War Department, a total of $1,407,046.44, an amount well below the annual average received in recent years. It will be noted, therefore, that the present total of unsatisfied outstanding claims ($68,977), all of which is expected to be paid, represents less than 5 percent of the interest received by the Philippine government on deposits handled, through the War Department, in the United States, during the year mentioned above.

Government-owned companies.-The net income of the Philippine National Bank amounted to $906,335 as compared with $327,509 in 1931. The sugar centrals controlled by the Philippine National Bank reduced their indebtedness to the bank by $1,513,391, leaving a balance of $8,496,053 due at the end of the year.

The Manila Railroad Co., which had been suffering before the depression from the competition of motor transportation, closed the year showing a loss of $48,688.

The Cebu Cement Co. is reported to have ended the year in sound financial condition.

Provincial and municipal governments. It became evident early in the year that, with the declining prices for Philippine produce, landowners were going to have difficulty in paying their taxes. The Governor General twice extended the period within which the taxes might be paid without penalty. An active campaign to induce taxpayers to pay their taxes was initiated. Nevertheless the total of the taxes accruing to the provincial treasuries, amounting to $20,707,827, was $583,894 less than for the preceding year. A new assessment law was enacted during the regular session of the legislature (Act No. 3995, approved Dec. 5, 1932) and incorporated a number of features designed to facilitate the payment of the land taxes.

The revaluation of properties which has been in progress for several years continued. At the end of the year the total value of taxable property in the 40 organized provinces amounted to $768,451,393 ($1,744,578 more than for the preceding year) and in the 9 specially organized provinces to $53,719,525 ($565,226 more than for the preceding year), making a total of $822,170,918 for the provinces.

Both the charter cities of Manila and Baguio enjoyed healthy financial conditions during the year under review. The city of Manila found itself with an unencumbered surplus at the end of the year, made possible by the stringent policy of economy followed in the administration of the government of the city.

EXTERNAL TRADE

The total external trade of the Philippine Islands with the United States and foreign countries declined to $174,733,166, a decrease of $28,417,627, or 13.9 percent, from 1931. This brings the total decline in Philippine external trade since 1929 to 44 percent. Exports amounted to $95,338,081, a decrease of 8.3 percent; imports amounted to $79,395,085, a decrease of 19.9 percent. The balance of trade in favor of the islands increased from $4,793,355 for 1931 to $15,942,996 for 1932. As usual this favorable balance of trade was due to the very large favorable balance with the United States, which in 1932 amounted to $31,350,117.

The trade of the islands with the United States amounted to $133,945,617 (a decrease of 8 percent), representing 77 percent of the total

external trade as compared with 72 percent in 1931. Imports from the United States amounted to $51,297,760 (a decrease of 17 percent from the preceding year) and represented 65 percent of the total as compared with 63 percent in 1931. Exports to the United States amounted to $82,647,867 (a decrease of 1 percent), constituting 87 percent of the total exports. The corresponding proportion in 1931 was 80 percent.

The United States was the main source of all of the principal Philippine imports. Cotton goods, representing 21 percent in value of the total Philippine imports, continued to be the largest single import item and was the only one to register an increase over 1931. The proportion of cotton goods coming from the United States rose from one half to three fifths. The share of the United States in furnishing the other main imports ranged from almost three fifths of the meat and dairy products to practically all of the automobiles and tobacco products. This country supplanted Japan as the chief source of manufactured silks (natural and artificial), furnishing 38 percent as compared with 23 percent in 1931.

Sugar constituted 63 percent of the total export trade of the islands, as compared with 48 percent in 1931. The quantity shipped rose from 741,036 long tons valued at $49,963,105 to 1,000,506 long tons valued at $59,801,885, practically all of which came to the United States. Embroideries, the only other commodity which showed an increase, found its market almost exclusively in the United States. The United States took practically all of the coconut oil, all of the desiccated coconut, one half of the tobacco products, and three fifths of both the copra and cordage.

Japan was the chief customer for abacá (manila hemp) and lumber; four fifths of the copra meal, or cake, went to Germany.

Tariff revision. The general tariff law in force in the Philippine Islands is the act of Congress approved August 5, 1909, entitled "An act to raise revenue for the Philippine Islands and for other purposes." The United States tariff act approved the same date established practically reciprocal free-trade relations between the United States and the Philippines, with certain restrictions (not, at the time, practically operative) on the amounts of sugar, rice, and tobacco which might be brought into the United States free of duty. These restrictions were removed by the United States Tariff Act of 1913. The rates in the Philippine tariff act were, therefore, in practice, applicable to Philippine imports from countries other than the United States and, in general, operated to produce revenue rather than to afford protection to Philippine products. The Congress has not enacted. any amendment to the rates thus fixed in 1909, but did, in the Organic Act of 1916, confer upon the Philippine Legislature authority to enact tariff legislation for the islands, subject to the approval of the President of the United States, reserving to the Congress the right to regulate trade relations between the Philippines and the United States. Between the years 1916 and 1932 the Philippine Legislature exercised only infrequently the authority thus conferred upon it. Increases of duty were made during that period on rice, cement, and cattle; and an amendment approved January 8, 1929, imposed upon sugars and tobaccos imported into the Philippine Islands the same rates of duties as might, from time to time, be imposed on similar importations into the United States. That amendment, however,

operated primarily to prevent the indirect favored access to United States markets, through the Philippine Islands, of sugar and tobaccoproduced in foreign countries.

Referring to the resulting situation, Governor General Roosevelt states, in part, in his annual report:

As one of the aids in remedying the above conditions, we undertook this year to reconsider carefully our tariff. The Philippine tariff has remained practically unaltered since 1909. Meanwhile conditions within the islands had changed radically and those outside of them to an even greater extent. Within the last 2 years, for example, the vast majority of the great countries of the world have gone off the gold standard. Their medium of exchange has been reduced 60 percent and more with reference to the peso. The result has been that foreign competitors of our industries have been able to undersell them and flood our market with cheap products competing directly with those produced in the islands. Under the circumstances everyone has suffered. Many of our young industries which were just beginning to take hold were faced with bankruptcy.

But while the majority of the members of the legislature recognized the general situation and were in favor of an upward revision, the fact that they had not previously dealt with tariff matters imposed a considerable degree of caution, especially in the face of heavy protests from foreign elements in the local business community. In short, while they appreciated the necessity for a change, it was difficult to crystallize opinion in favor of specific amendments.

I had outlined this situation in detail in my second message to the legislature (see appendix no, 3), and I am gratified to say that the very close cooperation between the Governor General's office, the special committee, and the legislature brought results far beyond expectation.

The outcome was the enactment of the amendments to the tariff act listed on page 6 of this report. Speaking of Act No. 4053, the general tariff revision act, which provided for increased rates in 70 out of the 300 paragraphs of the tariff act, the Governor General states that: "Practically all of the amendments contained therein arose from demands for protection of local production."

Carrying trade.-American vessels continued to lead in the volume of cargo carried in the Philippine trade, but the decline in the proportion of the total carried, which began last year with the increase in the British and Japanese participation, continued in 1932. The American percentage during the past 3 years has been: 1930, 44 percent; 1931, 39 percent; 1932, 34 percent. The corresponding proportions for the same period have been for British ships, 24, 26, and 28 percent; and for Japanese ships, 12, 15, and 17 percent.

EDUCATION

In view of the handicap of reduced appropriations, the year was one of very satisfactory accomplishment in educational matters. The secretary of public instruction reports that—

The public schools continued operating in 1932 along practically the same lines as in the past, with added emphasis on such of its usual major concern (sic) as the extension of educational opportunities in the elementary grades, the promotion of vocational education as well as health and physical education, and the improvement of instruction. Like the practice in previous years, these activities, undertaken with a view to a satisfactory realization of the practical ends of public education in the Philippines, went hand in hand with such allied efforts as experimentation and research, teacher training and supervision, employment of better qualified teachers, and the construction of more school buildings.

Definite emphasis was placed upon the policy that the first duty of the State, in educational matters, relates to primary education for the entire population of suitable ages. In order to accommodate

large numbers of children who would otherwise have been without schooling during the year, primary teachers were required to conduct two sessions daily for different groups of children.

The total enrollment for the school year 1931-32 was 1,213,419 (final report) as compared with 1,224,548 for the school year 1930–31. Of this number, 1,135,221 were enrolled in the elementary and 78,198 in the secondary grades. Of the latter, 16,839 were in vocational schools, practically the same as for the preceding year. The increase in the attendance at agricultural and trade high schools was offset by a decrease in home-economics course enrollments.

Community assemblies.-A matter to which Governor General Roosevelt devoted particular attention during his year in the islands was the fostering of a systematic plan for adult education through the medium of a form of rural conference to which the name community assemblies has been applied. In the localities where they were first conducted, the assemblies were greeted with an interest and enthusiasm which indicated the fulfillment of a need in the life of the communities, and the legislature provided for their continuance under the supervision of the director of education in an act (No. 4046) which states their objectives to be as follows:

1. To develop a more intelligent and enlightened public opinion, especially among adults.

2. To inform the public regarding subjects of wide interest.

3. To inform the public regarding citizenship activities, duties, health problems, proper diet, etc.

4. To guide the public in improved methods of industry, agriculture, and economy.

HEALTH

Incomplete returns indicate a slight increase in the general death rate over that for the preceding year, which was 21.39 per 1,000 (revised figures). In the city of Manila, however, the rate fell from 25.61 to 24.24; and the infant mortality rate from 151.58 to 139.82. There were no epidemics of consequence. Cholera, which in 1931 caused 784 deaths, was practically confined to two provinces-Samar and Leyte where 338 cases and 251 deaths were reported. No cases of smallpox were reported. Decreases in cases reported of beriberi, malaria, diphtheria, influenza, and measles, indicate the success of the campaigns conducted against those diseases. From the incomplete reports available, a decrease is indicated in the number of deaths from tuberculosis, although this disease remains one of the most serious problems of the health administration. During 1932, 2,596 positive lepers were detected and isolated; 206 negatives were released.

The Governor General states in his annual report:

Heretofore child health, maternal hygiene, and the control of tuberculosis have been separated from the Philippine Health Service and administered by other entities of the insular government. Under the reorganization act these agencies, together with all other health matters, are placed in a single bureau of health.

The principal health problems of the Philippine Islands are those concerned with environmental sanitation, namely, child health, nutrition, and the control of tuberculosis and leprosy. The work in these fields is going forward steadily and will be facilitated by the reorganization mentioned in the previous paragraph.

An increased effort was made to disseminate information in health and sanitation through the press and publications of the Philippine Health Service, the community assemblies, and the public schools.

The United States Army Medical Department Research Board continued to occupy quarters in the bureau of science and to cooperate with that bureau in health matters. The International Health Board of the Rockefeller Foundation continued its cooperation with the bureau of science in Manila in malaria investigations.

AGRICULTURE AND INDUSTRY

The area planted in 1932 differed only slightly from the preceding year. With the exception of sugar, however, there was a decline in production, due to adverse weather conditions and plant pests. The increase of 26 percent in centrifugal sugar production was due chiefly to improved methods of cultivation and manufacture, as the increase in area planted was only about 1 percent.

Most gratifying is the progress noted in the campaign against rinderpest, the deaths reported during 1932 numbering 139, the lowest since the appearance of the scourge in the late eighties. During the last quarter of the year, no cases were reported. With sustained vigilance, it is hoped that practically the complete extirpation of this disease, which has been such an obstacle to the development of the livestock industry in the islands, may be effected in the proximate future.

Improvement in the condition of the small farmer continued to be a main subject of executive and legislative consideration. Special emphasis was laid on the encouragement of diversification of agricultural products and the production in the islands of foods which are now being imported in large quantities, such as eggs and fish. Το these ends, extension work by the department of agriculture and commerce was expanded by means of lectures delivered at community assemblies and printed in dialects; participation in fairs and exhibitions, ranging from garden day celebrations in the schools to the first national horticultural exhibition held in connection with the annual Manila carnival; and demonstration trucks traveling through remote regions. By the end of the year, 5 of the 10 rural credit organizations authorized by Act 3895, approved November 16, 1931, had been organized under the supervision of the Philippine National Bank, and 5 more were in various stages of organization. Means for expediting the occupation and utilization of the agricultural lands of the public domain continued to be sought.

Gold bullion was shipped out of the islands to the value of approximately 5 million dollars as compared with 3% million during 1931. Although the waters surrounding the Philippine Archipelago abound in many varieties of edible fish, it has been a matter of concern for some years that the annual importations of canned and preserved fish have grown to considerable proportions. Experimental work has been in progress to determine the best methods for the local preservation of fish, and surveys have been made of the fishery resources. Act 4003, approved December 5, 1932, was enacted for the purpose of protecting the fishery resources and encouraging the fishing industry with a view to increasing the Philippine-produced food supplies.

The drastic decline in the market for Philippine abacá (manila hemp), due to competition both with other materials and with hemp grown elsewhere, has moved the government to undertake to seek out new uses for this fiber. Studies were initiated as to the possibilities