I hate to say this, but confidence in the soundness of the Reciprocal Trade Agreements Act has been impaired by the treatment accorded lead and zinc.

If the President were now to approve the escape-clause recommendation of the Tariff Commission on lead and zinc, it would do much to restore faith in the act, for it is intended to function without injury to the well-established and necessary mining industry.

Mr. Chairman, I have a memorandum which I would like to submit for the record of my conference with the President on Thursday, June 19, 1958, on the problems of the American lead and zinc industries. Mr. ROGERS. Without objection, it will be made a part of the record at this point.

(The document follows:)

MEMORANDUM FROM CONGRESSMAN THOMAS B. CURTIS RE PROBLEMS OF AMERICAN LEAD AND ZINC INDUSTRIES CONFERENCE WITH THE PRESIDENT, THURSDAY, JUNE 19, 1958

In 1954 the President, in rejecting the unanimous recommendation of the Tariff Commission to increase duties on lead and zinc, outlined two programs of stockpiling, one being the stockpiling of lead and zinc of domestic origin and the second being the stockpiling of lead and zinc of foreign origin under section 104 of the Agricultural Trade Development Assistance Act. Concurrently, the President stated that he was directing the Secretary of State to seek recognition by interested foreign countries that this increased stockpile buying was designed to help domestic United States production and that the foreign countries would not themselves seek to take unfair advantage of it.

The table below shows the imports of both zinc and lead as a percent of the United States total industrial consumption for each year 1947 through 1957 and during the first quarter of 1958:

From the above table it will be seen that the lead and zinc industry did not petition the Tariff Commission (in 1953) until imports of both lead and zinc were arriving in such volume as to take in excess of 50 percent of the industrial market. The stockpiling programs instituted by the President were successful from the standpoint of price in that during the year 1955 the prices of the two metals both rose to adequate levels. With the discontinuance of barter stockpiling in the first half of 1957, the market prices of both metals broke sharply to distressed levels and have remained at distressed levels ever since. The recession in consumption of these metals in the United States since the middle of 1957 has, of course, abetted this condition.

While imports of zinc during 1954 and 1955 were below the 1953 level, expressed as a percent of total United States industrial consumption, by 1956 the imports into this country had risen above the 1953 level and during 1957 were 73.5 percent of the United States market. During the first quarter of 1958 this figure had risen to 84.5 percent. The same thing was true of lead, although to a lesser

degree. Lead is in a peculiar position, however, in that between 40 and 50 percent of the total United States supply is always generated from domestic secondary materials so that an import rate of new metal and ores as high as 60 percent represents 100 percent of the remaining new lead requirements market. In early 1957, the administration introduced to the Congress a recommendation for a long-term minerals program which included a sliding scale of duties on lead and zinc. At current prices these duties would have been comparable to the duties presently recommended by the Republican members of the Tariff Commission. This was rejected by the Ways and Means Committee of the House because "administrative measures had not been exhausted" and the industry was told to return to the Tariff Commission as the proper channel. This was done in late 1957 with the result that the recommendation was made by the Tariff Commission in April 1958 with a unanimous finding of injury but a split recommendation on the amount of the duty.

Since this recommendation the administration has suggested two other alternatives; namely (1) the so-called global plan which, under the auspices of the State Department, would make bilateral agreements with various countries shipping to the United States to control their exports to this country in line with actual needs, taking into consideration an adequate mobilization base rate of production of the United States industry; and (2) the so-called Seaton plan of subsidies to the United States industry. A brief analysis of each of these plans and their present status is as follows:

1. Global plan: Industry representatives have met with Mr. Mann and his staff of the State Department for a preliminary discussion of such a plan. The industry indicated to Mr. Mann that they had no objection to such a plan being attempted and offered its cooperation if certain obstacles could be overcome. First, the whole matter would have to be cleared with the Justice Department for a ruling as to its legality under antitrust laws. Secondly, all of the countries would have to agree on proper allocation of exports to the United States which would be a difficult and laborious task. Thirdly, if the allocations are to be on the basis that the United States zinc industry could run at 550,000 tons per year and the United States lead industry at 350,000 tons per year, as set forth in the Seaton plan, then the total zinc and lead imports to the United States would voluntarily have to be reduced by 70 percent based on first quarter 1958 statistics and approximately 50 percent based on statistics for the entire year 1957, which in total was a fairly normal year consumptionwise. While this plan has possibilities for solving the long-term problem, there are many obstacles to be overcome and its outcome is uncertain.

2. The Seaton plan proposes to subsidize 550,000 tons per year of zinc mine production and 350,000 tons per year of lead production. In effect it removes the domestic mining industry to this extent from the perils of low world prices and places under it a price floor which under all economic conditions will virtually assure these levels of production. It was proposed without consultation with the industry and is opposed by a large number of the companies producing substantial quantities of lead and zinc in this country. If it is to work, the free market price must find a level which will, based on first quarter of 1958 figures, reduce the imports into this country by approximately 70 percent and, based on figures for the year 1957, a fairly normal consumption year, reduce imports by approximately 50 percent. Obviously, the free market prices would have to be substantially below the present levels and likely would create economic chaos in the mining industries of Canada, Mexico, and Peru. While this plan sounds politically intriguing to our foreign friends, when the facts are examined and the serious effect on their prices and production realized, it is certain that the United States will be blamed for the great dissatisfaction which is certain to be generated by its adoption.

If the alternatives proposed cannot be immediately effective without undue hardship, which they apparently cannot, and some solution to the extremely serious problem facing the industry instituted, which must be done, then modest duty increases should be considered. The present rate of duties on zinc and lead metal and zinc and lead concentrates, together with the recommended rates of the Republican Tariff Commissioners and the Democratic Tariff Commissioners, are as follows:

The market price of these metals is influenced much more by the supply of finished metal than the supply of the raw materials, which are lead and zinc concentrates. (This is true in the market prices for lead and zinc just as it is for steel where the supply and demand for steel has much more to do with making price than does the supply of iron ore.) Also in the case of zinc the United States needs very substantial imports of concentrates to satisfy existing smelter capacity, but under most conditions requires very little, if any, zinc metal. In lead, the same is true through to a lesser degree.

Therefore, since we must have a substantial flow of concentrates into this country at all times and since it is the miners in the various foreign countries that our Government is particularly concerned with, it would seem reasonable to increase the duties on zinc and lead metal by the amounts recommended by the Republican Tariff Commissioners and place the duties on lead and zinc concentrates at the levels recommended by the Democratic Tariff Commissioners. In this way the exporters of zinc and lead concentrates to this country would enjoy to a limited extent the benefits afforded to the United States miners of higher metal prices caused by increased metal duties. This would have the effect of being much less burdensome on the foreign miners than the Seaton plan and would be more palatable to a large sector of the domestic industry.

If the global plan could become a reality and it were proven to be so to the extent that it would increase United States prices above the point needed to maintain an adequate mobilization base in the domestic zinc and lead mining industry, during such time as the market price was above these prices, it would seem equitable to suspend the increased duties. This would also prove a workable means of encouraging the participating foreign producing nations to limit their exports to the United States so that they could enjoy the benefits of higher prices and at the same time lower duties.

The tariff method of regulating trade is by far the most liberal in that it permits industry to determine for themselves how to cope with the regulation. Licenses and quotas, of course, require the industries involved to come to Washington and deal with the administrative agency which handles the licenses and quotas. The subsidy method also requires the industries to come to Washington to deal with the particular agency which is going to set up the quotas and subsidies. It is axiomatic that the smaller businesses cannot afford to come to Washington and, because of this, do not get their views expressed. Therefore, as far as small business is concerned, it is much easier for them to deal with the tariff procedure rather than with the aforementioned alternatives. The subsidy method is also objectionable in that it requires the administrative tribunal to determine what industries are to be subsidized which will include both the efficient and the inefficient. Surely whatever method we select should not be used in such a manner as to encourage the inefficient operation of any business. If the industries elect to follow the tariff method, then this decision will be made on their own basis and those who have economic operations will stay in business and those whose operations are uneconomic for reasons of poor management, use of inferior ore, great distances from rail or other forms of transportation, etc., will cease. This is certainly consonant with our free enterprise system. It encourages efficient operation in business and industry which will redound to the benefit of our overall economy.

It is time that we took cognizance of the various cost burdens we place on our domestic industries through legislation designed to promote the best interest of our society. The Federal minimum-wage laws, antitrust laws, social security,

unemployment insurance, health and safety regulations are examples of such social legislation. Now, if we believe this legislation is desirable and has helped to promote the high standards of living in this country, and I believe that this legislation meets these standards, it is necessary for us to reflect this cost burden in our trading with nations abroad with a compensatory differential. The differential need not reflect absolute cost differentials, inasmuch as our society, through the high standard under which our workmen live, enjoys increased productivity from labor. The differential should be geared toward making competition equal and health. Ten-cents-an-hour wage from lead and zinc minerals of Peru in relation to $2 per hour paid in the United States requires some differntial to keep fair competition in force and to eliminate the advantage given to what we properly can term sweatshop labor. We have learned in this country that sweatshop labor in the long run is uneconomic. It does not help the employee, the consumer, or the economic health of the industry or the country in which the industry operates.

If we are to help societies abroad build their economies on a sold basis, we must not base the effort on the exploitation of foreign labor. What I have stated is, by far the most liberal and efficient manner of regulating a competitive differential,. It seems obvious that such a differential is needed for the domestic lead and zinc industries.

There are those who have said that our stockpile of lead and zinc is ample for the immediate future. I submit that lead and zinc and many other metals are going to become short in all countries in the world in the coming centuriessome even in this century. I think the following generation would regard us as being very wise to convert gold that does not have the practical or utilitarian value that other metals might have, partly, into ample stockpiling of lead and zinc. Accordingly, one means of assistance which is in complete accord with both the global plan and the application of a tariff differential is to continue stockpiling lead and zinc.

I understand that ex-President Herbert Hoover, one of the greatest mining engineers we have, feels it is sound public policy to convert our surplus and easily replaceable surplus agricultural products into the one-crop irreplaceable mineral deposits of foreign countries, such as exemplified by lead and zinc, which is currently obtainable at extraordinarily low world prices.

Mr. ROGERS. Are there any questions?

The gentleman from Nebraska, Dr. Miller.

Dr. MILLER. I presume, Mr. Curtis, one of your chief objections might be as to who has jurisdiction of the bill.

Mr. CURTIS. No. I think this committee has full jurisdiction over this, and we have jurisdiction over the other. I am simply suggesting, as is frequently the case where you have these clear jurisdictional lines that cover the same problem, that we ought to try, as best we can, to gear our ideas and knowledge on the subject. I am trying to be cooperative.

Dr. MILLER. I would agree with you, entirely, that we have to coordinate our activities.

Mr. DAWSON. Will the gentleman yield?

Dr. MILLER. Yes.

Mr. DAWSON. This is the situation of lead and zinc to which the gentleman referred: The lead and zinc industry went to the Ways and Means Committee asking for relief, and the Ways and Means Committee said, "Your relief should be with the Tariff Commission." Mr. CURTIS. That is right.

Mr. DAWSON. So, they went to the Tariff Commission; had lengthy hearings. The Tariff Commision made a favorable finding that the industry was in distress, and recommended relief. They went down to the President. The administration came back and said, "We do not want to do anything to hurt our foreign friends, and we propose, instead, a stabilization program."

Mr. CURTIS. That is right.

Mr. DAWSON. So, the stabilization program has passed the Senate and is back over here to this committee, and we have gone a complete circle and here we are back again with a dying industry, and we have come to the end of the road. The gentleman from Missouri is in a better position to testify on the circuitous path we have gone than anyone else I know of.

Mr. CURTIS. May I say this: To use a metaphor, this is one horse on the merry-go-round. I have tried to present in my statements what the other horses are, so maybe we can stop the merry-go-round and get something done.

Mr. ROGERS. Thank you.

Mr. ASPINALL. If the gentleman will yield, what it all amounts to, Mr. Curtis, is this: That the whole industry goes to pot while somebody is playing their own bull fiddle and we are not getting anyplace. That is what it amounts to.

Mr. CURTIS. I might agree with that metaphor, too.

Thank you.

Mr. ROGERS. The Chair will now recognize the Congressman from Washington, Walt Horan.

STATEMENT OF HON. WALT HORAN, A UNITED STATES REPRESENTATIVE FROM THE STATE OF WASHINGTON

Mr. HORAN. Mr. Chairman and members of the committee, I want to join others in urging the passage of S. 4036. The district I have the privilege to represent is vitally interested in the mining of the minerals which this measure seeks to assist.

Right now, these mines, along with similar operations throughout the Nation, are hurting. We would prefer tariff protection, but objections to that have been raised, perhaps with good reason, and this proposal appears a reasonable compromise.

I must call the attention of the committee to the necessity for maintaining whatever health we can for American underground mining. This committee will be told many times, of course, regarding the advantages that the American mineral industry has found in maintaining their mining operations abroad because of low production costs in the labor field.

However, with the present condition of the world, I feel that the Congress would be derelict in their duties to the security of this Nation if we did not take active steps at this time to maintain our underground mining operations in our own United States.

In this bill, minimum provisions have been made for the production of copper, zinc, tungsten, lead, and fluorspar minerals.

In case of military difficulty, which, unfortunately, has been with us for almost one-half century now, it is unconscionable for us to rely on offshore supplies.

One of the interesting facts brought out in the Senate hearings was the testimony of Wernher von Braun that it would be impossible for us to produce enough fluorspar, for instance, which is necessary for the ultimate of both solid and liquid fuel for our missiles and satellites.