Now although the program is a voluntary program, in fact there are ways of putting a certain amount of teeth into it and companies which do not comply with this are under certain disadvantages with respect to Government purchases and other things of that sort. In other words, where the Government has a choice on whether to deal with with companies that comply or do not comply we deal with companies that comply and not with companies that do not comply, and there are various ways of putting teeth into this program. It could be broken down if there were excessive violations which were, you might say, not absorbed by other members of the industry. I think the industry, as a whole, realizes that if you move from voluntary restraints into the field of legal quotas that carries you inevitably from one step to another until you have a very large degree of socialization of the whole industry, which is not desired, certainly by the present members of the industry, and I think by others, and the result is that there is a very strong effort being made within the industry to make these so-called voluntary controls, in fact, effective, and I think they have been very effective. There have been some threats to them but the plan is working pretty successfully up to the present_time. Senator CARLSON. Mr. Secretary, I want to state that when I helped write that section in the 1955 act, I was most hopeful that we would not have to have anything but voluntary programs. Secretary DULLES. Yes, sir. Senator CARLSON. I was opposed to mandatory controls then and I am opposed to them now, but sometimes I get concerned that we are not able to cope with the problems under its present law. Now, according to estimates furnished me which are based upon reports of the importing companies filed with the Texas Railroad Commission the outlook for the third quarter of this year is that imports of petroleum products will exceed 600,000 barrels daily which represents an increase of petroleum products of 40 percent over the third quarter of 1957, and an increase of 100 percent over the third quarter of 1954, which is the year that we established, that is, the President, set up his Cabinet committee to study this ever-pressing problem, and in view of that alarming rate of increase, I begin to ask myself, can we, at this session of Congress, afford to report a bill out of this committee that, without our having some assurance we will have some restrictions on this? Secretary DULLES. Of course there have been parts of this petroleum-products business which had not been under control, and I think those go to make up the figures. Senator CARLSON. That is correct. Secretary DULLES. I think in the area where the so-called voluntary ontrols have been established, the situation has been pretty good, and I am glad to note that within the last few days, I think the Texas Ema i Commission has increased from 8 to 9 days. Senator CARLSON. One day. Secretary DULLES. The allowables- SAT DULLES. And that is at least a step in the right direction. State ANDERSON. If the Senator from Kansas will just pardon In Fol me begin to understand though why many people are a little Some of our States have oil, lead, and zinc, and potash, and no matter what they are, there is always some reason why help is not available. When you want help, the life preserver never quite gets to you. Secretary DULLES. In this situation, Senator, the life preserver has gotten there. Senator ANDERSON. Any time it increases from 1954 figure by 100 percent, after we thought we had the job done, I sat in many conferences with the Senator from Kansas and although I was not on this committee, we thought we had done something in 1954. We would have to admit that it was not very effective. Secretary DULLES. I do not think you have to admit that, Senator. The area in which we dealt, the area of crude petroleum, there has been an effective reduction of imports. It has caused us a great deal of trouble. If you think that everything is sacrificed for foreign-policy considerations, I suggest you examine what has happened in Canada and in Venezuela because of the restrictions that have resulted here and you will see that foreign-policy considerations have in fact been sacrificed, I hope not unduly sacrificed, to meet the spirit of this act through this system of voluntary controls which has cut down very materially the importations of crude petroleum, so that it bears the same relationship to total production that it did several years ago. Senator ČARLSON. Mr. Secretary, I want to assure you I am most sympathetic with your problem because I have had something to do with this and I know some of the pressures you are under, because I know from the individual companies they are not all in accord on this as to the policy as to how it is to be handled and that is the reason I mentioned this and that is the reason I read this sentence and I am going to read it again, and I read it because of this threatened increase in the third quarter, not just crude oil but all forms of oil. Secretary DULLES. Yes. Senator CARLSON. And derivatives. "Additionally the Director reported that there had recently come to his attention reports of projected plans of some importers, which if carried through, could bring about a substantial increase in the level of products importation, which could seriously affect the voluntary program as now established.” And I want to have some assurance that this committee is going to continue to study this with the hope and the thought that these additional increased imports, should they develop, no matter whether from crude oil, residual oil, or any other derivative that the entire picture be taken into account. Secretary DULLES. Senator, you can have that assurance categorically, and I think you can have confidence in it because the report of the danger which you read here is a report which comes from this committee which shows that it is vigilant in watching the situation. Senator CARLSON. Well, Mr. Secretary, I appreciate your frankness and I appreciate your appearance, and I regret I took so much time. Secretary DULLES. You have taken very little time. Thank you. Senator ANDERSON. I think the Senator from Kansas is in about the same situation we would be in if they started to import wheat from Canada, and being a wheat State, the State Department does not worry, they will not import a lot of bread. Now they will bring in flour, bran, and a little wheat germ, but they will not bring in any wheat. It does not do much good as long as they try to bring in all the rest of these things. Mr. Secretary, I am sorry we kept you so long. We hoped to get you out of the trenches by 12 o'clock. The chairman has asked that I insert in the record of the hearings following the oral presentations by the Secretary of State and the Secretary of Commerce, the following statements of views of other departments and governmental agencies: Acting Secretary of Labor, James T. O'Connell; General Counsel of the Department of Defense, Robert Dechert; the Director of the Office of Defense Mobilization, Gordon Gray; Secretary of Agriculture, Ezra Taft Benson; Hatfield Chilson, Under Secretary of the Interior; William B. Macomber, Jr., Assistant Secretary of State; and United States Tariff Commission. (The reports referred to follow:) (See also report of the Treasury Department, p. 415.) EXECUTIVE OFFICE OF THE PRESIDENT, OFFICE OF DEFENSE MOBILIZATION, Hon. HARRY F. BYRD, United States Senate, Washington, D. C. DEAR SENATOR BYRD: This is in reply to your letter of June 13, requesting a report from this agency concerning H. R. 12591, a bill to extend the authority of the President to enter into trade agreements under section 350 of the Tariff Act of 1930, as amended, and for other purposes. There can be no doubt that a high level of foreign trade is an important element of our national security. Mutually beneficial trade with nations of the free world strengthens our own productive machine and increases the economic potential of our friends and allies. The reduction of unjustifiable trade barriers through gradual and selective tariff reductions is necessary to an increased flow of this essential trade. Extension of the Reciprocal Trade Agreements Act and the amendments proposed by H. R. 12591 appear to be well designed to accomplish that objective and we are in favor of its enactment. Special mention should be made of the revision of the national security amendment proposed by section 8 of the bill. The proposed changes are generally designed to clarify procedures and criteria for dealing with threats to the national security arising from imports and to require reporting of actions taken when such threats are alleged. We believe that these amendments are in keeping with the purpose of the statute and are glad to support them. The Bureau of the Budget advises that it has no objection to the submission of this report and that enactment of H. R. 12591 is in accord with the program of the President. Sincerely yours, GORDON GRAY, Director. STATEMENT OF GORDON GRAY, DIRECTOR OF THE OFFICE OF DEFENSE MOBILIZATION ON H. R. 12591 I welcome this opportunity to comment on the special responsibilities of the Office of Defense Mobilization under the Trade Agreements Act. They appear in the so-called "national security" amendment which was added to the act by the Trade Agreements Extension Act of 1955 and which now appears in section 8 of H. R. 12591 in the revised form approved by the House of Representatives. Congress delegated authority to the Director of the Office of Defense Mobilization for the initiation of procedures to deal with threats to the impairment of the national security arising from imports, and the purpose of this statement is to outline the manner in which the Office of Defense Mobilization has undertaken the discharge of that responsibility and to comment briefly on proposed revisions in that responsibility now before your committee. Of course, we also have a continuing interest in foreign trade policies and practices generally, in the sense that they affect our total national security position and have a bearing upon the development and maintenance of our mobiliza tion base. As examples, our stockpiling responsibilities take us into the area of foreign trade; and the President has assigned us the task of determining for what critical materials foreign funds obtained from the sale of agricultural surpluses may be expended. In these and other ways, the Office of Defense Mobilization becomes involved in issues concerning imports because of the relationship of those issues to the national security or the maintenance of the mobilization base. However, the special assignment to the Director of the Office of Defense Mobilization under the Trade Agreements Extension Act of 1955 has provided for the first time a means and forum through which any threat to national security caused by imports might be reviewed and considered. It is important to emphasize, however, that there has sometimes been a tendency to interpret the national security amendment as a substitute for the "escape clause." Our administration of the amendment has sought to cut across this interpretation and to make clear that, in fact, it provides a basis for action only in cases where imports threaten the national security by impairing or inhibiting the creation of essential productive capacity, required skills, or other factors essential in times of emergency. Whereas the essential function of the Tariff Commission under the "escape clause" is the determination of injury to industry from imports, we are concerned with discovering any threatened impairment of the national security, whether or not injury to a domestic industry is involved. In support of actions initiated under the national security section up to this time, we have undertaken to provide flexible procedures which could be adapted to the specific requirements of each situation presented to us. For instance, the Office of Defense Mobilization has made it a practice to hold public hearings if it has appeared that such hearings would provide an effective means of acquiring useful facts and viewpoints. In such cases, the primary purpose of hearings has been to obtain information and to advance investigation of the relevant facts, rather than to be adversary in nature. Information obtained from such public hearings is then studied and analyzed in the light of other facts at hand. In all cases, whether or not hearings are held, other agencies of the Government familiar with the subject matter and possessing information, expert advice, or specialized experience are consulted to obtain their views and knowledge. Sometimes the necessary investigations are undertaken through the establishment of interagency task groups specifically brought together for that purpose and, in other cases, the bulk of the pertinent information becomes available through the formal statements of the various agencies consulted. The net result of these various processes has assured the Director of the Office of Defense Mobilization that all the information and advice available is in turn made available to him in reaching a final judgment. As has been pointed out in the course of the discussion of this subject, the issues are seldom crystal clear in many of these situations. Also, some industries have found it very difficult to provide or assemble data to support a petition. Under these circumstances, after making every effort to check with other agencies and within the cause sufficient data were not quickly or readily obtainable. This has meant that a few petitions have remained in an inactive status for quite awhile, or have seemed to take a considerable time for processing. Finally, another noteworthy aspect of the national security amendment has been that, by its nature, it sometimes yields solutions which cannot be entirely final. The dynamics of trade and commerce in the setting of rapidly changing domestic and international developments impose a requirement that we be willing to reopen cases if petitioners indicate the availability of new information or if circumstances change. may pose some very difficult problems and judgments. As I have indicated, think I need not elaborate the fact that the national security amendment the questions involved are only occasionally so clear cut as not to be arguable. This is particularly true because the level of imports with respect to a given commodity or industry is often only one of a number of factors which may be affecting the domestic producers and their capacity to meet mobilization requirements. Likewise, the substantial changes in mobilization base and actual mobilization requirements brought about by ever-advancing scientific and technological developments may well produce a different judgment from that which might necessarily have been reached in World War II, for instance. this act altogether seriously. If we are called upon to administer the revised section before your committee, we intend to continue to rely heavily upon the advice of other governmental agencies and to give all petitions the most searching examination. In that connection, the revision of the national security amendment which has been approved by the House of Representatives has our support. In general, the proposed changes are designed to clarify administrative procedures and criteria and to require reporting of actions taken when threats to the national security arising from imports are alleged. We believe that they are in keeping with the purpose of the statute and that the revised provisions would provide an effective means of giving national security cases the attention they require. I would now like to describe briefly our operating experience under this amendment, and summarize the cases which have been before us. They have involved the following items: In June 1957, after a finding by the Director of the Office of Defense Mobilization that there was reason to believe that imports of crude oil were threatening to impair the national security, the President established a Special Committee To Investigate Crude Oil Imports under the chairmanship of the Secretary of Commerce. The Committee's investigation of the effect of the trend of imports on national security led it to recommend, in July 1957, that a plan of voluntary limitations on imports be adopted by importing companies. The President accepted the Committee's recommendations. The plan applied to all parts of the country except district V (Washington, Oregon, California, Arizona, and Nevada). When this exception was made, it appeared that imports into the west coast district would no more than make up the difference between demand and domestic crude oil production. Later in the year, however, the Committee found that imports into district V were increasing sharply and would also be at excessive rates unless action were taken to curtail them. Accordingly, the Committee recommended that a plan of voluntary restrictions also be adopted by importers in that area, and this plan became effective January 1, 1958. More recently, on May 28, 1958, I recommended to the President, in concurrence with the Special Committee, that the importation of petroleum products be placed under the cognizance of the Committee, in order to guard against any possible circumvention of the crude oil program. The President accepted the recommendation and, on the advice of the Special Committee, has directed the initiation of a program limiting the importation of unfinished gasoline and oils. The need for maintaining a balance between imports and domestic production of crude oil, in the interest of national security, arises from the probability that excessive imports would weaken and might destroy the incentive for exploration and development of new domestic sources of supply. This conclusion was first put forward by the President's Advisory Committee on Energy Supplies and Resources Policy in 1955 and was reiterated in 1957 by the Special Committee To Investigate Crude Oil Imports when it found that additions to domestic reserves had not been keeping pace with the increase in domestic consumption and that the sharp increase in imports then scheduled would bring about a further decline in domestic exploration and development activities. Taking all factors into consideration, including the importance of foreign oil resources to our national security and the importance of the United States market to the oil exporting countries of the free world, the committee found a need for achieving some reasonable balance between imports and domestic production at this time. Its recommendations for a pro |