In some industries the Smoot-Hawley rate may be far more than is needed, and in some cases it may not even be enough as it stands today because of the passage of time and changing circumstances.

The thought does occur to me that in the interest of fairness and justice a trade program should not operate in such a fashion that a limited number of industries must bear a very heavy burden--and in some cases a killing burden as far as some particular manufacturers are concerned while on the other hand there would be others that would stand behind tariff walls so high that there would be no possibility of anyone crossing those barriers to compete with them.

Now, does that seem fair to you?

Secretary WEEKS. That coincides with my middle of the road theory; yes, sir.

Senator LONG. You would feel that those who have a tariff that is too high should not have that high a tariff barrier to protect them; that there should be some competition, I take it?

Secretary WEEKS. I am a great believer in competition; yes, sir. Senator LONG. Do you still favor the proposal the administration made some years ago that there should be a suspension of tariffs in regard to items that are imported in negligible quantities only? Secretary WEEKS. I do not think you would

Senator LONG. You will recall the administration's recommendations of 2 years ago. Was that a matter of cutting in half the tariff or just suspending it on commodities that are either not imported at all or imported in only negligible quantities?

Secretary WEEKS. I am advised that was put in in the original H. R. 1 in 1955 but was not adopted by the Congress and we did not reinsert it in our proposal this year.

Senator LONG. I understand Secretary Dulles still feels favorable towards it.

I just wondered how you feel about it.

Secretary WEEKS. To be honest, I have not given it any thought since the original proposal 3 years ago.

I have not thought about it.

Senator LONG. My impression is that some people are getting far too much protection and others are not getting enough.

What is your attitude toward American industries in general which find that foreign producers can now produce at a lesser cost? Is it your judgment that over a period of time the American industry ought to make preparation to get out of business, or do you think that we should adopt a tariff policy which means that the foreign producers can get a portion of the market which should be restricted at a certain level?

Secretary WEEKS. I think that if a given industry is faced with disastrous competition, the administration's program is to see that it is not placed in jeopardy.

For example, in the woolen and worsted industry, we have in the GATT arrangement the 5 percent tariff quota.

When our imports exceed 5 percent of the average of domestic production of similar fabrics in the 3 preceding years, then it is possible, under a reservation to our concession, to increase duties on imports exceeding 5 percent. This safeguarding action has been taken by the President: this is the second full year that he has applied it.

Now this is a recognition in this particular case of the principle at the lower rate, the concession rate, of giving the foreign producer a share of the market which is 5 percent, and beyond that having them pay a higher rate.

Senator LONG. Here is the thing that concerns me somewhat, Mr. Secretary.

Louisiana is very much of an oil-producing State. Three years ago I voted to extend this act for 3 years rather than 2, and I think mine was the deciding vote.

I was absent when the vote occurred and I believe mine was the one majority in favor of making it 3 years rather than 2, and I voted for a substitute to a proposal offered by Senator Kerr at that time which substituted the so-called voluntary program you had here for a mandatory limitation on oil imports.

Now the program for which I voted at that time had been administered by the Department for a period of 3 years, and oil and oil products imports had risen from about-what percentage of the market was it about 3 years ago do you recall, was it 12 or 14?

Mr. MUELLER. Imports of oil and products in 1954 were 1610; percent of domestic production of crude petroleum.

Secretary WEEKS. Imports of crude and products.

Mr. MUELLER. That is everything.

Senator LONG. As of now it is up to about 23 percent according to the testimony I heard here.

Mr. MUELLER. That is right.

Senator LONG. That is an increase of almost 50 percent, and the importers now have almost a quarter of the market, and incidentally those are mainly American companies, too.

They are not foreign companies. If we continue to go along like. that in the oil business, it would look to me as though about two more extensions and the oil business will have gone the route of the clothespin manufacturers that Senator Flanders made reference to, or the route of some of the textile mills in Louisiana, at least the principal ones that I heard from last time.

I know they wrote me a lot of letters last time and they are not writing me this time because they are out of business. Is there any way we can nail this thing down to try to keep the oil industry in line, keep the imports in line with what they started out?

Mr. MUELLER. Senator, in 1954, which is the base year that the oil industry points to, the percentage of imports of crude oil to crudeoil production was approximately 10 percent.

I say approximately because it may have been 10.2 percent, it may have been a fraction of a percent one way or the other. On the basis that the Cabinet Committee was appointed, it was appointed to investigate the impact of crude-oil imports on the national security under section 7. So the committee in its deliberations determined that it would first adopt a voluntary program and second, hold the imports of crude oil to approximate the same percentage that it was in 1954, and on that basis in regions 1 to 4 the allocation was set at approximately 780,000 barrels per day of crude oil.

This was a year ago. Now region 5 at the time a year ago, no allocation was put into effect for the reason that region 5 is a deficit

area.

In other words, in region 5 there is approximately 900,000 barrels of oil per day produced, and approximately 1,200,000 barrels of oil consumed. Šo that there was reasonable balance a year ago between the imports into region 5 and the demand for oil and petroleum products.

Senator LONG. If you applied that same logic that you are applying to sugar in Louisiana we might just as well plow under our sugarcane fields if we are only going to produce for the Louisiana market, the sugar, and you are going to take the attitude everything else is a deficit area.

Mr. MUELLER. No. The reason it is a deficit area is you cannot transport oil from the eastern part of this country up to the Rocky Mountains over into that area on an economic basis. In other words, the oil produced in Oklahoma and Texas is not available in California and Washington and Oregon unless it is transported in tankers from the gulf coast around through the Panama Canal and up.

It is economically unsound on the basis of the posted price of crude in regions 1 to 4. The Four Corners comes from New Mexico, and there is today a Four Corners pipeline so called that is built, and that transports oil mainly from New Mexico, which is a reasonably new area or field.

Senator LONG. When you say all that is unsound economically, I take it you mean because oil from Venezuela or from the Orient can be shipped to the west coast more cheaply than oil from the gulf coast?

Mr. MUELLER. No. Because the cost of transportation s such that it would result in region 5 experiencing a much higher cost than other regions if they used domestic crude entirely.

You understand they produce out there, and they have been producing for many, many years in the California oilfields, but the California oilfields have been gradually, slowly but gradually declining.

This is a comparatively recent thing in region 5.

Up until a few years ago they were producing practically as much as they were consuming, but over the last-I cannot give you the exact number of years-they have had to import oil or had to bring oil from other areas.

They are bringing oil today from Canada, as you know, into the Pacific Northwest, and they are importing oil, a certain amount, from Sumatra.

They are importing it from the Dutch East Indies.

Senator LONG. It would certainly seem to me that if we are thinking about American industry and trying to assure American industry a certain portion of the American market, that you would look at the United States as a whole when you decide what portion of the market you are going to let the foreign producers have, and let them bring it in wherever it is most to their advantage.

Of course, the percentage of the market or the portion of the market they are going to have, that would be about all of it.

Now, inasmuch as you have made reference here to the cost, hauling it across the ocean, oil is one of the principal defense commodities, and with 500 Russian submarines out there on the high seas, you cannot count on any of those tankers from these foreign countries getting to the west coast in war time, can you, or can you?

Mr. MUELLer. No.

Secretary WEEKS. That is correct, and that is the area of national security on which the oil industry has been protected by reducing the amount of imported oil.

We are importing, Senator, 300,000 barrels less of crude oil today than we were a year ago, and that has all come about as a result of the voluntary oil program.

Secretary WEEKS. Three hundred thousand barrels a day.

Senator LONG. I have had considerable complaints that there are chislers against this program and so far the chiseler seems to get ahead and gain by doing it.

Now what is your reaction to that?

Secretary WEEKS. Senator, when we recommended to the President and he invoked this voluntary quota basis of last summer, there were 3 companies, I think it was 3, that did not comply with the quota. assigned them on a voluntary basis.

When we reviewed the program and reduced the imports from about 770,000 barrels a day down to 713,000 in March this year, there was a grave question as to whether we would go to mandatory controls or endeavor to make the voluntary controls work, and we adopted the procedure on the part of Government agencies and departments of invoking the Buy American Act, and they do not buy the Government requirements from companies that have not received a certificate of compliance with the quota that is assigned to them, and this has brought the words offenders under the original into line.

They have subscribed to and are now conforming to that quota. We think that this voluntary basis is working.

It did not work 100 percent before, but we think it is today, and for a variety of reasons we have thought that it was the desirable way to do it.

We thought of mandatory quotas. There are many problems involved, not to mention possible lawsuits or what not.

Senator LONG. Now over a period of time isn't it likely that most industries would tend to have a capacity in line with their demand or the consumption of their product.

In other words, that their production and their capacity will tend to come into line just on the theory that it is usually not economic to try to maintain a capacity far in excess of your rated amount of production or the amount that you can sell.

Secretary WEEKS. Well, you do not ever build productive capacity beyond what you think your market will absorb, but in the oil industry, the only reason that we did or could take action was under the national security, and that was due to the fact that we had to safeguard the development and drilling and new production in the industry.

Senator LONG. That is the point I have in mind. If you do not maintain a sufficient production of petroleum and petroleum products in peacetime to meet your defense requirements in the event of war, you just cannot depend on expanding what you have rapidly enough to meet demand and to meet your requirements in the event that your overseas supplies are cut off during a war period, can you?

Secretary WEEKS. That is right, and the only reason that we could act was to try to see to it by our action that there was development sufficient to keep the industry in a healthy condition.

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Senator LONG. Now some people have tried to make the argument, and to me those who have made it just did not understand anything about the oil and gas industry, that it was a good idea to keep bringing in these foreign imports and to save our oil in the ground.

What those people were failing to realize every step of the way is that if you have got to fight a war the fact that you have got reserves is not going to do you any good unless you have got holes down in the ground to get to the oil and steel pipe laid down there so the oil can come to the surface.

years drilling for it, the war Now that is something you

And if you have got to spend 4 or 5 might be over before you ever get it. well recognize, do you not, Mr. Secretary? Secretary WEEKS. Yes, sir.

Senator LONG. And the amount of oil that you can produce--come an emergency, just like Suez, when you are called upon to produce what you can get right then and there as an immediate expansion of production and what you can make available to meet your emergency, that is what you count on to fight a war, not some reserve that you might be able to go drill for and fully develop if you have 5 or 6 years to do it.

Secretary WEEKS. That is correct.

Senator LONG. Thank you very much, Mr. Secretary. I appreciate your courtesy. I know we have kept you here for some time and Senator Malone has got a lot of questions to ask. I feel that I have imposed enough on you today.

Senator MALONE. We stand adjourned until 9 o'clock in the morning.

Mr. Weeks will be here at 9 and then the Secretary of State at 10. (Whereupon, at 5:10 p. m., the committee adjourned to reconvene at 9 a. m., Saturday, June 21, 1958.)