Two Cents Philippines Preference

an “Empty Gesture”

Early in June, as the position remained obscure, and continued uncertainty was affecting- copra trade in the Australian zone, we suggested to the Prime Minister’s Department, Canberra, that it w r ould be a matter of much public convenience if an inquiry were made in U.S.A. through the Department of Commerce.

On June 12, the Secretary of the Prime Minister’s Department, Canberra, very kindly supplied us with the following: — “Information has been received that the trade (vegetable oils industry) estimates that the new tax will double the price of two-thirds of all the oil fats used by American soapmakers. The Bureau of Raw Materials American Vegetable Oils Industry has made the following comment on the situation: — “ ‘Congress has retained the tax of 3 cents per lb. on Philippines coconut oil and on various oils presumed to be in competition with Philippines coconut oil.

“ ‘Congress has unexpectedly placed a tax of 5 cents per lb. on coconut oil from sources other than the Philippines; and it claims, in consequence, that the copra producers in the Philippines are receiving a preference of 2 cents per lb. in the American market.

“ ‘The only result of this preferential treatment will be the embarrassment of the copra crushers in the United States, as it will prevent them from purchasing copra from sources outside the Philip pines. The tax in the manner arranged will not help the Philippines copra grow ers, as palm kernel oil carries the same tax as Philippines coconut oil—namely, 3 cents per lb—and palm kernel oil will fill the gap.

(Continued overleaf.)

“ ‘The importation of coconut oil, after the imposition of 3 cents tax, will be so small compared with the total output of the Philippines that the 2 cents preferen tial treatment in favour of the Philip pines oil is an empty gesture’.”

The Prime Minister’s Department states also that a section of the new American Act reads as follows: “Upon exportation to any foreign coun try of any article with respect to the pro cessing of which the tax has been paid, the exporter shall be entitled to a refund of the amount of such tax. Upon giving a bond, any person is entitled, without payment of the tax, to process for such exportation.”

Reports also have been received by the Prime Minister’s Department to the effect that Canadian soap manufacturers have been drawing heavy supplies of tallow and other ingredients from the United States; and that the prospective condi tions in consequence may develop in favour of copra exported from the Aus tralian zone in the Pacific.

We learn, from other sources, that the whole of the processing tax on Philippine copra, which on the old basis of import would amount to about 25,000,000 dollars per annum (£5,000,000) will be returned by U.S.A. to the Philippines, on condition that the latter government will not use it to in any way subsidise producers of copra, coconut oil, or allied products.

Our London advices are that the new American Act is regarded as “a most extraordinary piece of legislation.” The Philippines Government naturally will do everything possible to assist copra exports to U.5.A.—25,000,000 dollars is equal to three-quarters of the Philippines’ total annual expenditure!—but if the Govern ment does anything at all to encourage the growers there in a practical way, it may be regarded as subsidising the growers, and thus lose this magnificent bequest from Uncle Sam.

It seems to be assumed in the sum maries received by the Prime Minister’s Department that the United States will continue to consume coconut oil in various forms in quantities much the same as hitherto. We cannot agree with that view.

The effect of the tax definitely is to add enormously to the cost of every commodity in which coconut oil is used; and it is therefore inevitable that the United States manufacturers will turn away al together from the oils which are taxed and will make use of substitutes which are free from taxation —such as cotton seed oil and soya bean oil, of which very large quantities are produced now in the United States.