term interests nor in the long-term world interests of assuring that there are adequate supplies of tin to meet demand.

And I think even the tin producers now have come to the conclusion increasingly that the recent rise in prices is contrary to their interests because it encourages the substitution of other materials such as plastics for tin and has the effect of destroying long-term demand for tin. Senator BARTLETT. Because the United States obtains 80 percent of its tin from foreign sources and obtains the rest by reprocessing used tin, why is the administration setting such a low goal for tin in its stockpiling planning, especially in light of our statement that the price is rising and tin is becoming more scarce?

Mr. BOSWORTH. Senator, I think that is probably a question Mr. Mitchell may be in a better position to respond to than I since the actual goals of the stockpile program are not something which are within my province and responsibility.

Senator BARTLETT. Could I leave that question with you, Mr. Chairman? I have to leave in a few minutes.

Senator HART. Thank you, Mr. Bosworth. If you want to expand on the record or offer additional information

Mr. BOSWORTH. Yes, I would like to respond in the record to your question which involves some numbers I didn't have right at my fingertips.

Senator HART. Thank you very much.

I would like to ask Mr. Dale Church, Deputy Under Secretary for Acquisition Policy, Office of the Under Secretary of Defense for Research and Engineering to give your statement to the committee.

STATEMENT OF DALE W. CHURCH, DEPUTY UNDER SECRETARY FOR ACQUISITION POLICY, OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR RESEARCH AND ENGINEERING, ACCOMPANIED BY RICHARD E. DONNELLY, STAFF DIRECTOR FOR MATERIALS POLICY

Mr. CHURCH. Thank you, Mr. Chairman. I would like to introduce Richard Donnelly, my staff specialist in materials policy, to help me answer questions.

Mr. Chairman and members of the subcommittee, I appreciate this opportunity to appear before you in connection with your deliberations on the pending legislation including S. 2575, a bill to amend and review the Strategic and Critical Materials Stock Piling Act.

The provisions of the proposed legislation relate primarily to the functions of the Federal Preparedness Agency of the General Services Administration which is the Federal agency responsible for the operation and management of the stockpile itself. We work closely with that agency, not only for stockpile planning, but also in connection with other related national preparedness functions. I would like to first make some general remarks on S. 2575, the other bills and on the national stockpile of strategic and critical materials as a whole, and the role of the Department of Defense in its management and control. With respect to stockpiling calculations, the Department of Defense provides to the FPA estimates of wartime military hardware production requirements, estimates of shipping losses, information on

scenario characteristics and other defense-related factors. The direct defense requirements are then combined by FPA with the wartime. requirements of the civil sectors of the economy. Where proiected wartime supplies are determined to be inadequate, a stockpile inventory goal is established.

Two years ago, an extensive interagency study of the policies and assumptions which underlie stockpile planning was completed. This study effort, which was chaired by the Federal Preparedness Agency, included full participation by the Office of the Secretary of Defense and the Organization of the Joint Chiefs of Staff. The Department of Defense concurred in the interagency study which was the basis for issuance of new National Security Council policy guidance. This guidance generally calls for stockpiling those materials for which we are dependent upon foreign sources of supply, in quantities sufficient to meet U.S. national security requirements during a major war assuming large-scale industrial mobilization, and providing at the same time for a broad range of civilian needs to insure a viable industrial base.

Last year, the change in the administration caused a moratorium to be placed on the implementation of the study and all stockpile acquisitions and disposals. In October 1977 the moratorium was lifted and major elements of the stockpile policy developed by the interagency study were reaffirmed. One new element of the policy, however, is to insure that the highest priorities for acquisitions of stockpile materials are associated with developing a strong readiness posture for the first year of an emergency.

As the result of the interagency study, an annual materials plan was established which calls for annual reviews of changes in national security planning and product and market conditions as they affect stockpiling. The DOD and other Federal agencies participate in this annual review through membership on the Annual Materials Plan Steering Committee. We also participated in three subcommittees which deal with issues such as the impact of changing defense requirements on materials' usage, the International Economic and Political Impacts of stockpile transactions, and New Materials Requirements.

The intent of the plan is to promote improved coordination of material acquisition and disposal decisions.

We have noted the current stockpile goals reflect significant shortages and excesses when compared with actual inventories. We support prompt action to alleviate the most critical of these shortages as well as to dispose of those quantities which are clearly excess to requirements. We recognize the actions need to be tempered by market conditions, foreign policy implications and budget priorities; however, critical strategic needs should be the overriding requirements.

Now, returning to the specific reason why we are here today, your consideration of S. 2565 and the other pending stockpile legislation, I would offer comments on the eight features which we believe are of major importance in the bill.

Senator HART. S. 2575.

Mr. CHURCH. 2575. You were listening carefully.

First, Senate bill 2575-

Senator HART. It is my bill.

Mr. CHURCH [continuing]. Limits release of stockpile material for purposes of national defense and prevents use of the stockpile for economic or budgetary purposes.

Second, the bill emphasizes the use of the stockpile for civilian needs as well as military needs.

Third, the bill combines the three stockpiles that currently exist. Fourth, the bill requires congressional authorization for acquisition, or more accurately procurement, as well as disposal of stockpile materials. The existing law requires congressional authorization only for disposals.

Fifth, the bill establishes a program for acquisition and disposal of stockpile material by means of a bartering system. Excess stockpile material and surplus Government-owned goods would be transferred as payment for expense of acquisition of strategic and critical materials needed for the stockpile.

Sixth, the bill establishes a transaction fund to which all moneys received from disposals of stockpile material are credited to an account for the acquisition of strategic and critical materials needed for the stockpile. Unexpended moneys would revert to the general Treasury after a definite period of time.

Although these six features are not directly under our authority, we support them all in principle. We would like to defer to GSA on specific amendments they may be offering on behalf of the administration.

Senator HART. Are you speaking in that regard for the administration in terms of general support?

Mr. CHURCH. I am speaking for the Defense Department with respect to those six points. I think it is more correct that the Federal Prepardness Agency, Mr. Mitchell, will speak for the whole admin

istration.

Senator HART. Thank you.

Mr. CHURCH. There are, however, two other features in the bill of direct concern to the Department of Defense. First, the bill limits the release of stockpile material to U.S. interests. We suggest this be waived in its entirety or at least for NATO member countries. It is in the national interest to allow our allies to obtain, at fair market value, strategic and critical materials of importance to their own defense production programs.

Second, the bill would limit the authority of the President to use, sell, or otherwise dispose of nonexcess stockpile materials only in response to a national emergency. "National emergency" is defined in section 3(2) of the bill as "a period of time during which the national security of the United States is jeopardized by the threat or action of a foreign power." The effect of the bill would be to remove the existing authority of the President to release nonexcess stockpile materials at any time when in his judgment such release is required for purposes of the common defense. Thus, the President would be powerless to release stockpile materials for defense produdction at times when these materials are not available through normal commercial channels. An example of such a situation might be the loss of materials production facilities occurring as a result of a natural disaster. We recommend section 8(A) of the bill be broadened to grant the Presi

dent the same authority to release stockpile material as is now provided in section 5 of the Strategic and Critical Materials Stock Piling Act.

I would like to take this opportunity to note, however, the revised language for the bill presented by the Federal Preparedness Agency has been reviewed by the Defense Department and satisfactorily deals with these concerns.

I would like to turn to S. 1198 and its companion H.R. 4895. These bills are to amend the Strategic and Critical Materials Stock Piling Act, and for other purposes.

While the bartering and special fund provisions in these two bills are of the same nature as those in S. 2575, they are not identical. Those bills establish a bartering program using any Government-owned goods in exchange for strategic and critical materials needed for the stockpile, while your bill limits the bartering to surplus Governmentowned goods. "Goods" owned by the Department of Defense may range from electronic components and metalworking machines up to and including complete weapons systems. While we have no objection to the concept of bartering, we are firmly opposed to bartering of Defense Department goods which are not excess to DOD needs. Bartering of nonexcess goods from DOD stocks could result in deficiencies in the levels of equipment determined to be necessary to maintain the readiness of the U.S. Forces. Consequently, we prefer the language concerning bartering in S. 2575 over that presented in S. 1198 and H.R. 4895.

Regarding the special fund provision, all three bills establish a procurement fund where all moneys received from sales of excess stockpile material are kept in the fund to be used as payment for acquisition of new strategic and critical materials. We support the intent of S. 2575 which provides for moneys in the fund to be available for a fixed period of time after which they would revert back to the general Treasury.

We think this fixed period of time puts the maximum incentive and motivation on those people to acquire the goods in the time period.

I would now like to comment on S. 1810, a bill to amend the Strategic and Critical Materials Stock Piling Act in order to prescribe the method for determining the quantity of any material to be stockpiled under such act, and for other purposes. The purpose of that bill for bartering, congressional authorization, and special funds are identical to S. 1198 and H.R. 4895. The bill does contain another provision prescribing a method for setting stockpile inventory objectives. The proposed methodology bases objectives on 1, 2, and 3 years of net import levels of materials which are determined to be necessary to the security of the United States and essential to the economy of the United States. We do not support this proposed method for determining stockpile inventory objective, because it does not take into account the increased demand for materials which could occur and likely would occur during

a war.

When the DOD participated in the interagency stockpile policy study, the Department asked the Institute for Defense Analysis to independently evaluate the adequacy and accuracy of the modeling techniques employed by the FPA in its computation of stockpile goals. The study showed the FPA modeling techniques adequately account

for the many factors that change when an economy transition from peacetime conditions to a wartime national emergency footing. Therefore, we conclude the FPA procedures, while admittedly more complicated than those proposed in S. 1810, are more accurate and preferable to the Defense Department.

In closing, I wish to affirm our desire for prompt acquisition of materials for which priority deficiencies exist. We support the maintenance of a coordinated Federal program for materials acquisitions and disposals such as the Federal Preparedness Agency's annual materials plan.

This concludes my statement. I will be pleased to respond to your questions.

Senator HART. Thank you very much. I appreciate your comments. That is a very good statement. Let me turn your attention to page 5 of your statement where you indicate that you are opposed to provisions in S. 2575 prohibiting release of stockpiled materials of foreign interests.

you

I want to make sure I understand the nature of this concern. As know, the stockpiles are sized to protect the U.S. interests. And of course we do not stockpile for our allies as such. However, the provision you refer to deals with routine peacetime disposals and is of course an effort to have, if you will, a sell-American provision comparable to the buy-American Act. The emergency release is under section 8. And the President would have blanket authority to dispose of the stockpiles as he sees fit. Do you oppose restricting the sale of excess materials during peacetime to American firms?

Mr. CHURCH. Yes, that would be the intent of my comments, which would be that we feel as though our defense interests are inextricably tied to those of our allies; and most significantly, the efforts that we are now undertaking to greatly strengthen the NATO alliance with respect to updating of weapons systems and the like. And we feel as though there may be, although we don't identify any particular instance at the present time, reason to be able to allow our allies to also share in the stockpile, because again I point out that their readiness and preparedness for an emergency is also inextricably tied to ours. And we feel as though the strict limitation that is provided by the bill is too tight. However, we would be willing to live with some restriction which allowed waiver for those allies to which we have this special tie.

Senator HART. Well, the proposed legislation does contain we believe that kind of escape clause. The section is 7(e) where it says, “The administrator may acquire any material for or dispose of any material from national defense stockpiles without regard to provisions of subsections (b), (c) and (d)." I take it that does not accommodate your concern?

Mr. CHURCH. Is that a change? I do understand that the FPA has come up with some amended language which does take care of our concerns. Now, if this is the amendment, the amended language, then

Senator HART. No; I think this is the language from our original text, unamended. But I think I would invite you to take a look at that. It is on page 7 of the printed bill, subsection (e). And I think it may permit the kind of flexibility that I believe you are arguing for here.