On the basis of the survey that has been made of these measures and which is presented in the following pages of this publication, the authors believe that the economic losses caused by laws and regulations that unduly restrict commerce in agricultural products have been substantial. This opinion is shared by a large number of State officials who have worked with the authors in the preparation of this report.

This publication does not presume to be a legal document. It has been written by economists and is primarily concerned with the economic implications of these laws. Their constitutional aspects have received but slight attention and such interpretation as appears in the report is that of the economist, not the legal expert.

As we see it, there is a real need for many kinds of marketing laws and this need probably will continue to increase as our civilization becomes more complex. This situation calls for active cooperation between Federal, State, and municipal officials to give the public all necessary protection and, at the same time, to allow and to promote the free exchange of goods from one part of the country to another.

The problem is not one that can be solved simply by repealing a few laws or by writing a few new ones. It will be solved only if farmers and public officials alike see the dangers inherent in some of the recent legislative trends and are willing to work continuously and intelligently to develop a cooperative program. A large number of Federal, State, and city officials were consulted in connection with the study on which this publication is based. Without exception they all showed a real interest in the problem and a desire to improve the present interstate trade situation. For example, one of the eight State commissioners of agriculture who reviewed the manuscript of this report wrote:

"I have read all of the chapters on this great subject of interstate movement of farm commodities and noted the barriers and handicaps that are shown in your research work. I am amazed at the contents of these several chapters and the picture that you have been able to present . . One of two things, I am sure, will happen in consequence. Either the people of the several States

will come to their senses and recognize that we have a Union of 48 States instead of a disunion, or there will be drastic demands for Federal control over these matters. Sooner or later it should mean cooperation by all of the States and the Federal Government in place of individual State action or absolute Federal control."

Similar comments were made by several other State commissioners of agriculture and by State marketing officials. The thought in the last quoted sentence has been expressed by almost all Federal and State officials who have discussed this subject with the authors. None of them wants to see the Federal Government take over all regulation in the field of marketing, and all believe there is a growing need for a cooperative program on which the Federal, State, and municipal governments can unite.

In the various parts of this report the authors have felt an obligation to make suggestions which might well be considered in such a cooperative program of legislation, but these suggestions are necessarily tentative and general in character. A great deal of detailed work would be necessary to put these suggestions into effect and to develop others that offer promise of greater protection to the public and of freer movement of farm products in interstate com

merce.

One general suggestion might well be made here. Regional and national associations of milk inspectors, quarantine officials, graders, and other specialists can perform a very useful and important public service by providing for free and frank discussion of their common problems and by working cooperatively for uniform laws, or at least for laws that do not conflict unnecessarily with one another. The regional plant boards and the National Plant Board have done very effective work in recent years toward the elimination of unnecessary quarantines and in the coordination of quarantines in the several States. The National Association of Marketing Officials has cooperated actively with the Bureau of Agricultural Economics in the development of standardized grades for farm products. Activities of this kind should be encouraged and expanded.

But it is believed that to the discussions of such specialized groups of scientists and officials should be added the viewpoints of the general economists, the marketing research men, the home economists, and others working in related fields. The effects of a law or regulation upon consumers, its effect upon the marketing system, and its general economic effects, need to be considered as well as its effects upon the producers in a special field. The discussion of quarantines mentions the work of a California committee of entomologists, plant pathologists, and general economists which made a thorough study of the quarantines in California and recommended a specific program for improving them. There is a decided need for similar studies of this and other problems in other States.

Moreover, the reader will note the wide variety of laws and regulations. It is not enough to improve the laws on a single subject when

many kinds of laws may hinder the free movement of farm products in our markets. Some way must be found for coordinating the recommendations of the many groups of specialists into a general program. Probably this can be done best by cooperation between the United States Department of Agriculture and various organizations of State officials such as the National Association of Commissioners, Secretaries, and Directors of Agriculture, and between the United States Department of Agriculture and the Council of State Governments, which has recently interested itself in the problem of interstate trade barriers.

If this publication attracts interest to the growing need for cooperative efforts to maintain free markets for farm products in this country, and especially if it results in definite action to accomplish this end, it will have served its purpose.

THE GREAT MASS of dairy legislation that has appeared in the last 10 or 15 years has been designed primarily to accomplish one or both of the following ends: (1) To protect the health of consumers of dairy products by insuring a clean and wholesome product, and (2) to stabilize the dairy industry and to increase the purchasing power of dairy farmers.

In the attempt to obtain these objectives (objectives which in the laws are often combined and almost indistinguishable), legislation has been adopted which has given rise to serious interference with interstate and even intrastate commerce. The evidence of such interference will now be examined, first as it has to do with health and sanitary legislation, and then in connection with laws designed directly to stabilize or control the supply, price, or marketing processes.

HEALTH AND SANITARY MEASURES Tremendous progress has been made during the last two decades toward the production of clean and wholesome milk. In part this has resulted from educational work, not only of the United States Public Health Service, but also of the health departments of States, counties, and cities. Chiefly, it has been achieved as a result of laws and regulations adopted by the States, counties, and cities, as well as by other subdivisions of the States. These measures prescribe, often in minute detail, the conditions under which dairy products shall be produced, processed, and distributed. To enforce the sani

tary standards prescribed, official inspection is usually required. Farmers, processors, and distributors are typically granted licenses or permits to dispose of their product in a given market only after certification of satisfactory inspection by the officials of the city or State concerned.

We are concerned here not with the details of these regulations, but rather with the extent to which they constitute an obstacle to the free movement of dairy products.1 Especially important are the market restrictions that have been placed on fluid milk and cream in certain parts of the country. These will be considered first and then some attention will be given to restrictions on other dairy products.

MILK AND CREAM

In a number of Eastern States (including Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Virginia, and Florida) all fluid milk (and in some cases cream) must come from farms that are licensed or inspected by the officials of the State into which the milk is shipped. All of these States produce milk and cream, but they also bring in a part of their supply from outside their own boundaries. It is obvious, therefore, that should any of them wish to use their health- and sanitary-inspection requirements for the purpose of retaining a larger part of the State market for State pro

1 A detailed study for the New England States has recently been published. See BRESSLER, R. G., JR., LAWS AND REGULATIONS GOVERNING THE PRODUCTION OF GRADE B MILK IN NEW ENGLAND. (Issued by the New England Research Council on Marketing and Food Supply), Boston, 1938. (Mimeographed.)

ducers, they could do so through limiting outside inspection and thus protecting home producers. Only a very thorough investigation would show the extent to which this has been either the purpose or the result of such legislation. The survey of the situation attempted here shows some of the existing tendencies toward market restriction.

Apparently the State of Connecticut has followed the practice of limiting its out-of-State inspection of farms that produce fluid milk for the Connecticut market. In 1931 permits were withheld from a small group of producers in New York State, located near the Connecticut border, who had been sending milk into Connecticut. Public protest led to the revival of these permits, but with the provision that the New York producers must pay inspection costs. Despite the concession, relatively little milk has been permitted to come in from outside the State. In part, at least, as a result of this restrictive policy, Connecticut producers have been enabled to get relatively high prices for their fluid milk.2

This conclusion is supported by the study made by the Federal Trade Commission of the Connecticut milkshed. The commission reports that—

"There are . . . indications that Connecticut has used its milk-inspection laws advantageously in keeping out milk from other States, although it does not admit this use of its powers.' 3 Recent dairy legislation passed by the State of Connecticut directs the State commissioner to refuse to inspect farms outside the "natural milkshed." Perusal of the pages of the Connecticut Milk Producers Association Bulletin strongly indicates that an important purpose of this legislation was to secure even more effective restriction of out-of-State milk.4

The Massachusetts law requires registration and inspection by Massachusetts officials of all farms from which fluid milk is shipped into the State. The cost of such inspection is borne by the Commonwealth. The Federal Trade Com

2 SPENCER, LELAND, PRACTICE AND THEORY OF MARKET EXCLUSION WITHIN THE UNITED STATES, Journal of Farm Economics, vol. XV, pp. 150-1.

3 Sale and Distribution of Milk Products, Connecticut and Philadelphia Milksheds, 74th Cong., 1st sess., House Doc. 152 (1935), p. 90. Connecticut Milk Producers Association Bulletin, April, May, and June 1937.

mission report on the Boston market (1936) says that "... it is not the purpose of the Massachusetts State inspection authorities to exclude out of State milk." 5

But there has been considerable pressure from certain State interests to use inspection laws for restrictive purposes. Bills have been proposed before the last two sessions of the legislature which would extend inspection requirements to cream as well as fluid milk. One of the latest proposed measures provided that special inspection certificates should be issued to cream shippers which would not entitle them to ship milk as well. Such a distinction is apparently related not so much to public health as to market exclusion. At least the editor of the New England Dairyman seems to have regarded protection to Massachusetts producers as the chief purpose of this proposal.

Rhode Island admits cream from outside the State on the basis of proper certification by the State of origin. Since 1931, however, this State has been one of the most active in passing health and sanitation laws with respect to fluid milk which, whether or not so designed, may be used for restrictive purposes. Inspection and registration is required of all farms shipping to Rhode Island markets and numerous regulations have been adopted which put the distant producer at a disadvantage. By an amendment to its laws in 1936, Rhode Island required reregistration of all dairy farms. In this process, 62 registrations of farms were terminated in Massachusetts and Connecticut and only one distributor was reregistered in Vermont. The number of shipments of milk from Vermont have been nearly cut in half since 1931, they have entirely ceased from New Hampshire, and from Massachusetts and Connecticut they have been appreciably reduced.8

In the Middle Atlantic States, municipal regulations have often been of greater importance than those of the States. The strict inspection laws of both New Jersey and Pennsylvania have exerted a considerable market influence, however, especially as they require their own farm inspection not only of milk but also of cream supplies. In both States ice-cream manufacturers report that were it not for inspection restrictions they would make larger purchases of western cream than are now possible. In the 1938 session of the legislature New Jersey extended its requirements for inspection of the farm source of supply to include goat's milk.

Recently ice-cream manufacturers in western Pennsylvania have been trying unsuccessfully to get permission to import cream from sources in Ohio. In retaliation against the Pennsylvania restrictions, cream producers in Ohio have threatened to urge passage by the State of Ohio of inspection laws which would bar dairy products from those small localities across the border in Pennsylvania that send milk or cream into Ohio.

Finally, two students of the dairy problem who have studied the Pennsylvania situation are here quoted. Leland Spencer found that regulations of the Pennsylvania State Department of Health"... cut down considerably the receipts of outside cream in Pennsylvania markets, particularly during the last 2 or 3 years." And James Andes, who has made an elaborate study of the Philadelphia market supply, writes: "The Pennsylvania inspection movement also gives some indication of attempts to limit the milkshed through health regulations." 10

The Florida inspection law could be used for market-restriction purposes, but we have seen no evidence that this has been the case. A New York State law, adopted in May 1937, provides for out-of-State farm inspection by New York State officials, but this legislation has been on the statute books too short a time to give clear

• Western Cream for Eastern Markets, Farm Credit Administration, Cooperative Division, Misc. Report No. 14 (Washington, D. C., 1937), p. 4.

10 ANDES, JAMES, PROBLEMS IN THE BASIC-SURPLUS PLAN IN THE PHILADELPHIA MILKSHED, p. 94. (Privately printed. Copy on file in the Library of the University of Pennsylvania.)

indications as to how it will be used.11 But it may be noted that upon the passage of this law

the editor of the American Produce Review remarked:

"It remains to be seen whether the law is to be enforced as a health measure, or a disguised plan of discriminating economically against dairymen located outside New York State." 12

Market restriction through inspection requirements is promoted by cities and towns as well as by States. In fact, the regulations of certain large cities have been of equal importance with those of the States. Since 1906, New York City has maintained farm inspection of its sources of milk and cream supply, and since 1926 has definitely limited this inspection area. Thus it is practically impossible to ship fluid milk or cream to the New York City markets from points west of the New York or Pennsylvania State lines.13 So far as fluid milk is concerned the restriction is not very important at present, for probably very little milk would move into New York City from beyond the inspected areas in any case. But cream, which as compared with milk combines greater value with less bulk, can be shipped for long distances. The effect, therefore, of the New York inspection requirements is to bar western cream and to raise the price of cream in the New York City market.14

Several years ago the city of Baltimore had a drastic limitation on its supplies of milk and cream. The commissioner of health of Baltimore ruled that cream for manufacturing ice cream could not be brought from a greater distance than 50 miles from the city except when "emergency" shortages were declared to exist. This ruling was contested in the Federal district court and found invalid by Judge Chestnut. A brief excerpt from his decision may well be quoted here. He said: