Rather than limit my remarks to just the merits of S. 3118, I would rather attempt to address the apparent lack of consideration that elements of the Senate appear to have for an industry that offers the American society much in the way of employment, tax revenues, and public enjoyment. This bill, S. 3118, is just one effort among many in an attempt to destroy the tobacco industry and the benefits it provides. I am sure that other witnesses will provide the committee greater detail, but it is my understanding that the U.S. tobacco industry provides in excess of $6 billion in tax revenues to the various governmental agencies to which it must contribute. Further, I understand that it provides income for 1 million persons involved in the farm production of tobacco and created tobacco farm income of $2.3 billion last year. Also, some 41,000 persons with wages totaling more than $521 million were employed by the U.S. manufacturing companies. This employment and creation of tax revenues deserves just consideration when any attempt at legislation that interferes with industry success is presented.

The area of our industry that I am here representing today is the role of the burley leaf dealer. The leaf dealers are service-oriented businesses that offer their abilities and facilities to the United States and foreign manufacturing industry in several different areas. One large area of endeavor is that of servicing the leaf tobacco exports of this country to the consuming areas of the world. Total unmanufactured exports of all tobacco types from this country amounted to $1.2 billion in the year just ending.

In conjunction with manufactured exports, tobacco provided a much needed $1.36 billion favorable contribution to the Nation's balance. of payments.

Of particular interest and pride to our association, burley exports have grown in recent years to where unmanufactured burley exports amounted to approximately 83.4 million pounds processed weight. The majority of this business was conducted through the member firms of our association. In providing the facilities and personnel to purchase, process, store, and ship these exports, the burley dealers also provide the local producing community with the economic benefits of capital investment in factories and equipment and employment for a sizable segment of the immediate area. To illustrate, members of our association have five operating facilities within the State of Kentucky that represent estimated capital investment in excess of $12 million and provide full-time employment for a minimum of 500 persons and seasonal employment for an additional 2,000. The total wages and compensation paid by these Kentucky firms is in excess of $8 million each year.

To further illustrate, within the city of today's meeting, three burley dealer firms have facilities with capital investment of greater than $7 million and annual payrolls and other compensation in excess of $4 million.

Also, our association has members located in other tobacco-producing States and by transporting the burley tobacco they purchase to these facilities carry the economic benefits to those areas. In particular, the States of North Carolina and Virginia have several large dealer facilities to conduct the even larger flue-cured exports of that area and some burley is moved to these facilities for processing.

The above benefits to the burley-producing area I have mentioned and the even greater benefits provided by other industry segments must be defended from those who attempt to gain political popularity by their shortsighted attempts to destroy a vital national industry. Senate bill 3118 deserves defeat and I trust that the wisdom and ability of this committee will serve that end.

Thanking you for allowing my visit and the opportunity to present the burley dealers portion of the economic impact of the U.S. tobacco industry.

Senator FORD. Thank you very much, Tom, for your statement. Alex, would you go ahead with your statement now? I'll have some questions for both of you, I think.

STATEMENT OF ALEX PARKER, CHAIRMAN, PARKER TOBACCO CO., MAYSVILLE, KY.

Mr. PARKER. Thank you, Senator Ford.

Members of the committee, my name is Alex Parker. I am chairman of Parker Tobacco Co., Inc. of Maysville, Ky. My company has been involved with production, purchasing, processing, and selling of tobaccos, mainly Kentucky burley tobacco, since 1932. We operate worldwide.

I am speaking here today as an individual, a resident of Kentucky and a citizen of the United States.

Burley tobacco is the main agriculture cash crop of Kentucky. It has been and hopefully shall continue to be. There is a demand on a continued steady upward scale for burley tobacco on a worldwide basis. I know this for a fact because one of our organizations is constantly circulating around the globe keeping in close touch with the marketplace. The 600 to 625 million pounds of U.S. burley produced every year amounts to 5 percent of the world production of all tobaccos.

Any detrimental force to curtail the production of Kentucky burley, whether by law or taxation, would be a major financial blow to the many growers, their families and the overall economy of Kentucky. The domino effect would be disastrous.

Tobacco is the third largest source of revenue to the U.S. Government. Income taxes and petroleum are the only two ahead of it. The U.S. Government receives between 13 and 15 times as much in revenue per acre of tobacco as does the grower, netwise. As hard up as the U.S. Government is for revenue and with its fantastic deficit financialwelfare state-programs, it is really quite idiotic to try to comprehend their logic and reasoning to cut out completely the golden revenue from tobacco products.

Earlier in this century we had prohibition of liquor and it was chaotic. This same thing would happen with tobacco. The "peddlers" are standing by licking their chops waiting to get the nationwide smuggling business going. When they get in, there will be not a farthing for Uncle Sam. By adding additional taxes the net result will mean less revenue. New York State already has experienced this situation. Smuggling of cigarettes all over the world has become a tremendous business and the reason is the same as S. 3118 intends; excesive taxation and restrictions bring on cheaper illegal sales of cigarettes. For example, the present day flow of marihuana coming

into the United States from Colombia and other places. The U.S. Government agents are apprehending only between 1 and 2 percent of the total amount of marihuana enroute to its destination. This marihuana group will be handling the cigarettes also.

To look further into this matter and to get down to the basics-my concern deepens. I am talking about the Constitution of the United States and my individual rights as a citizen of this country. The right that I hold most dearly is "the freedom of choice." S. 3118, like so many bills being presented today, is abusing and restricting my option to choose. I resent it terribly. I do understand and have sadly watched the decay of free enterprise slipping into collectivism. This transition has been directly proportional to the expanding growth of the U.S. Government bureaucracy. It is also quite obvious that this bureaucracy is a cancer and will finally destroy every freedom we possess. The House and Senate are really in the same position as we individuals and are merely used for the benefit of the bureauracy as they see fit.

I resent paying exorbitant taxes to finance Government agencies and programs that are sinister, wasteful and fraudulent while at the same time delivering us all into a "one-world society" that reeks of Marxism and mediocrity. For instance, the present GSA scandal which would amount to more than $500 million and the $20 billion of waste per year in the HEW budget of $182 billion. What will turn up in all the other agencies will be unbelievable. In essence, this makes the Kentucky burley tobacco industry absolute slaves to the whims of the free spending bureaucracy.

The deficit financing of our enormous bureaucracy will run in the red this year approximately $50 billion. This is the reason for the complete lack of confidence in the dollar by the rest of the world. This is why every dollar that I have generated over the past 30 years has been devalued in excess of 40 percent within the last 16 months. I am not only resentful-I am damn mad.

With the presentation of S. 3118, the nine Senators have beamed in on one particular industry-tobacco. Ultimately they plan to destroy this industry. If this is allowed to happen, the economy of Kentucky and five other States will be put in serious jeopardy.

Water seeks its level in life and the answer is moderation whether it is eating, drinking, exercising, smoking, or what have you. Each individual will have to adjust accordingly so as not to abuse his or her own physical, mental or spiritual presence.

Senator FORD. Thank you, Alex. I appreciate this very fine statement and I agree with many things you said relating to waste, and maybe we can begin to turn these things around. Once the wheel starts turning it's awfully hard to stop it and once we stop it its' hard to get it started, too.

Tom, how does export of tobacco affect the Kentucky economy? Mr. NORVELL. The bottom line, as I mentioned in my testimony, for the country as a whole is the $1.36 favorable contribution to the balance of payments. I'm sure you have heard that today. Many witnesses have testified as to the effect it has to the local economy through farm employment. I have attempted in my statement to present to you the employment advantages that go with our particular part of it. The dealers have sizable organizations and facilities themselves and then also, other than that, the contractors and other businesses that we deal

with, such as the trucking industry and all the fuel and supplies that our business requires, again just adds to this rippling effect that's been mentioned here.

Senator FORD. Alex, in your statement you say that you have been involved with the production, purchasing, processing, and selling of tobacco, mainly Kentucky burley tobacco, since 1932. How much effect, in your opinion, would exports have on the income to Kentucky farmers? I'm trying to get it down to Kentucky now. I know we're looking at the broad area of tobacco sales, but how effective is it for Kentucky as it relates to exports? Do you have any idea? I don't think we have received that testimony today and I'd like to get it. I know the total, but I'd like to have it for Kentucky. We're running a $1.4 balance of payments.

Mr. PARKER. Right. We have a plus balance but I think the important thing about the tobacco that's grown for export is that most of your foreign purchasers are buying high quality tobacco and when they come into the marketplace here in Kentucky and they put their demand in, which is upward to 100 million pounds out of the 600 million, when they come in and put the pressure on the market, this generates more money. There's more money spent for tobacco. So it puts a plus pressure and more competition into our auction system.

Senator FORD. Are you saying that they come to Kentucky to buy our product because of its superior quality?

Mr. PARKER. That's the No. 1 reason; yes.

Senator FORD. And they come in to purchase approximately what— one-sixth?

Mr. PARKER. One-sixth.

Senator FORD. One-sixth of the production of burley tobacco in the State?

Mr. NORVELL. And that's growing, Senator, each year.

Senator FORD. I was here when they would come in and buy 5 to 15 million pounds and we thought that was pretty good. It did have an effect on the market when they came in at 5 and 15 million pounds. If they're coming in at 100 million pounds, it really is placing an economic impact on the upward trend as it relates to sales and income to Kentucky: is that correct?

Mr. NORVELL. The increasing popularity around the world of the U.S. blended-type cigarette is helping us tremendously in moving our tobacco production. Even though in some cases it's more highly priced than others it is helping us to move it into these consuming areas. Senator FORD. Because of the quality?

Mr. NORVELL. Because of the quality.

Senator FORD. Maysville is the second or third largest tobacco market?

Mr. PARKER. Second.

Senator FORD. I was close. How many pounds of burley is moved through the Maysville market during the season?

Mr. PARKER. Maysville averages about 33 to 35 million pounds. Senator FORD. That's an income of roughly what, $50 million, to the farmer through that market?

Mr. PARKER. That's $45 to $50 million, plus the amount of people who are working there in the warehouses and in the factories.

Senator FORD. But that income would go to the farmer and those who purchase it would put it into the product like you, then it would

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be spending that money to make a profit off of the crop that's produced by the farmer by turning it into cigarettes and other related items. So it does have a rippling effect, in addition to that.

Mr. PARKER. Right. Everybody that handles it tries to make a little something on the way up.

Senator FORD. I understand. Do you believe that it turns over five times in a community; it's 5 to 1?

Mr. PARKER. I think so, yes.

Senator FORD. You think that is right?

Mr. PARKER. Yes.

Senator FORD. What would happen to Maysville if no more tobacco would be sold?

Mr. PARKER. I think it would be a tremendous shock to them. We raise about 8 million pounds in the county and every grower there raises tobacco. I would say every farm family there is involved in the production of tobacco.

Senator FORD. I was surprised when the Governor testified this morning that Pulaski County was one of the counties he spotlighted— that, as you know, is down in southeastern Kentucky and I wouldn't think of it as a tobacco growing county as such if you just look at a map. You think more of the Lexington-central Kentucky area, but they had over 4,000 allotments in that one county. So it indicates how important tobacco is not only to this region but throughout the State.

I think both of you have made excellent statements. I have no further questions. In fact, I was trying to grope for some. I always feel I ought to pull some out. If you have anything additional you would like to say before we close off, I'm perfectly willing to listen. If not, I want to thank you for coming today and I assure you that your testimony will reach Washington and hopefully we will make some inroads with it. I think you will be proud of taking time out today to come and testify so we can get it in the record. We thank you both.

Senator FORD. The next panel will be the bankers and we would like to hear from W. B. Collins, Bank of Maysville; and W. M. Ellis, executive vice president. Bank of Commerce and Trust Co., Lexington. Mr. Ellis, would you like to start off with your testimony and if you want to just hit the highlights that's fine.

STATEMENT OF W. M. ELLIS, EXECUTIVE VICE PRESIDENT, BANK OF COMMERCE & TRUST CO., LEXINGTON, KY.

Mr. ELLIS. Thank you, Senator.

I am W. M. Ellis, executive vice president of the Bank of Commerce & Trust Co. and also a tobacco producer.

Thank you for this opportunity to appear before this committee on behalf of the tobacco growers in the State of Kentucky and on behalf of all Kentuckians. I say all Kentuckians because most all of our people either directly or indirectly depend on income produced by tobacco in one way or another.

I am informed that 118 of our 120 counties raise tobacco and a total of 144,741 farms had tobacco allotments which produced income to the farm owners and also a tenant if the owner did not raise the farms' tobacco: 225,000 to 300,000 of our people participated in the growing of our three types of tobacco. To show that these people believe in