« PreviousContinue »
and other fine print in these contracts, however, and the suspicion arises that they may be partly designed to facilitate obtaining the approval of the Congress in the present 60-day period. While the outsider can only speculate on price policy, I would not expect to see prices for synthetic rubber maintained at this level in the face of rising demand and a natural rubber price level of 30 cents or higher.
Third. Disposal would leave the Government with continuing expenses for maintenance of unsold plants and for fundamental research, without operating income to cover them. Maintenance on the Institute, W. Va., GR-S plant, and on the Louisville alcohol butadiene plant, is clearly essential as partial insurance against a future emergency. Such maintenance costs have not been published, but would probably exceed $1 million per year for these 2 plants.
A report on rubber research was prepared for the Department of Defense early this year by the National Academy of Sciences. The report stated that some $40 million worth of fundamental and applied research will be required over the first 5 years after disposal.
The panel estimated the private industry would carry about half this sum, in applied research, but probably would do almost no fundamental research. The report noted that fundamental research in synthetic rubber is urgently needed, and recommended that the Government finance it for about $20 million.
The RFC and the Federal Facilities Corporation have been supporting a research program at the rate of 4 to 5 million dollars per year. The effect of disposal on the Government's research program, then, would be merely to remove the source of income to support it. Competitive research, sometimes mentioned as a major virtue of disposal, would seem to be valuable only to the private companies, but not to the Government and the taxpayers.
Fourth. Almost all of the major buyers of the plants, and a number of the lesser participants, have very unsatisfactory antitrust records. They have not been content to rely upon the economics of ologopolies. Instead, in their own words, according to a report on the Canadian 1953 antitrust case on tires: "* * * The companies replied that they were forced to band together for mutual protection during the depression."
From January 1937 to October 1952, the period covered by the charges in the case (to which they pleaded guilty), was an extremely long depression. This case involved the Canadian subsidaries of the Big Four rubber companies plus subsidiaries and an affiliate of three other tire companies in the United States.
Congressman Celler's statement before the House Armed Services Committee covered in some detail the antitrust record of many of the proposed purchasers. Senator Douglas of the Senate Banking and Currency Committee requested Assistant Attorney General Barnes to have the Department of Justice submit for the Senate subcommittee record a similar statement. I will not, therefore, burden the record by referring to these cases individually.
I have examined these cases for their implications for the future economic conditions in the synthetic rubber industry, if the industry is sold under the present disposal plan. It is my conclusion that the disposal plan will not in fact "best foster the development of a free competitive synthetic industry.”
The attention of the committee is invited to the Canadian experience with their Government-owned synthetic rubber industry. Their industry was built with Government money in 1952 and 1943, just as ours was, and the plants were operated under contract by the Canadian subsidiaries of much the same companies that have operated the plants in this country. After World War II Canada invited bids for disposal of their plants, but found the bids unsatisfactorily low.
Polymer Corporation, Ltd. (a Crown corporation similar to our Reconstruction Finance Corporation) gradually took over the actual operation of the plants, staffing them with Government employees, and ran the industry on a straight commercial basis. Manufacturers of rubber products in Canada were free to buy synthetics from Polymer Corporation, or to use all natural rubber. (The Canadian Government did not continue wartime controls over rubber usage, as we did.)
Polymer Corporation pays income taxes and all other taxes any privately owned company would pay. It has been prospering; it has expanded capacity, repaid capital advances ahead of schedule, and paid dividends into the Canadian treasury. It has also shipped 10,000 to 20,000 tons of synthetic rubber per year to the United States for the past several years, in spite of our 10 percent ad valorem tariff on synthetic (but not natural) rubber.
The cry of socialism has been raised against those who object to the disposal of the Government-owned synthetic rubber industry. It is significant that no such cry was raised when the Government was running this industry at a loss during World War II. Apparently it is socialistic only for the Government to make a profit.
If the Canadians can run a Government corporation on a full commercial basis in a competitive market, pay full taxes, and still earn net profits equal to 10 percent on sales and about 7 percent on gross investment as they did in 1953, then certainly the United States could do as well, provided we are not deterred by scare words.
If it is not possible to fashion an actively competitive synthetic rubber industry, as the report of the Disposal Commission clearly indicates, another solution must be found. There are technical problems which arise from the physical interconnections from the oil refineries to the butadiene plants to the GR-S plants. The inelastic demand for rubber certainly renders competition, in the economic sense, unlikely.
In such a case the synthetic rubber industry under historical American policy is affected and imbued with the public interest, and if sold, must be regulated like any other public utility. The only other alternative is continued Government ownership. To forestall future cries of “tax subsidy," we might seriously consider setting up the industry on the Canadian pattern.
In the event, however, the Congress does not disapprove the disposal plan, another problem arises. This is the question of the Baytown GR-S plant and possibly the three plants in California bid upon by Shell Chemical Co. The Congress should provide that all these plants be kept in operation and not be permitted to shut down, as required by the Disposal Act.
I understand that all GR-S plants (except the one at Institute, W. Va., which is shut down), all petroleum butadiene plants, and the styrene plant, are operating at full capacity. Consumption of GR-S is running equal to, or above, production. The loss of any of these plants to shutdown could result in a very tight market this year and over the next 3 years, leading to even greater upward pressure on prices. These plants should not be frozen.
Finally, if the disposal plan is permitted to go into effect some action should be taken regarding the 180-day period in the national-security clause. This provision is too weak. In a real emergency, such as a second loss of access to the natural rubber supply of southeast Asia, 6 months is much too long to permit any of these plants to remain out of full production. Yet, there is a loophole even in that period, since the purchasers would be excused from reconverting if they were unable to obtain materials and equipment with which to reconvert.
I suggest that all purchasers of plants be required to maintain intact at all times whatever materials and equipment would be required to permit complete and expeditious reconversion.
The CHAIRMAN. One minute.
Now, members of the committee, I have a statement from Mr. James G. Patton, president of the National Farmers Union, in regard to the disposal program.
Now, is Mr. Patton in the committee room?
The CHAIRMAN. If Mr. Patton is not in, we will file this statement in the record.
Mr. VAN ZANDT. Let's vote, Mr. Chairman.
(The statement follows:)
Mr. Chairman and members of the committee, as president of the National Farmers Union, I am urging disapproval of the proposal to sell United States built and owned synthetic-rubber plants.
These plants were built at a time when the Nation was in great peril and when the development of the synthetic-rubber program determined whether or not
this Nation would be defeated in the struggle against the dictatorial and imperialistic nations of Germany, Italy, and Japan. During World War II big business put the dollar sign ahead of patriotism and refused to go all-out to help win a war unless economic incentives and profits guaranties were offered by the Government. When at the moment, we are threatened with war again, we are at a loss to understand why it is necessary to abandon Government ownership and operation of these plants.
The proposals, from an economic point of view, are not in the public interest. It appears that the United States would be selling the plants at a price which would permit the big corporations to regain their entire investment within a very few years. For example, if the price of rubber was increased to 30 cents a pound, profits in a single year would exceed $150 million. In the light of this fact, the proposal which calls for the downpayment of only $128.5 million and a total price of $260 million to be paid over a period of 10 years, seems ridiculous. Transfer of the plants under this proposal may be properly labeled a "giveaway."
We do not think the assumption that the present price of synthetic rubber will increase from 23 to 30 cents unreasonable. Manufacturers, we are told, have expressed a preference for synthetic rubber and therefore it may logically be assumed that the price will increase to that level. It is significant that there is no provision in the proposal or in the law which prevents the rubber company from increasing prices. Rubber is a relatively inelastic commodity, economically speaking. The economists point out that the urge to increase the price of such commodities when possible is almost irresistible.
Rubber companies would be in an excellent position to increase prices. At the present time, Firestone Tire & Rubber Co., Goodyear Synthetic Rubber Corp., Texas-United States Chemical Co., United States Rubber Co., Goodrich-Gulf Chemicals, Inc., and Shell Chemical Corp. control 87.6 percent of the industry. Shell Chemical Corp. is not to be considered apart from the big rubber companies. Shell has always integrated its policies and practices with them. The sale of the synthetic plants to these gigantic corporations would bring about complete domination of the industry by a few mammoth corporations. Small business would have no part of their plans and programs. If rubber became scarce again, smallrubber corporations, or small businesses depending on them, would be completely crushed.
The record of the big corporations lends credence to this view. Department of Justice and Federal Trade Commission records indicate that the rubber companies and companies distributing rubber products have been consistently antitrust-law violators. Those who have been charged with antitrust-law violations, with price fixing, and conspiracy of the restraint of trade, and other malpractices include Firestone, Goodrich, Goodyear, United States Rubber, and Dunlop Rubber; Sears-Roebuck, Phillips, Standard Oil of California, Goodyear Tire & Rubber of Canada, Socony-Vacuum Oil, Standard Oil of New Jersey, Texas Co., Gulf, Continental, City Services, Food Machinery & Chemical Corp., Allied Chemical & Dye Corp., General Cable Corp., and a number of others. Most, if not nearly all, of these companies have been indicted and have either been found guilty or pleaded nolo contendere. A number of cases involving a number of companies mentioned have been handled by the recent Attorney General and that is why we are at a loss to understand his statement that the sale of these plants will be beneficial to our free-enterprise system. We think that sale of the plants would completely destroy the free-enterprise system in rubber manufacturing and distribution and bring about a complete industrywide monopoly in this field.
We, therefore, urge the committee to approve Representative Patman's resolution which would prevent the sale of United States-owned synthetic-rubber plants. We feel that such sale is not in the public interest, that it is against the interest of consumers, our national-defense program and our free-enterprise systen.
The CHAIRMAN. Now, our colleague from California, the author of the Resolution 171, Mr. Doyle, stated to me that he desired to speak to his resolution. It will be a pleasure to hear Mr. Doyle at this time. And if he will come around to the witness chair, we will be more than delighted to hear what he has to say.
Mr. DOYLE. Mr. Chairman and my colleagues, on June 25, 1953, on the floor of the House of Representatives, of which I am a Member
with you, in my support of the rubber-disposal bill, which I did, I said:
May I make it crystal clear, however, that because today I support this bill, I want it understood that nevertheless if any report comes back from the Disposal Commission which I feel does not fully and in the utmost good faith and strictly carry out the objectives stated by the President of the United States, and is also not in strict accordance with the fundamental requirements of this bill, then I want the record now to show that I intend to then vigorously oppose any sale that is void of these fundamental requirements in my judgment. I shall oppose such sale proposal just as vigorously as I now support the bill.
And of course we as members of the House and of this distinguished committee, presided over so fairly and so distinguishedly by our distinguished chairman, we know that that is fundamental to members of the House and of this committee; that even though we may support a bill, that we reserve the right to object later on if we find substantial objection to it.
Now, manifestly, at this hour and also for the reason that many of the reasons I had for filing this resolution, which I did in perfect sincerity, I wish to assure you, have been given by other witnesses before this committee, I will not take the time of this committee to repeat those. I will try to avoid duplication of some of these arguments that have been given.
I think it is fundamental that I should state that I do not think the convenience of the Commission in desiring to close its disposal program is any justification for any sale if that sale is in any way contrary to the terms of the act.
I do not conceive of it as justification for making a sale under this bill that the time for the disposal program is about to run out, if that factor entered into the awarding of any sale as reported to us.
I, as you know, was a member of the subcommittee of this full committee that traveled to these several States. I think I attended every session of the committee. I am sure I attended every session while the subcommittee was en route to several States, and I enjoyed it. And I wish to say that I am sure we all miss our distinguished colleague, Paul Shafer, who did such a magnificent job as chairman of the subcommittee that reported this bill.
I had no idea, having practiced law 30 years actively before I came here, that the contention would ever be made, the way this bill was written, that the word "shall” was less than mandatory. If I had had any idea that it would be contended by either the Disposal Commission or by anyone that we who wrote this bill did not intend that the Disposal Commission should be bound, strictly, to follow those provisions which have been referred to as to the terms and conditions of the sale and what ingredients should be included, I certainly would have tried to see that there was legal language which made it clear that “shall” did mean mandatory, where the word “shall” was used in this bill.
In other words, I want to make it clear that as a member of this committee and of this Congress, I think the intent of this bill and the intent of Congress when we voted for it, when I voted for it, was that the Disposal Commission could not restate any section of this bill and make it discretionary where the word "shall” was used in connection with these fundamental requirements.
I notice, for instance, in the bill itself—and I have briefly counted them up—there are 6 cases where it is specified, 6 paragraphs where
it is specified by the wording of the bill itself that “The amount proposed to be paid shall be for each of the facilities.”
In no place in this bill, Mr. Chairman, is the wording used, directly or indirectly, as I have read it and studied and helped write it—in no place does this bill indicate that there shall be authority granted to the Commission to digress from the strict construction of this bill to the point where it had the right or the discretion to say to Shell or anyone else: You do not need to bid on each facility. Even though the bill says that, in section 7 (a) (4) you don't need to do that. It doesn't mean that. In our judgment, you can make a total bid, a total sum, without bidding on each facility
I think as a matter of law-I think not only as a matter of law but I think as a matter of congressional intent, the intent clearly was, and the basis of the bill is, that each facility should have been bid on in each case.
Now, in the committee's report—and of course the committee's report also goes to the subject matter of showing the intent of Congress. I am trying to avoid getting into an argument with our busy, able lawyers, including our very able counsel, Mr. Courtney. But I do find, in order to make clear my position, that I must refer to his opinion given our distinguished chairman.
Mr. Courtney, on page 4 of his worthy opinion, stated, in (b):
It is to be noted that the legislative intent of this section, as stated in (h), House Report 593, accompanying Public Law 205—that report states that subsetion (4) of section 7 (b) is "mechanical in nature."
But Mr. Courtney could well have included in that opinion to the chairman this paragraph of the report, on page 8—it is a companion paragraph, and we have to read the whole bill together—and I quote:
Paragraph 3 of subsection 7 (b) is of extreme importance to both the Commission and the bidder, for it is on the basis of the information contained in the requirment that the Commission will be able to determine the competitive pattern that will be established in the industryclearly making clear, Mr. Chairman and my colleagues, that the bidder had an interest in the manner in which this disposal was interpreted by the Disposal Commission, in addition to the Government.
And I submit that every bidder who bid in this disposal program was an interested party and has a vital, substantial interest, not only as a bidder but as an American citizen.
Now, take Mr. Courtney's worthy opinion, subsection (2) on page 4, section 7 (b) (4):
It is well settled it is directory and not mandatory, upon the authority cited. It is a "procedural detail, mechanical in nature" and "not going to the substance of the thing to be done.” This section is for the guidance of public officials and the protection of the Government.
And now notice this: "and grants no right to private citizens.”
And I have just read paragraph 3, subsection 7 (b), which shows that the bidders and the private citizens are interested parties in the manner in which this disposal is being conducted.
Now, there is an angle in connection with the law on this matter which has not, I think, been touched upon in any of the arguments, and I feel it is incumbent to have the record speak pretty clearly.