A New Era for Sugar

Unusual circumstances in the international sugar trade brightened the dawn of this new era for Philippine sugarmen. World War I temporarily destroyed the largest contributor to world sugar supplies, the Continental beet industry, and global output dropped from 18,008,380 tons in 1912 to 15,212,772 at war's end. Europe's recovery took until about 1927, and beets never again retrieved their relative share of prewar world production. Events particularly favored Cuba, which increased its yield from 1,593,867 to 3,967,094 tons over the same period. Wartime witnessed a steep rise in prices, but nothing compared to those in the two years following armistice. In early 1920 New York raw sugar touched a phenomenal high of 20.8 cents a pound, which translated in Manila to P54 per picul for centrifugal. Better markets might have prevailed longer, but Cuba had already so increased its output as to fill much of the gap created by European losses; hence, prices slipped rapidly to preboom levels and below by the end of the year and into 1921 (see figure 4). In 1923 a temporary production shortfall of more than a million tons lowered world supplies, so that Philippine centrifugal briefly reached P20.50 per picul; thereafter, price direction followed a generally downward slant as global output once more outgrew demand.^[1]

Despite the short duration of the era of extravagant prices, euphoria reigned in Philippine sugar circles. Speculation in the Visayas for the 1920 crop became unusually vigorous as other optimistic indications appeared. The end of hostilities brought a sharp reduction in overseas freight rates, further improving the salability of the archipelago's agricultural produce. Additionally, under three separate tariff acts between 1916 and 1922 the U.S. Congress moved to raise duties on foreign sugar imports from 1.560 to 2.2060 cents per pound, and from 1.0048 to 1.7648 per pound on Cuban sugars, while continuing duty-free status for the Philippine product. Even

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Figure 4.
Sugar Prices on the Manila Market, 1919-34. Based on monthly
quotations, but excluding slack period of July, August,
September, and October. Sugar News 1-15 (1919-34).

though sugar prices never again approached their immediate postwar highs, America absorbed on favorable terms all the centrifugal the Philippines could produce, and this accessibility stimulated the growth of export throughout the period (see table 10). Despite particularly poor weather conditions in parts of sugarlandia in 1923 and 1926, sugar exports grew at an annual rate of 11.2 percent.^[2]

The differential between the protected New York price for Philippine sugar and the London world price ranged from 30 to 150 percent, so that tariff preference led insular exporters to an almost complete reliance on the American market. Meanwhile, the decline of muscovado exports from 127,433 tons in 1921 to just 603 a decade later signified the demise of both the China and Japan markets, which previously absorbed all of the lowergrade product.^[3] When the Depression deepened, sugar purchases by U.S. refiners came to represent 60 percent of the archipelago's export income, as opposed to 30 percent in the early 1920s.

To profit in the face of falling prices Philippine sugarmen raised their output of high-quality sugar by augmenting advanced milling capacity and by growing more cane. In 1922 twenty-six large and small centrals turned out 233,770 tons of centrifugal, whereas the 1933-34 yield was 998,123

tons manufactured at forty-five plants. Aside from one in Batangas and two in Tarlac, other centrals constructed in the 1920s on Luzon, Panay, Leyte, and Cebu tended to be smaller, testimony to the difficulties encountered in financing major projects. While export increased almost four times, cane plantings in the archipelago grew by some 27 percent, from 241,345 hectares in 1921 to 305,890 in 1934.^[4]

Hacenderos in both western Negros and Pampanga ceased grinding in the old-fashioned muscovado factories, and the change in method netted from their cane about 20 percent more sugar of a uniformly higher grade, as well as quantities of alcohol obtained from new syrup distillation.^[5] Greater output derived from expanded capacity at the existing centrals rather than from the addition of big new centrals. The former region had seventeen factories in 1922 and just eighteen a decade later; the latter region went from two to four factories (see map 8). The twelve largest centrals in the two provinces, however, increased their production significantly over this period (table 11).

Western Negros expanded its sugar hectarage by 44 percent, while Pampanga's grew only 14 percent; instead, Pasumil and Pasudeco added to

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Map 8.
Main Sugar Centrals in Pampanga and Western Negros, 1934

their stocks of cane by drawing from plantations in nearby Bataan and Tarlac. The two large centrals constructed in 1927 and 1929 in Tarlac reflected the lack of room for expansion in Pampanga and the need for the industry to move further north.

As table 12 indicates, the quantity of sugar per hectare also rose. Likewise, all centrals raised their productivity at this time; however, they did so at disparate rates and by stressing amelioration of different phases of their operations. Comparable data on sugar processing for each of the

central milling districts no longer exist, making broad comparisons of productivity impossible; however, annual reports of the Hawaiian-Philippine Company offer especially good information on how improvement came about in one case.^[6]

Hawaiian-Philippine Company was founded in 1918 by corporate members of the Hawaiian Sugar Planters' Association in an effort to employ Philippine labor locally rather than across the Pacific in Hawaii. After failing to reach a satisfactory arrangement with planters in Pampanga, organizers decided to erect a central in Silay, drawing cane from the surrounding area and milling on the basis of a fifty-five-forty-five percent split of extracted sugar between hacenderos and central respectively. Planters who contracted with the new factory formed the Silay-Saravia Planters' Association in 1919, and grinding began January 15, 1921.

The central enjoyed rapid success and by October 1929 redeemed its initial capital indebtedness of P5,496,000 to its Hawaiian creditors. The company paid its first 6 percent dividend on 197,428 outstanding shares of stock in 1927, and thereafter shareholders' returns went up to 12 percent. In 1931, even as the Depression deepened in the United States, Hawaiian-

Philippine Company gave shareholders. a two-for-one stock split, at par value of P20, plus additional cash for a payout of P4,422,185. High dividends continued throughout these early years of world economic crisis.

Silay's productivity can be gauged from the following figures:

The central raised its milling capacity substantially, and its quality of production compared well with that of plants in other parts of the world, as evidenced by its extraction. "The efficiency of milling is generally expressed in terms of the percentage of total sucrose in the cane that is extracted in the juice (sucrose in juice per cent [of] sucrose in cane). This figure is known as the sucrose extraction or more briefly the extraction."^[7] Concurrently, Australia matched Hawaii's extraction at 95.5, while Java managed 94, and Louisiana and Cuba were slightly lower at 93. Silay's varied from a high of 96.23 in 1923 to a low of 92.679 in 1931. The effects

of weather on the quality of cane and the volume of cane milled influenced the extraction and may account for Silay's lower rate, but generally speaking the mill's performance met the world competition, despite some decline as the era closed.

In field productivity Silay milling district made large gains in cane per hectare. Aside from its contribution in greater milling efficiency, the central also provided planters with expanded field transportation, access to fertilizers, and interest-free fertilizer loans. Further, the central maintained experimental facilities to study cane varieties, supplied samples of high-yielding strains, and offered technical advice on field management.

Many hacenderos belonging to the Silay-Saravia Association responded positively. The district contained some of the most experienced farmers in Negros, and more farseeing ones understood the multiplier effect: that modern farming methods netted correspondingly much higher crop yields and, hence, better returns on investment and that good agricultural practice offered the best hedge against falling prices. Two of the district's leading sugarmen, hacendero Cesar Gamboa and technologist Carlos Locsin, stressed this point in articles for major sugar publications. In numerous ways planters contributed to higher productivity: they increased their use of fertilizer, dug drainage canals, employed irrigation pumps, set up cane seed beds, used better seed selection, and undertook deep plowing with tractors. These actions added sufficiently to yields to make Silay in 1933 the third most productive (after Bais, Negros Oriental, and San Carlos) Philippine sugar district. Gamboa's 1927 record of 129.04 piculs per hectare placed him among the most efficient farmers both in his district and in western Negros. In 1933 the top planters in North Negros Sugar Company (Manapla) included the Philippine Chinese Yee On with an extraordinary 179.82 piculs and Catalino Valderrama (of the famous lumber family) with 127.91 on his best fields.^[8]

Centrals, by virtue of their size and wealth, could undertake activities on a larger scale to support planters. For instance, Pasumil purchased tractors and rented them to farmers so they could deep plow the dry, hard soils of northwestern Pampanga. Ma-ao acquired a limestone crushing plant to supply inexpensive fertilizer, and the very progressive Victorias Central conducted advanced research on various farm activities, including studies concerning the deterioration of burnt cane. Centrals normally became involved in provincewide campaigns to eliminate such plagues as rinderpest and locusts. The government helped in numerous ways, not the least of which was through studies on seed strains conducted at its major research facility, La Carlota Experiment Station. Its findings appeared in

the quarterly Philippine Agricultural Review , published by the Department of Agriculture and Natural Resources.^[9]

Not all milling districts reached the same level of productivity, and those in Pampanga did not succeed as well as ones on Negros. For instance, Pasumil district, which developed the highest yields on all of Luzon, in 1923 produced only 24.55 tons of cane per hectare and 2.67 tons of sugar per hectare, compared with Silay's 30.95 tons cane and 4.19 tons sugar. Experts proffered two explanations for the disparity: weather and outdated farming practices. Central Luzon experienced more pronounced wet and dry seasons than did Negros, and the long rainless spells affected cane growth in the north; hence, technologists recommended that Capampangan invest in major irrigation projects to assure adequate water supplies. Such waterworks, however, materialized only after World War II. In the matter of cane selection Capampangan had a more feasible opportunity to raise yields but did not take it. Despite all the research on new strains, as late as 1932 Luzon planters still sowed their fields with 57 percent old, low-yield, native varieties of cane, compared with just 28 percent in Negros. Finally, the more worn soils of Pampanga required heavier applications of fertilizer than did the fields of Negros, and many Pampangan farmers lacked financial resources to meet those demands.^[10]

Even the highest Philippine yields did not compare with those in other major world cane areas: for example, in 1932-33, the number of tons of sugar per hectare in the thirty top Philippine milling districts—5.8—was second worst among Hawaii (17.3), Java (15.7), Puerto Rico (9.9), and Cuba (4.9). And whereas the most modern planters on Negros averaged between one hundred and two hundred piculs per hectare, centrals on Hawaii regularly produced more than two hundred, while some Javanese fields employing the latest, best strains of cane reached four hundred.^[11] Although various factors—including a longer growing season, more centralized management, and more intense research in the other areas—accounted somewhat for these disparities, the poor performance of the PNB-financed centrals reduced significantly overall Philippine averages.

Bank centrals (as they were often called), though founded in an era of great optimism about sugar's future, could not have been launched at a worse time. Machinery prices had steadily risen throughout the war and the immediate postwar periods, fueled by a scarcity of parts and high wages; hence, investors had to borrow heavily to finance these projects. The new factories quickly evolved into investment and management nightmares because original cost estimates proved so low that initial loans did not cover all the construction. In several cases the new central operators

did not have money to lay down sufficient railway track to reach contracting planters in their district. PNB extended further loans (see table 13) and mortgagees, mainly local planters, had to put up as further collateral most of their fields, often evaluated at inflated prices. Moreover, PNB estimated the payback time on the assumption that extraordinary wartime prices would prevail for several years longer. When sugar dropped precipitously in 1921, bank centrals could not meet even their interest payments. There followed a series of crises, and the government found it necessary to create the Philippine Sugar Centrals Agency, a special branch of the PNB just to supervise management of the six plants. Ownership of several of these ventures changed hands; and for his gross mismanagement of bank funds, especially with regard to loans to sugar interests, PNB president Venancio Concepcion eventually went to prison (see appendix D).^[12]

By 1923 sugar experts correctly concluded that, given the inflated debt structure of bank centrals, all save Pasudeco lacked sufficient milling capacity to meet their minimum payments and that only by expanding extant facilities could they become viable enterprises. PNB, which had recently faced a situation in which its ratio of outstanding loans to deposits was woefully inadequate and in which 52 percent of those loans was already committed to bank centrals, moved conservatively to become involved in further expansion. Nevertheless, pressure from the presidents of Bacolod and Isabela centrals, Rafael Alunan and Emilio Montilla, and from knowl-

edgeable American sugar technicians overrode the conservative advice of financial advisers, and PNB provided money, first to Talisay, later, in smaller amounts, to Isabela and Ma-ao, and finally, to Bacolod in 1924.^[13]

But the bank's troubles did not end at this point, for both Talisay and Bacolod overdrew their extension loans, the latter by P2,102,970 ! Unsurprisingly, the annual report for 1925 noted that the bank centrals' total debt in outstanding loans and unpaid interest exceeded by almost two million pesos the obligations owed in 1922. When the 1925-26 planting season on Negros proved a disaster, PNB at last called a halt to serving as an open wallet to the centrals. Not until 1927 did they all begin to show positive results from their enlarged milling capacity and to pay down on their enormous debts. Pasudeco, the best-planned operation with the smallest outstanding obligation, paid off its mortgage that year, and Talisay followed in 1929. Extremely productive seasons in the early 1930s seriously reduced the debt of Bacolod, Isabela, and Ma-ao. By the mid-1930s, only Binalbagan remained a problem.^[14]

Throughout much of its early history, a combination of corruption and maladministration associated with Binalbagan's financing and operations caused PNB, the government, and local planters serious difficulties. Originally founded by the Yulo family, Binalbagan changed hands in 1919 because its owners feared losing their lands while raising necessary capital to meet increased construction costs. An American named Philip Whitiker managed to acquire the major interest, almost solely with bank credit; moreover, he presented PNB president Venancio Concepcion with more than P600,000 worth of stock "for services rendered." Senator Esperidion Guanco acted as the company's vice-president at this time when the Binalbagan estate owed PNB P12,000,000. Eventually the credit pyramid crumbled, and the bank, under a new president, took over ownership of the plant.

More than a year of bad management ensued, and hacenderos complained of losses incurred during milling. In late 1923 a minority shareholder, Enrique Echaús, attempted to buy the factory. He failed, despite obtaining a PNB loan with his land serving as collateral, and the bank now had invested P14,000,000 in a factory valued by some outside experts in 1923 at P4,000,000. It seems that Echaús employed his loan to make high-interest crop loans to Binalbagan planters; moreover, he found himself locked in combat with the unpopular manager, an American named Locey. In early 1924, Echaús engaged 250 armed men, invaded the factory grounds, evicted Locey, and began to ship out sugar held in the central warehouse. Order subsequently returned, and lawyers for the bank and Echaús sorted out the tangled web of debts. PNB, still the owner, in 1927

turned operations over to John Dumas, a highly efficient manager who so boosted the central's production that it achieved its first million picul season in 1934. PNB general manager Rafael Corpus served as president of Binalbagan and succeeded in reducing its debt considerably; nevertheless, it remained the only plant under the bank's ownership until after World War II.^[15]

Bank centrals did not have the same resources as privately funded centrals to raise productivity and profit margins. Investors owed PNB for construction costs, and since many of them were also planters, they had to pay off crop loans as well. The bank, already overcommitted to the centrals, proved miserly with funds for improvements and did not sponsor the kind of research that increased yields in the private milling districts. Talisay, for instance, appears to have operated far more effectively after it returned completely to private control in 1929.^[16]

On three occasions between 1920 and 1926, the government and PNB entertained offers to sell their interest in the bank centrals to private American financiers—Philip Whitiker, Pacific Commercial Company (PCC), and Hayden, Stone and Company. Each time, however, Filipino leaders and American officials turned down the bids, either because the financing was inadequate or on the grounds that it was important to maintain a strong Filipino presence in milling.^[17]

Native opposition to these various offers did not imply a hostility toward all American participation in the Philippine sugar industry. Indeed, in no other endeavor did Americans become more active or cooperate with native entrepreneurs more fully. Political leaders like Manuel Quezon and Rafael Alunan made it clear that U.S. capital remained crucial to the continued development of Philippine agriculture.^[18] On many issues Filipinos and Americans shared a common interest and point of view, so that sugar represented the business area of most cosmopolitan interaction.

The launching of centrals brought to prominence a group of U.S. sugarmen, some with prior experience in the Philippines, some, including the Hawaiians at San Carlos and Silay, new to the islands. Laws inhibited foreign ownership of land, and Americans became most numerous at top levels of finance and management and in the construction and technical operations of centrals. The experiences of two early American businessmen offer good examples of the origins of U.S. participation in the Philippine sugar industry.

John Switzer's career coincided with the rise of PCC, which had its origins as California-based Castle Brothers, Wolf and Company, selling produce to the U.S. Army in the Philippines since 1899. Castle Brothers became involved in scandal involving commissary supplies but evaded

prosecution, and the firm grew into the largest American export-import firm in the Philippines. Meanwhile, Switzer, a veteran of the Philippine-American War, achieved financial success on his own in Cebu, where he developed diverse commercial enterprises.

A major change occurred in late 1911 when Maurice Lowenstein, an employee of Castle Brothers, acquired the firm and reorganized it into PCC with better financing. Switzer merged his Cebu interests into the new corporation and became its general manager. Stockholders and members of the board of this new company included Galen Stone of Hayden, Stone and Company; Andrew Preston of United Fruit; and Francis Hart of Old Colony Trust Company of Boston. New York's prestigious Sullivan and Cromwell acted as the company's legal council. PCC had by this time branch offices in Cebu, Iloilo, San Francisco, New York, Kobe, and Sydney. Under Switzer's guidance PCC went into sugar milling. Along with Alfred Ehrman, Switzer in 1912 finessed the friar lands at Calamba, Laguna, and established Canlubang Sugar Central. Several years later Ehrman and PCC, backed by the resources of the powerful West Coast Spreckels sugar interests, constructed Pasumil, and PCC continued as agent for these two major centrals throughout much of the pre-World War II period.

The firm in 1917 became a branch of the umbrella conglomerate Pacific Development Corporation. Among the most important new investors and members of the board were William Endicott of Kidder, Peabody and Company and Herbert Fleishacker of the Anglo-London Paris National Bank of San Francisco, which had become chief fiscal agent for Calamba Sugar Estate as well as its largest shareholder. Anglo-London included among its stockholders Governor-general Francis Burton Harrison (1913-20). Besides their connections with Harrison, Lowenstein and Switzer maintained personal ties with Clarence Edwards and then Frank McIntyre, successive chiefs of the U.S. Bureau of Insular Affairs (BIA), the liaison office between the Philippines and the U.S. government. These ties proved very helpful, for both Harrison and the BIA provided useful assistance in the establishment of Pasumil.

Switzer departed the Philippines a wealthy man in 1919, having served PCC and Pacific Development well. He had brought into the firm very talented personnel like sugar agent Alfred D. Cooper (taken from San Carlos Milling), central managers John Dumas and R. Renton Hind, executive Horace Pond, and publicist Lorenzo Thibault, former editor of the Manila Times . A staunch Republican, Switzer firmly held the view that for economic reasons the United States should postpone as long as possible granting independence to the Philippines. As head of the New York office of PCC until the mid 1920s and as a member of the board of the Philippine-

American Chamber of Commerce he continued to use his influence in this cause. Even in retirement he unofficially advised his old friend, senate, then commonwealth, president Manuel Quezon on economic and political matters. Meanwhile, under General Manager Horace Pond PCC remained an active participant in the milling and export ends of the sugar business.^[19]

As an individual George Fairchild probably had more sway over the industry than any other American. Arriving from Hawaii in 1912 with considerable experience in sugar manufacture, he became involved in one or more phases of the construction of at least five centrals. He also formed Welch, Fairchild and Company, a major sugar trading and management firm that had among its clients Silay-Hawaiian Central. Like Switzer, Fairchild remained a solid Republican wedded to retention for both political and personal economic reasons. In 1920 he purchased (curiously, with the help of Manuel Quezon) the Manila Times , and for six years used that paper as his forum against independence. He also helped found and actively participated in the American Chamber of Commerce to promote his cause. His greatest influence, however, came through his role as cofounder and longstanding secretary-treasurer of the Philippine Sugar Association (PSA).^[20]

Established in 1922 as a technical forum for all participants in the industry, the PSA within a decade became an organization representing the collective voice of more than 80 percent of the central millers in the Philippines. From the dawn of the central era the Philippine sugar industry became a game of statistics in which chemists, engineers, and agronomists played an increasingly important role, and it remained for such privately employed individuals to isolate new strains of cane, to raise field productivity, and to ameliorate milling procedures. The PSA acted as the clearinghouse for their findings. Even at its outset, however, PSA maintained a legislative committee to keep track of insular and metropolitan government actions affecting Philippine sugar; and this subgroup, which included Fairchild and Felipe Buencamino, Jr., received regular intelligence from the BIA in Washington. As time passed and membership in PSA grew, the legislature committee greatly augmented its activities and achieved added importance within the organization. Initially about one-third of the centrals belonged to PSA, but that number grew in the late 1920s and early 1930s as schemes for the imposition of tariffs and/or import restrictions began to attract attention in Congress.

Through PSA Filipino, American, and Spanish millers united as a single force to compete with Cuban, Puerto Rican, Hawaiian, and U.S. beet interests for privileged access to the American market. Officers of PSA came from the upper ranks of mill owners and managers and constituted

a cosmopolitan mix. In succession, American R. Renton Hind (Pasumil), Filipinos Rafael Alunan, Wenceslao Trinidad (Pasudeco), Cesar Ledesma (Talisay), and Alunan again became the organization's presidents, while Fairchild (Silay-Hawaiian) served as permanent secretary-treasurer. Vicepresidents, such as Spaniard J. M. Elizalde (La Carlota), and other members of the board of trustees represented all other participating centrals. Even PNB president Rafael Corpus in his capacity as president of Binalbagan joined the association's ruling council. The PSA therefore included practically all the most influential and wealthiest sugarmen and the most outstanding professional managers and technicians.^[21]

Despite PSA efforts and claims to represent the entire sugar industry, it did not. As new centrals came on line in the late 1910s and early 1920s, planters in each milling district formed associations to protect their interests. They hired their own technicians to check the centrals' test results and to supervise the distribution of cane and sugar among member planters and between hacenderos and centrals. In 1924 four planter groups—those milling at Talisay, Bacolod, Ma-ao, and Isabela—founded the Confederation of Associations and Planters of Sugar Cane (La Confederacion de Asociaciones y Plantadores de Caña Dulce, Inc.). Working with a subsidy of two centavos for every picul of sugar milled, this umbrella organization gradually attracted to its ranks planter groups from all the other major milling districts on Negros and from Pasumil in Pampanga. The confederation, representing 52 percent of centrifugal output, did everything from securing better loan terms from PNB to lobbying through its president and chief spokesman Amando Avancefia in Manila and Washington. Planters at times adopted an adversary relation toward millers and tended to take their own stand on the twin issues of immediate independence and free trade.^[22]

The struggles over Philippine independence and economic arrangements have captured considerable attention from scholars, and only the critical role of sugar in those deliberations needs emphasis here. On the American side, a major—perhaps the chief—impulse toward Philippine independence came from agribusiness: sugar and dairy people who wanted to exclude Philippine sweetener and coconut oil from the duty-free U.S. market. Politicians and lobbyists for the U.S. Beet Sugar Association, American Sugar Cane League, American Farm Bureau Federation, Hawaiian Sugar Planters' Association, Association of Sugar Producers of Porto Rico, as well as corporations heavily involved with Cuban centrals such as National City Bank, United Fruit, and Hershey's Chocolate, all joined the campaign. Although Philippine sugar never represented more than a fraction of the total production within America's tariff walls, its share of imports grew

dramatically from 7.6 percent in 1921 to 24 percent twelve years later, alarming American competitors. As world supply became overabundant and prices skidded, they somewhat incorrectly viewed the Philippine product as a substantial threat to their profits and in some cases to their survival.

The Philippine movement for independence had its roots in the nineteenth century, and by the early twentieth century it involved partisans from every region of the archipelago. In Philippine politics, the Nationalista party with its platform calling for immediate, absolute independence captured the hearts and minds of most Filipinos in elections after 1907. The two main leaders of that party, Manuel Quezon of Tayabas Province and Sergio Osmeña of Cebu, rose to power on that platform and never wavered from that stand in their public utterances.

Several factors impeded the road to swift independence, however. In the United States many members of the Republican Party continued to share the view of Governor-general Leonard Wood (1921-26) that the Philippines was simply not ready for self-government. Also, those who profited, either as importers of American goods to or exporters of Philippine produce from the archipelago, those who had invested their lives and savings in the Philippine economy, as well as others with strategic concerns favored gradual devolution of power to native hands. Filipinos who feared the economic and global political dangers of independence expressed, albeit softly in the face of strong contrary opinion, a need to postpone total autonomy until some indefinite time in the future. Payne-Aldrich had accomplished what many nationalists feared it would; it had made the Philippine economy, especially the pivotal sugar industry, dependent on American preferences. Against this background, the drama of Philippine national and international politics unfolded.^[23]

Between 1924 and 1933 American interests in and out of Congress attempted by various means to curb the access of Philippine sugar. In the Fairfield Bill (1924) they sought to do so by granting the Philippines early independence, but actions by John Switzer, members of PSA, and other Filipino politicians prevented their success. In 1928 Congressman Charles Timberlake of beet-growing Colorado introduced a resolution seeking to cap Philippine imports, but Switzer, the PSA, Governor-general Henry L. Stimson (1928-29) and former BIA chief Frank McIntyre, among others, managed to bury his proposal. Likewise, Cuban and American interests tried to cut imports of duty-free Philippine sugar in the Hawley-Smoot Tariff Act of 1930, but again Stimson, now Herbert Hoover's secretary of state, intervened, and free Philippine entry remained. While the Philippine sugar interests escaped American legislative efforts against their industry,

they also refused to participate in the Chadbourne International Sugar Agreement of 1931, which planned to limit world production.^[24]

As Philippine independence loomed, the thinking among Philippine political and economic leaders clarified as they contemplated the consequences of losing duty preferences. Some sought means to protect that access as the best way of preserving economic health, even as they worked toward the highly desired goal of self-rule. Others concluded that the quicker Filipinos obtained independence, the sooner they could begin taking charge of their economic destiny. This dichotomy of thought appeared in the remarks of leading sugarmen, some of whom became directly involved in independence negotiations. Urbano Zafra, an administrative secretary of the PSA and sometime Washington lobbyist, wrote the following in the procentral Sugar News :

Taken as a whole, with all its imperfections, the tariff relationship between the United States and the Philippines, under which the trade and commerce between the two countries have been developed for the past 33 years, has resulted in mutual benefits to the Philippines and the United States. To the Philippines it has opened to the products of these Islands the great American market—a prize for which the nations all over the world are striving—and has been responsible for the attainment of our present economic progress. . . .

Irrespective of what political relations may be established in the future between the United States and the Philippines, it is to the advantage of both Filipinos and Americans to continue, even in modified form, the present reciprocity in Philippine-American commerce.^[25]

On the other side, leading planter spokesman Amando Avanceña declared:

The sugar planters of Negros, however, are always disposed to forego at any time the advantages offered by the American market, provided the loss of such advantages will bring independence to the Philippines, not a nominal independence but one real and complete. We are therefore disposed, moreover, and so we ask, that America concede to the Philippines its independence without any period of transition, although this may mean that we have to abandon the planting of sugar cane and must produce other products; but such independence should be real, in other words, once she has granted independence to the Philippines, the United States should not have

any military or other reservations within the territory of the Philippine Islands.^[26]

Manuel Quezon, the consummate politician best able to clarify Philippine sentiment, bridged the dichotomy in the arguments when he offered these thoughts in a letter to John Switzer in 1931:

I will not advise my people to oppose immediate and complete independence without free trade if it is the purpose of Congress to grant it. On the contrary, I would advise them to accept it. The present situation is getting to be intolerable and rather than continue it indefinitely, not knowing what is to come next, we had better face whatever consequences the loss of free trade might involve.

. . . And if the only means to do away with [the present] government is through the loss of free trade with the United States, I am ready to lose it. For one, I am willing to compromise on the question of immediate independence and let it be postponed, if thereby I can prevent poverty to my people and make independence more secure when it comes. But under no circumstances am I willing to compromise on the question of self-government.^[27]

The two independence bills, Hare-Hawes-Cutting (1933) and its near clone the Tydings-McDuffie Act (1934), contained provisions both beneficial and detrimental to Philippine sugar. The main provision of the bills, a ten-year commonwealth period, represented a triumph of American agricultural and Cuban sugar interests in Congress over the wishes of President Hoover and other Republican retentionists, who wanted a longer transition period. However, the final independence bill included a sizable quota of 850,000 long tons of sugar—800,000 centrifugal and 50,000 refined allowed duty-free entry into the United States during the first five years. Then would follow a 5 percent duty increase in each of the next five years. All sugar over the limit and all imported after ten years would be subject to the full foreign tariff. The limitation represented a sum larger than American farmers had demanded.^[28]

In all these deliberations Philippine sugarmen, especially centralistas, spent heavily to forward their interests. The PSA opened a New York office in 1929 and paid for it with an assessment on every picul produced by its member centrals. The funds also supported negotiators and lobbyists taking care of business in Washington. PSA did not rely just on Philippine officials and businessmen to advance its cause; it hired influential Amer-

icans as well. In 1933, following his retirement from the Senate, Harry Hawes of Missouri, one of the authors of the first independence bill, became PSA's leading lobbyist. He had served as chairman of the Senate Committee on Insular Affairs, and in 1930 traveled to the islands on a factfinding mission. Hawes also came to know Quezon and other Philippine leaders and subsequently solicited their thinking on legislative matters in Washington. After retiring, he devoted much of his time to protecting Philippine quota rights. For several years Joseph Tumulty, formerly a personal adviser to President Woodrow Wilson, joined Hawes in those lobbying efforts.^[29]

In the political struggles between Manuel Quezon and Sergio Osmeña, sugarmen generally supported the former and helped him become the first president of the Philippine Commonwealth. Quezon numbered among his most important allies both Rafael Alunan and Amando Avanceña. Almost all sugar legislators backed Quezon, including Senators Sotero Baluyut (Pampanga) and Gil Montilla (Negros Occidental) and Representatives Felipe Buencamino, Jose de Leon, Emilio Yulo, and Enrique Magalona. An important exception, however, was Benigno Aquino, Sr., of Tarlac, who kept faith with Osmeña. Even so, most of the big-money contributors like the Elizalde family and M. J. Ossorio helped Quezon.^[30]

While consideration of the two independence bills proceeded apace in Washington and Manila, New Deal administrators sought to uncover means of alleviating America's farm crisis. Since Hawley-Smoot tariff legislation had not succeeded in raising prices sufficiently to aid the plight of sugar producers, the government turned to restrictions on production as a means of coping with the industry's dilemmas. Congress amended the Agricultural Adjustment Act (AAA) of 1933 to incorporate more reasonable production limits suggested by the administration. Approved on May 9, 1934, the Jones-Costigan Act provided quotas for all domestic, insular, and foreign suppliers to the U.S. market, the total amount adjusted to annual American consumption. It was hoped that a decline in output would stimulate a rise in American prices. To minimize the economic sting of limitations, producers would receive proceeds from a sugar-processing tax. Congress made provisions of the bill retroactive to January 1, 1934.

Throughout the negotiations Philippine sugar interests lobbied energetically for higher limits. Hawes, Alunan, Governor-general Frank Murphy (1934-35), and many others either testified before committees or corresponded with officials to prevent cutting the insular quota, despite efforts of fiercely competitive rivals to accomplish such reductions. What finally emerged in the Jones-Costigan Act was a 1934 export quota of

1,015,186 short tons (920,970 metric tons) of sugar, including 79,661 short tons (72,268 metric tons) of refined. Again Philippine advocates had prevented the worst from happening to their industry.^[31]

Difficulties associated with the administration of Jones-Costigan initially created confusion in Philippine government circles and caused considerable anxiety among sugarmen. Several problems immediately surfaced, the most salient of which centered on matters of scheduling. Because the law applied retroactively to January 1 and the milling and crop seasons ran from November to May, what limits should, or could, be placed on the 1933-34 crop, the one just harvested and milled? Allotments to various centrals and planters could not be applied rationally, for by June of 1934 shippers had already sent to market quantities equivalent to the 1934 quota, and some large centrals had not yet completed their milling season. Should the government stop further shipments?

A second set of problems centered on equitable quotas. Given a maximum figure for export each year, what basis should determine each central's share of that amount? Two plans surfaced: one, favoring older, larger factories, called for averaging production for calendar years 1931, 1932, and 1933 at each plant, and then giving each one a proportional share tied to that number. A second option, favored by smaller centrals, including seven that had only recently started up, proposed taking each factory's single best year as the figure on which to divvy up the quota. The choice involved considerable differences in the size of allocation to each central and led to sharp cleavages among the membership of PSA. Felipe Buencamino and Esteban de la Rama among others favored the latter method, while spokesmen like L. Weinzheimer of Pasumil and Avanceña, on behalf of many planters, favored the former. The matter precipitated something of a credit crisis as well, for PNB became reluctant to offer crop loans until it had some idea of how many hectares each hacendero could plant.^[32]

In June 1934, Governor-general Murphy set about laying down the rules and building the machinery by which the Philippine quota would be administered. He opted for the system of average central output as the basis of allocation, thus pleasing the larger centrals, and he decided that sugar should continue to go to the United States throughout 1934, the amount over the quota (some 400,000 tons) to be held in bonded customs warehouses for sale after January 1, 1935. He thus postponed the hardships of output reductions until the following year and allowed himself sufficient opportunity to emplace the insular quota system. During the remainder of the year local advisers and AAA officials from Washington helped him turn out the legislation and establish the bureaucracy to give each central and each planter an exact share of the dwindled pie.

By mid-December, all plants had their 1935 allocation, based on a total export of some 552,000 tons. At the same time the first 195 planters in Silay received their quotas, and others were on the way. Despite troubles in 1934 and the prospect of a bleak future, the Philippines exported its largest crop ever, a fitting conclusion to the prosperous central era.^[33]