STOCKPILE AND ACCESSIBILITY OF STRATEGIC AND CRITICAL MATERIALS TO THE UNITED STATES IN TIME OF WAR WEDNESDAY, JANUARY 13, 1954 UNITED STATES SENATE, SPECIAL SUBCOMMITTEE ON MINERALS, MATERIALS AND FUELS ECONOMICS OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D. C. The subcommittee met, pursuant to call, at 2 p. m., in the committee room, 224 Senate Office Building, Washington, D. C., Senator George W. Malone, chairman of the subcommittee, presiding. Present: Senator George W. Malone, Nevada (chairman of the subcommittee), and Senator Henry C. Dworshak, Idaho. Present also: Jerome S. Adlerman, counsel to the subcommittee; George B. Holderer, committee engineer; and Richard G. Sinclair, subcommittee accountant. Senator MALONE. The subcommittee will be in order. Let the record show that Senator Dworshak is present and, while not a member of the subcommittee, is a member of the Interior and Insular Affairs Committee. It is understood in all subcommittees that any Senator may sit in and have all the privileges accorded to the members of the subcommittee. Without repetition, without unnecessary repetition, I would simply say, again, that under Senate Resolution 143, the committee is directed to determine the availability of critical materials to this Nation in wartime, for its expanding economy and for its security. The Senate resolution injected into this investigation a question of availability in wartime which had not heretofore been included in such investigations. Naturally, included in the investigation then is the determination of which transportation lines can be kept open in wartime. It will avail the United States little if we were on the most friendly terms with nations who own certain areas and are friendly and we are securing materials from them, if they are unavailable when the war starts. I think all of us here are of an age to have experienced three of these conflicts. It has been testified before the committee, that in case of an all-out war the Western Hemisphere will be the only dependable source of supply. That the delivery of strategic materials located offshore across both our major oceans would be very problematical, to say the least. Many consider that to be a champion understatement. This committee is interested in any plan that tends to make us independent of these materials from areas where mineral strategists testify that it is problematical whether delivery can be made or not. We have not yet analyzed the testimony to correlate all of the factors, and we have made no conclusions, no findings and no recommendations, as yet. However, my feeling of the situation at this time after hearing a great deal of testimony is that under the policy that we have long adopted, for the past 21 years, we have become dependent upon these areas for strategic materials that will probably be unavailable and without which we cannot conduct a war or have a successful civilian economy. We have definite instances where nations have, through their export control, stopped shipment of important goods to this country in peacetime. Whether it was done to further some economic agreement or for some other reason, it is not our prerogative to inquire. But the fact that it can be done is something that can be looked into, even in peacetime. I recall that in 1947 it was my privilege to visit most of the European nations. I thought I was getting into it at about the right time, being in the engineering business for 35 years and industrial engineering for 15 years of that time, and that perhaps I could contribute something to the Senate. The Marshall plan had been suggested. So I went into these nations. In Germany, I saw the Ruhr, steel mills and coal mines, in Frankfurt, its chemical industries and then to France, England, Italy, Greece and all the rest of them, and the Middle East, with its industries. This will be found in the Congressional Record I think in a 1948 debate, when on the occasion of visiting the Birmingham area, only 50 or 60 miles out of London, I visited the director of fuels, Sir Ben Smith. Sir Ben had considerable to say. He first said he thought we ought to continue lend-lease without any idea of stopping it. I had nothing to say. I was very new in the Senate, and it was the second time I had been in England. As long as I didn't reply he went a little further. I still had nothing to say, and finally he said, and it is a very significant statement: You know, we control the area, accounting for three-fourths of the strategic and critical minerals and materials that are produced on this earth, and we can stop the production if we want to. I still did not say anything, but it was a very significant statement to me, and it is beginning to make a little sense now. I don't think he intended to say that, as a matter of fact. Mr. Armstrong, I wish to ask you a question in relation to the two organizations, International Trade Organization and the IMC, the International Materials Conference. I asked the question on January 5, the occasion of your first appearance here with our good friend Mr. Don Lourie. I asked you what was the difference between the International Trade Organization that the Congress refused to accept, and the International Materials Conference formed by the State Department later. The purport of your answer was that they were formed for different purposes, that the ITO, the International Trade Organization, did not deal with shortages that the International Materials Conference was organized to deal with shortages. Do you want to answer that question again? STATEMENTS OF DONOLD B. LOURIE, UNDER SECRETARY OF STATE (FOR ADMINISTRATION); THRUSTON B. MORTON, ASSISTANT SECRETARY OF STATE FOR CONGRESSIONAL RELATIONS; JOHN W. EVANS, WILLIS ARMSTRONG, OFFICE OF INTERNATIONAL MATERIALS POLICY, BUREAU OF ECONOMIC AFFAIRS; AND EDMUND E. GETZIN, METALS AND MINERALS STAFF, STATE DEPARTMENT Mr. ARMSTRONG. I think I have it in the record, sir, and I think I made myself reasonably clear on that. Senator MALONE. I was just giving you another chance. Mr. ARMSTRONG. The IMC was founded for the purpose of taking care of shortage problems in an emergency on a temporary basis. The ITO was proposed as a means of handling a general code of commercial policy and a code of possible agreements on commodity problems, where those commodities might be in a surplus position. Senator MALONE. That is what I remembered your answer to be then, that there was no comparison between the two organizations. Mr. ARMSTRONG. The only real similarity, sir, is that neither exists. Senator MALONE. All right. Now, I will call your attention to article 57, chapter 6, of the Habana charter for an International Trade Organization, March 24, 1948. When did you first enter the State Department? Mr. ARMSTRONG. I went into the State Department in 1946. OBJECTIVES OF THE INTERGOVERNMENTAL COMMODITY AGREEMENTS The members recognize that intergovernmental commodity agreements are appropriate for the achievement of the following objectives: A. To prevent or alleviate serious economic difficulties which may arise when adjustments between production and consumption cannot be effected by normal market forces alone as rapidly as circumstances require. Would you say that the International Materials Conference could have originated under article 57, or have been based on this Habana charter for an International Trade Organization? Mr. ARMSTRONG. Do you mean describe the International Materials Conference? Senator MALONE. The International Materials Conference and the International Trade Organization. Mr. ARMSTRONG. Well, in that article 57, that is one of the articles. in the proposed charter for the International Trade Organization. Senator MALONE. You had something to do with this; did you not? Mr. ARMSTRONG. Not with that part of the charter; no, sir. Senator MALONE. Did you have anything to do with the charter? Mr. ARMSTRONG. I had to do only with the State trading provisions. of the charter. Senator MALONE. What did they include? Mr. ARMSTRONG. Well, it is a long while since I had anything to do with it, sir, but as I recall it, the objective in trying to put together some material on State trading was to make a code which would not put private trade at a disadvantage when it was dealing with State trading organizations. The whole general concept was that there was a predisposition against State trading but that there was a recog nition that it existed and might exist. The purpose of the language which was put into the charter was to try to make State trading as commercial as possible so that it would not injure private trade with which it was dealing or competing. Senator MALONE. Do you think you were successful in that effort? Mr. ARMSTRONG. We were never very satisfied with the language, sir. We found it a very difficult thing to devise. Senator MALONE. Do you think any language would have helped it? Mr. ARMSTRONG. I don't know, sir. I worked on various suggestions. I did not have the responsibility for final acceptance of the language or the negotiation of the language at Habana. I was not at Habana. Senator MALONE. You only helped write it? Mr. ARMSTRONG. I helped with the consideration of some of the alternatives which were suggested. Senator MALONE. You are, of course, familiar with the fact that all of your international trade agreements, your trade agreements under the 1934 Trade Agreements Act, do not prevent the manipulation of currency values and quotas, specifications, and the several devices that have been used for many years in the manipulation of trade. You are familiar with the fact that none of your rules or regulations prohibit the use of such devices? Mr. ARMSTRONG. I wouldn't say that, sir, because I have not read all the trade agreements that the United States is a party to. Senator MALONE. That is not a very good answer. I would like you to answer directly. Do you know of any agreement that does include it? Mr. ARMSTRONG. I am sorry, sir, I never worked on trade agreements. I dealt with only one. Senator MALONE. Just answer the question. Do you know of any that prohibits the use of such devices? Mr. ARMSTRONG. Of devices of currency Senator MALONE. Currency manipulation, quotas, specifications, and the many other subterfuges that are used to defeat any trade agreement with any nation. Mr. ARMSTRONG. I know of a trade agreement which prevented the use of quotas in a good many instances. Senator MALONE. Do you know of any that prohibited the manipulation of currency values? Mr. ARMSTRONG. I do not know, sir. Senator MALONE. That is better. Now, do you know of any that prohibited specifications that would keep out certain kinds of goods? Mr. ARMSTRONG. I don't know of any which prohibited the entry of any specific type of goods. Senator MALONE. That is the question I asked you, and it is "No."; is that right? Mr. ARMSTRONG. NO. Senator MALONE. Now, what was this agreement that you know about that prohibited the use of quotas? Which one was it? Mr. ARMSTRONG. It was the trade agreement between the United States and Sweden which was negotiated some time in the 1930's. I have forgotten. Senator MALONE. Is that the only you know of? Mr. ARMSTRONG. That is the only trade agreement that I dealt with in detail. Senator MALONE. Is that the only one you know of which prohibits the use of quotas? Mr. ARMSTRONG. Specifically and positively, yes. Senator know of? MALONE. The answer is "Yes," that is the only one you Mr. ARMSTRONG. That is the only one I know of. That is the only one I worked with. Senator MALONE. Is it the only one you know of? Mr. ARMSTRONG. To my own knowledge; yes, sir. Senator MALONE. That is good. That is much better. Now, I will continue to read from article 57, where you answered that the International Materials Conference was organized to deal with shortage and the International Trade Organization was not organized to deal with shortages. Is that what you said? Mr. ARMSTRONG. That is the way I understand the facts to be. B. To provide during the period which may be necessary a framework for the consideration and development of measures which have as their purpose economic adjustments, designed to promote the expansion of consumption or a shift of resources and manpower out of overexpanded industries and to new and productive occupations, including as far as possible in appropriate cases the development of secondary industries based upon domestic production of primary commodities. Is that section the one that covers the current suggestions that when, through excessive imports or any other reason, we have depressed areas, or industries, that you can now set up a school to educate the people driven out of employment for a different industry, train these men to work in different industries and send the Government-financed industries into these areas to alleviate these depressed areas? Mr. ARMSTRONG. I don't know of the specific proposal, sir, to which you refer. Senator MALONE. Do you read the papers? Mr. ARMSTRONG. Now and then; yes, sir. Senator MALONE. Well, have you not seen that proposal, that we allocate industries and finance industries in depressed areas? Mr. ARMSTRONG. Yes, I have seen that, sir. Senator MALONE. Well, this B paragraph would in some way cover that situation; would it not? Mr. ARMSTRONG. Well, there would seem to be some similarity. Senator MALONE. Well, let's go on a bit. That is your testimony. I will accept that. [Reading:] C. To prevent or moderate pronounced fluctuations in the price of a primary commodity with a view to achieving a reasonable degree of stability on the basis of such prices as are fair to consumers and provide a reasonable return to producers, ever with regard to the desirability of securing long-term equilibrium between the forces of supply and demand. This is an international organization, as I understood you to tesify before, of around approximately 55 nations, and this gives you the right, then, to stabilize the price on any commodity within that entire area; is that right? 39888-54-pt. 4- -8 |