respect to S. 4036, both the Treasury Department and the Bureau of the Budget have voiced their disapproval of utilizing the public debt transaction method.... In letters to Senator John J. Williams, dated July 10, 1958, Laurence B. Robbins, the Acting Secretary of the Treasury, stated: "*** In this particular case funds borrrowed from the Treasury would be used to make subsidy payments which would not be repaid. In these circumstances, there is no justification for this type of financing, and the Treasury is opposed to it ***." And the Bureau of the Budget wrote: "*** The Bureau does not favor the creation of a borrowing authority for this program, and would strongly recommend that appropriations be used to finance the program * * *. These opinions, coupled with the continued criticism of the public-debt-transaction technique by the Comptroller General, are strong arguments against the method of financing proposed in S. 4036. We believe that the United States should pursue a constructive and realistic tariff policy which will encourage the flow of international trade and at the same time afford reasonable protection for American industry and agriculture against destructive or uniair competition from abroad. In supporting the reciprocal trade agreements program we have testified on our belief that this legislation should provide an escape clause permitting modification or withdrawal of concessions in order to deal with unforeseen developments seriously injurious to domestic producers. Unreasonable or unethical competition should not be the cause of serious injury to domestic producers, but the determination of injury due to imports should be judged in the light of the national interest. The chamber recommends, therefore, that your subcommittee disapprove S. 4036 with its direct subsidies, its dangers of Federal control, and its unsound financing. The escape clause of the Reciprocal Trade Agreements Act is the appropriate device for considering relief to the domestic mining industry. We request that this letter be made a part of the record of the hearings on S. 4036. Cordially yours, CLARENCE R. MILES. Mr. ROGERS. Without objection, a statement submitted by the aluminum producing industry in the nature of a letter addressed to the Honorable John Foster Dulles, Secretary of State, Washington, D. C., and a memorandum submitted by the Aluminum Company of America, Anaconda Aluminum Co., Kaiser Aluminum & Chemical Corp., Olin Mathieson Chemical Corp., Revere Copper & Brass, Inc., and Reynolds Metals Co. will be inserted in the record at this point. (The documents referred to follow :) UNITED STATES SENATE, Washington, D. C., June 25, 1958. DEAR MR. SECRETARY: The aluminum industry is an important segment of the economies of our respective States, as well as a major component of our country's mobilization base. Since World War II, the industry has invested over $2 billion of private capital to build primary and fabricating facilities, most of it in furtherance of Government mobilization expansion programs. At present approximately one-third of the productive capacity of the industry is shut down, in part because of increased imports of aluminum, principally from friendly countries whose aluminum markets are effectively closed to United States manufacturers. In addition, the economic warfare tactics of the Soviet Union have weakened aluminum prices in the world market and lessened the domestic industry's ability to maintain production during times of reduced demand. In the case of other materials, many of less strategic importance than aluminum, the executive agencies have from time to time taken such action as they deemed necessary in an effort to help reduce the effect of increased imports on domestic production. We suggest that it may be of mutual benefit to discuss with representatives of the aluminum industry the problems with which the industry is now confronted and concerned. In this regard we hope that you will agree to meet with representatives of the aluminum industry at your earliest convenience. The representatives are also interested in meeting with officials of the Department of Commerce, the Department of the Treasury, the Department of the Interior, the Department of Defense, the Office of Defense Mobilization, and General Services Administration, and a copy of this letter is being sent to each of these agencies. Very sincerely, United States Senators Lister Hill, John Sparkman, J. W. Fulbright, MEMORANDUM SUBMITTED BY THE ALUMINUM PRODUCING INDUSTRY CAUSES AND EFFECTS OF IMPORTS OF ALUMINUM: THE NEED FOR GOVERNMENT ACTION Preliminary statement-the extent of the problem The aluminum industry has been one of those most seriously affected by the recession. Thirty percent of the existing domestic facilities for producing primary aluminum are now idle-605,450 tons out of the existing installed capacity of 2,026,500 tons. There is also under construction additional capacity of 578,000 tons, and the present depressed condition of the industry has already compelled 170,000 tons of this program to be indefinitely postponed. In this situation, continued heavy shipments of foreign aluminum into the United States market are causing widespread distress. It is estimated that there are now 20,000 workers unemployed in the aluminum production and fabricating industries. If the penetration of the domestic market by foreign producers continues to grow, as it seems likely to do with the growing use of subsidies and other export supports by those foreign governments anxious to obtain dollar exchange, both the number of unemployed and the percentage of unused capacity are likely to increase. At this juncture the sudden emergence on the world market of Communistbloc aluminum offered at artificially low prices has seriously weakened the world market and the United States domestic market. Prices have been forced down to a point at which United States producers and fabricators find great dfficulty in competing against foreign suppliers, whose manufacturing facilities are often as efficient as any existing in this country but who enjoy the advantage of labor costs which are only a fraction of those existing in the United States. The impact of these events is best understood in the light of the history of the last 20 years. Twice in that period, first in World War II and then during the Korean war, the United States has found that its national security imperatively required a greatly increased domestic supply of aluminum. In each case the Government necessarily initiated and pressed forward urgently a major expansion program. The domestic aluminum industry rose to the occasion. Then and since, it has conclusively established both its ability and its willingness to expand sufficiently to meet-at reasonable prices-all of the Nation's aluminum needs. The measure of this willingness is in the statistics of capacity. United States capacity for the production of primary aluminum increased from 164,000 tons in 1939 to the present figure of over 2 million tons as of July 1, 1958, with enough more capacity under construction to total 2,604,500 tons a year. Over $2 billion of private funds have been invested in aluminum producing and fabricating facilities since the end of World War II alone. The major national effort involved in these expansion programs, public and private, was directed toward establishing a healthy, dynamic aluminum industry as one of the keys to United States leadership of the free world. This is as necessary in the economic struggle in which we are now engaged as it ever was in the "hot" wars. Today, however, the situation is deteriorating, and it is not completely within the industry's own power to supply either a long-range cure or the necessary immediate remedies. The long-term cure will be the creation of markets for the world's surplus aluminum; the industry considers that this should be one part of our program of assistance to the less developed areas of the free world. The immediate problem of the industry is to stem the current flow of surplus aluminum and aluminum products from the other producing countries to the already unbalanced United States market. In both cases governmental action is necessary. 1. A PRINCIPAL LESSON OF BOTH WORLD WAR II AND KOREA WAS THAT A STRONG DOMESTIC ALUMINUM INDUSTRY IS ESSENTIAL FOR NATIONAL SURVIVAL (A) The challenge of war At the outset of World War II Germany and its allies controlled over half the world's aluminum capacity. Facilities available to the United States were grossly inadequate for the minimum needs of our own Armed Forces, and we were required to support the forces of all our principal allies as well. As a result, a huge emergency aluminum expansion program throughout the early years of World War II was given one of the highest priorities of our war effort. Only in this way could we overcome the military advantage which Germany held through prewar leadership in aluminum production. The more limited Korean emergency again pointed up the need for having immediately available, here in the United States, enough aluminum capacity to meet the requirements of war. As the amount of aluminum needed by the Nation's Armed Forces increased, the amount offered for importation declined, and a system of allocation again became necessary. Accordingly, the Government once again pressed the industry to undertake a sharp expansion of domestic capacity. (B) The industry's response In order to meet the national need and to supply the civilian markets for aluminum which the industry had developed in the peacetime years, the United States aluminum industry has expanded its capacity from 164,000 tons in 1939 to 2,026,500 tons by July 1958-a growth of over 1,000 percent. Fabricating facilities to convert this enormous volume of raw material into useful shapes and forms for industry and the public also had to be provided. Expansion since World War II has required private investment in excess of $22 billion, with heavy additional investments committed for in connection with the plants now in various stages of construction. (C) The industry's commitment to the future The United States aluminum industry is determined to do everything in its power to assure that never again will the national interest demand domestic aluminum production and find the means wanting. The industry's huge construction program since Korea-now set back temporarily-has been planned to meet not just the immediate needs of the United States but the demands of its future growth, both as the most prosperous and expansive economy the world has yet seen, and as an indispensable supplier for the less developed areas of the free world. The industry is committed to meeting these demands by constructing the necessary facilities in advance, so that aluminum will be available in quantity at reasonable prices, when it is needed. Such a program necessarily must envisage temporary periods of surplus supply, which the current recession makes more difficult. The aluminum industry, however, should not have to contend with exploitation of a temporarily unbalanced domestic market by foreign suppliers channeling into it their own surplus products, often at subsidized prices. II. IMPORTATION OF UNNEEDED ALUMINUM AND ALUMINUM PRODUCTS FROM LOWWAGE NATIONS HAS INTENSIFIED A SEVERE RECESSION IN THE DOMESTIC ALUMINUM INDUSTRY At present the United States aluminum industry has 1,421,050 tons of primary aluminum capacity operating, and 605,450 tons idle. With the addition of new facilities now under construction the aluminum producing capacity of the United States will be nearly double the capacity now in use to meet current demands. Yet foreign aluminum is continuing to enter the United States market in undiminished amounts, as some foreign governments, anxious for dollar exchange, assist their own producers with excess capacity to unload aluminum in the United States. Imports have actually risen from 177,652 tons in the aluminum shortage year of 1955 to 216,401 tons in 1956, and 222,158 tons in 1957. Without exception, the consumption of aluminum in every country which is now on balance a net aluminum exporter to the United States is substantially less per capita than the consumption of aluminum in this country. Yet the all too common reaction of many foreign aluminum producers and fabricators to the problem of surplus appears to be not to develop further their own domestic markets or to penetrate the huge still undeveloped markets existing elsewhere in the free world, but instead to unload their surpluses in the United States market which has been the most fully developed in the world and is today the most adequately supplied by its own domestic industry. The result of this determined effort to sell surplus aluminum in the United States market is a completely unjust distribution of the worldwide surplus of aluminum capacity. Thirty percent of installed United States primary aluminum capacity is now idle as against only about 10 percent idle capacity in the remainder of the free world. Today the United States presents the anomaly of a country which is the world's largest producer of both primary aluminum and of fabricated aluminum prođucts, which has three-quarters of the world's unused aluminum capacity, and yet is at the same time a substantial net importer of both primary and fabricated aluminum. Moreover, price cuts by foreign producers have forced general price reductions in the United States market which domestic producers are less able to bear, since most foreign producers pay wages far lower than those which are paid to United States workers, although their operations and facilities are generally as efficient as those in the United States. Average hourly wages in manufacturing industries in 1957, for example, were $2.07 in the United States (in the aluminum industry they were nearly $2.50) while they were $0.62 in the United Kingdom, $0.39 in France, $0.48 in West Germany, and even in Canada they were only $1.63. ལ་། While the immediate effects of this aluminum importation from Tow-wage countries have been intensification of unemployment and indefinite postponement of construction, the long-range effects of continued imports at the present level will be even more serious: Lack of growth by the United States aluminum industry; rebirth of dependence on foreign aluminum to meet essential American needs; and inability of the weakened domestic industry to create and expand into potential markets here and abroad. III. THE DANGERS TO THE UNITED STATES ECONOMY OF RELIANCE ON FOREIGN Foreign aluminum producers have been an extremely undependable source of supply, increasing sales to United States market at times of worldwide aluminum surplus but decreasing shipments during some of the very times when aluminum has been most badly needed here. During the most critical Korean war years, for example, aluminum importation dropped from 176,778 tons in 1950 to 122,422 tons in 1951 and 128,233 tons in 1952. Again, during 1955, a year of aluminum shortage, importation, declined to 177,652 tons from 215,250 tons during the previous year. During those years of worldwide aluminum shortages foreign producers diverted a portion of their supply to other, more attractive, foreign markets. The reduced availability in the United States of foreign aluminum and aluminum products during the times when they are most needed in the United States flows naturally from the fact that offers of such goods at low prices in the United States market during times of surplus are frequently the result of economic policies consciously adopted by foreign governments to earn additional dollars. Many of the foreign countries from which aluminum and aluminum products are presently coming to the United States market grant subsidies, tax rebates and exemptions, and other benefits to companies exporting aluminum. West Germany, Belgium, France, the Netherlands, Italy, Switzerland, the United Kingdom and Japan are among the countries which grant significant tax advantages or subsidies to exporters. The price of many foreign aluminum products has been as unstable as their availability, undercutting the prices of United States producers and fabricators during years of excess capacity but rising to all the traffic would bear during shortage years. For instance, the United States Government recently purchased about 1 million pounds of aluminum plate on a competitive-bid basis. The lowest bid, by a New York importer was about 20 percent below the average of all domestic bids. His source of supply is a Belgian mill which is a heavy purchaser of Russian aluminum. The United States Government nevertheless awarded its order to this importer. In contrast, European producers and fabricators were charging premium prices far above domestic prices in the shortage year of 1955. Most foreign governments have not only encouraged exports, often at an artificial level, but have imposed rules and regulations designed to protect their local economies against the importation from the United States of goods available in soft-currency areas. As a result, the aluminum industry is not con It fronted simply by the ordinary competitive problems of free would trade. instead must meet the opposition of governments which prevent or discourage the importation of United States aluminum but which take whatever steps are necessary to cause foreign aluminum to be imported into the United States in order to build up dollar reserves regardless of conditions in the United States market. IV. THE SOVIET CHALLENGE TO UNITED STATES SUPERIORITY IN ALUMINUM United States leadership in world production of aluminum, established as a result of the national effort of World War II, is again endangered, this time by the Soviet Union. Soviet bloc production has increased from 25 percent of United States production in 1946, to 57 percent in 1958, with 1,200,000 tons of capacity planned by 1961. A vigorous and growing United States aluminum industry is essential if this challenge is to be met in the world's undeveloped areas. Even the price of aluminum offered in the United States market by foreign producers has been drastically affected by the Soviet Union's arbitrary pricing of aluminum for export. During 1955, with a shortage affecting free world markets, Russian aluminum appeared in western European markets at premium prices. Russian aluminum sold at a 28 percent premium in the United Kingdom. During the last half of 1957, though world aluminum markets were weakening rapidly, Russian aluminum was again offered in British, German, and Belgian markets. No effort was made to get the best prices possible as had been done in 1955. Instead the aluminum was offered at a discount of about 2 cents per pound below the price the principal aluminum suppliers, Aluminium, Ltd., was then charging, although Soviet domestic aluminum prices were 139 percent higher than these Soviet export prices. No action was taken by the British Government, and this Soviet dumping of perhaps less than 20,000 tons of aluminum in the British market at arbitrarily low prices weakened the world price for aluminum. In March of 1958 Aluminium, Ltd., announced a 2 cents per pound cut in its world price, matching the discount then being given by the Russians. The new price became effective on April 1 throughout the free world, including the United States and affected about 3 million tons of annual production. Despite this price cut the Soviet Union continued its economic offensive against the free world's aluminum trade, cutting its British offering price by another 2 cents and even more. The most recent aluminum to be offered at this artificially low price is reported to come from Hungary. There is no secret as to the purpose of this Soviet activity. In November of 1957, Mr. Khruschev stated specifically: "We declare war upon you-excuse me for using such an expression-in the peaceful field of trade. "We declare war. We will win over the United States. The threat to the United States is not the ICBM, but in the field of peaceful production. We are relentless in this and it will prove the superiority of our system." Three times in two generations a "hot" war has caught this Nation unprepared. It should not be caught unprepared by this form of economic warfare, which can be no less deadly to the future of our country. Russian activities to date are only the beginning—a preliminary trial of the effect on normal trade and the free world's economy of an influx of Soviet products, marketed at artificial price levels, for the purpose not of normal economic advantage but of weakening and even destroying other industry-particularly United States industry. This country has not even a skeleton defense, not even an agreed procedure to follow in the event of a full-scale Russian economic offensive in the United States domestic market. |