadian View-
point." gnarterly Journal of Economics. Vol. 35 (August

Morton, Walter A. "Tariff Theory". Journal of Farm Economics,
XIX (November 1937), pp. 845-860.

Renne, Roland R. "Verification of Tariff Effectiveness by
Different Statistical Methods”. Journal of Farm Economics,

XVI (October 1934)

 

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