Page images

of the Defense Production Act, or did the Government initiate that proceeding?

Mr. FLEMMING. Senator, I said that the domestic producers initiated action under section 7 of the Trade Agreements Act, which is the section dealing with imports. They did not initiate any action which in turn led to the bringing into existence of the Middle East Emergency Committee. But as far as the action under which I held a hearing on the oil-import situation in November is concerned, that was done on petition of the domestic producers.

Senator BARRETT. Yes, I understand that, but the point that I have in mind was the implementation of the work under the amendment and the understanding of May 8 last whereby the Attorney General proceeded to give an approval to the understanding that was reached. Now, was that understanding initiated by the Government of the United States, or by these various oil companies ?

Mr. FLEMMING. Senator, as I indicated in response to an earlier question of the chairman, the plan of action under which we were dealing with the Middle East emergency situation was initiated by the Department of the Interior, and that of course was considered by the other departments which I havė named, and finally approved by the Attorney General on my recommendation. That was entirely an action on the part of the executive branch of the Government acting under the authority of the Defense Production Act.

Senator BARRETT. And the Attorney General issued his concurrence and approval, then, at the request of the Department of the Interior and yourself; is that right?

Mr. FLEMMING. Technically at my request. The flow_is, it comes from the Department of the Interior to the Director of Defense Mobilization, and then I in turn ask the Attorney General for his approval and ask for the Federal Trade Commission to comment-the law distinguishes between the Attorney General and the Federal Trade Commission-the Attorney General must give it his approval, and we must give the Federal Trade Commission the opportunity of cooperating.

Senator BARRETT. And these cooperators, then, are working at the instance of the request of yourself and the Department of the Interior?

Mr. FLEMMING. That is correct. Once the Attorney General approved the plan, I then issued letters of invitation to the oil companies inviting them to participate under this, or to participate under the terms of this voluntary plan of action. And of course they were under no obligation, legal obligation, to respond affirmatively to that request.

Senator BARRETT. Now, when you issued these invitations and the calls, I assumed that you endeavored to get the companies that controlled the most production in the country; is that not right?

Mr. FLEMMING. The test was to get the companies that were participating in the foreign trade, that was your test, to get all of the companies into it that were participating in foreign operation, big and little.

Senator BARRETT. You would have to get the companies that had the oil at their command, however, in order to supply Western Europe; would you not?

Mr. FLEMMING. Well, Senator, the test was, does the company participate in foreign operations? If it participated in foreign operations, then it was invited. Now, these companies that are on the committee did not control all domestic production by any means.

Senator BARRETT. That is quite true. But it so happened, I assume, that there are big concerns that have at their command sufficient oil that is available to export; is that not right?

Mr. FLEMMING. Well, many of them are big, I can go along that far with you-and, of course, just looking at the list makes that perfectly clear. But they do not control all of the oil that they would need for export-I mean, they do have to buy oil from other sources.

Senator BARRETT. That is a part of their operations?

Mr. FLEMMING. That is right, as a part of their regular operations. In this case, of course, they would have to find additional domestic sources of supply.

Senator BARRETT. The fact that a company like the Standard of New Jersey is the biggest oil producer and the biggest exporter in the world would not subject itself to any criticism by reason of the fact that you found it necessary to really get them into the program if it was going to succeed, isn't that a fact, Mr. Flemming?

Mr. FLEMMING. Senator, that is right. I mean, these companies were invited by the United States Government to become a part of a plan of action which the United States Government believed was essential and necessary to carry out an important aspect of its foreign policy.

Senator BARRETT. And that would be the only way you could work out the plan, would be to get the people who have the oil for export to send it over to Western Europe; isn't that right?

Mr. FLEMMING. Again I would say that we needed to get into the plan of action the people who were engaged in foreign operations, that is right, and that we have no directive authority within the executive branch that would be anywhere comparable to the area that can be covered by a voluntary agreement of this kind.

Senator BARRETT. You have no authority at all to increase the production in the several States; that would be up to the regulatory bodies of the States; is that not true? Mr. FLEMMING. That is generally the case, that is right. Senator BARRETT. That is all, Mr. Chairman.

Mr. McHugh. Dr. Flemming, don't you have the authority under the Defense Production Act actually to direct the movements of oil directly to the countries and to the persons whom you think would best suit the purposes of the Government's program?

Mr. FLEMMING. American oil and American ships only.

Mr. McHugh. Was there any consideration given to the use of these powers before the plan of action of August 10 was adopted ?

Mr. FLEMMING. Yes. In my judgment, if you tried to deal with this kind of a problem simply by dealing with United States oil and United States Ships, you couldn't come anywhere near making as favorable a contribution to the solution of the problem as you could or can by bringing into a plan of action those who are engaged not only in United States oil operation but in foreign operation, and those who have access not only to United States tankers but to foreign-flag tankers. And the latter is a very important part of my answer, because I think we are all acquainted with the fact that a pretty large percentage of the tanker capacity, the free world tanker capacity, is under foreign flag.

And we felt, I would say very frankly, as we worked on this in the planning stage we felt that the limiting factor in this would be transportation facilities, tanker facilities, and that it was essential to put ourselves in a position where we could get a pool of the tanker facilities so that we could move (a) some of this oil from the gulf over to our east coast and (b) from the gulf to Western Europe. And I think it is very important to keep that in mind, that that was our basic objective in the beginning here, to take care of what we felt would be a shortage of transportation and a shortage of tankers.

Mr. McHugh. You are speaking of foreign oil companies or tankers controlled by foreign nationals over which the United States would have no jurisdiction; is that correct?

Mr. FLEMMING. That is right.

Mr. McHugh. Do I understand, then, for this plan to be effective it contemplates participation by the members of the Middle East Emergency Committee in some type of arrangement or agreement with these foreign companies? Mr. FLEMMING. That is correct. Mr. McHugh. And is that the way the plan has been, in fact, carried out today?

Mr. FLEMMING. Mr. Chairman, if I might, I would like to ask Mr. Stewart to respond to that specific question, because it does deal with the day-by-day operations of the plan, but the question having been raised, I think this is a very good time to get the answer into the record on it.

Senator O'MAHONEY. In view of the fact that it is almost 12 o'clock and time to take a recess, and in view of the fact that


members of the committee will be tremendously interested in your response, I am sure that you would like to have a little time to confer about it.. Suppose we postpone that until this afternoon's session. Is it agreeable to you to come this afternoon? Mr. FLEMMING. I will be very happy to come, Mr. Chairman.

Senator O’MAHONEY. Let me ask you this question. You spoke in your testimony of the planning stage of this complex problem, and I assure you again that I sympathize with the complexities of this problem as presented to you. "Did you consider any alternative plan of any kind!

Mr. FLEMMING. I think it is fair to say that, having thought this thing through pretty carefully in connection with the development of the amendment to the voluntary agreement of May 8, 1956, from that point on we assumed that if we were confronted with this kind of a situation we would proceed in the manner in which we have proceeded. In other words, that became a basic plan, as far as we were concerned, to deal with this kind of a situation.

Senator O'MAHONEY. Do I understand, then, that the answer to my question is "No"?

Mr. FLEMMING. That is right, because, Mr. Chairman, when I appeared before the Senate Banking and Currency Committee in connection with these 1955 amendments, in effect I was asked to consider whether or not there were alternative plans of action that could be utilized in dealing with problems of this kind. And I said, in our judgment, there were none. And I was backed up in that by the Departmentof Interior, the Department of Defense, and the Department of State, who felt that something like that was necessary.

90507-31-pt. 1

Senator O'MAHONEY. When did you appear before the Banking and Currency Committee?

Mr. FLEMMING. That would have been back-those were the amendments of 1955—that was back in, I would say, May, June 1955—it was near the end of the session, of that particular session.

Senator O'MAHONEY. Over a year ago?
Mr. FLEMMING. That is right.

Senator O'MAHONEY. And long before Nasser blockaded the Suez Canal ?

Mr. FLEMMING. That is correct, Mr. Chairman.

Senator O'MAHONEY. Now, the calendar shows that you had these three plans. One was approved in 1953, one was approved in 1954, another was amended on May 8, 1956, and finally a plan came out in August 1956, and then that later was amended. Now Nasser blockaded the canal, as I recall it, sometime in October 1956. So that the crisis of making it necessary for the United States to provide substitute oil for our allies in Western Europe for that which they lost by reason of the blockade, that crisis did not arise until long after the act of 1950 had been passed, and long after the first plans which you have worked on were written?

Mr. FLEMMING. That is correct. Mr. Chairman, I would like just to read, in connection with the question the counsel has raised and your comment, one paragraph from my letter of November 30, 1956, addressed to the Attorney General, in which I said:

Under existing statutory authority this Government may allocate materials in the interests of national defense without the consent of the industrial concerns involved, and it would therefore be theoretically possible for the Government to direct the movement of all oil subject to American jurisdiction without involving the companies in any joint action having antitrust implication. Such a procedure would, however, have several deficiencies, any of which would make it ineffective in the relief of the existing stoppage. Notably, the shipments of American oil which must be coordinated are less than one-half the total of such shipments, so that similar authority would have to be exercised by a number of other governments in order to make a mandatory system effective. This would certainly require an international body to integrate the actions of the various governments into a single scheme of distribution. Further, it would require the creation of advisory bodies made up of oil-company representatives who would themselves be required to work out an interchange of information adequate to the preparation of considered advice to their governments. Since the net effect of this would be the working out of the tentative programs by industry for implementation by governmental authority, it might serve only to delay action by the addition of substantial administrative machinery with the resultant orders conforming substantially if not precisely with the recommendations of the industry representative. It is not entirely clear that even such an arrangement would avoid infringment of the antitrust laws in the necessary process of information gathering.

If I haven't already done so, I will insert the whole letter to the Attorney General in the record. But it seemed to me that particular paragraph is relevant to the point we have just discussed.

Senator O'MAHONEY. It may be received as an executive exhibit.

(The letter of Mr. Flemming to the Attorney General dated November 30, 1956, was made a part of the record, and will be found in the appendix.)

Mr. McHUGH. Dr. Flemming, isn't it true that, under the arrangements you have just referred to, there would be power, however, to compel companies to take action which the Government thinks is necessary pursuant to the objectives of this plan of action?

Mr. FLEMMING. Within the limitations outlined in that letter.

Mr. McHugh. But under the present voluntary plan of action there is no way to compel companies to take action which they are unwilling to do even though the Government believes that action would be necessary to meet the objectives of the program?

Mr. FLEMMING. That is a very fair statement of the situation, because this says it is a voluntary agreement, and it is a voluntary operation all the way through. You are absolutely right on that.

Mr. McHugh. Dr. Flemming, do you feel that the plan of action, since the Middle Eastern Emergency Committee was activated approximately the early part of December last year, has been effective in meeting the objectives of the Government in getting oil to Western Europe

Mr. FLEMMING. Mr. Chairman, I am afraid I will have to make a speech on that one. I don't know whether you want to do that now or this afternoon.

Senator O'MAHONEY. We are always glad to listen to you talk, Dr. Flemming. Obviously, it is a question asking for the opinion of the witness, and if this were a court, where perhaps we would

Mr. FLEMMING. You wouldn't want me to just state my opinion without giving my reasons for my opinion, I am sure. Senator O’MAHONEY. We will postpone that until this afternoon.

Mr. FLEMMING. Whatever you want; I am perfectly willing to do it now.

Senator O'MAHONEY. You are the most willing and cooperative witness we have had to date.

Senator DIRKSEN. Mr. Chairman, I have one question.
Senator O'MAHONEY. Senator Dirksen.

Senator DIRKSEN. Dr. Flemming, the data that was adduced at the hearing in November with respect to the importation of oil, was that sufficient to give some hint as to how far there was a departure from the 1954 historical basis, and would those figures have any value for the record ?

Mr. FLEMMING. Senator Dirksen, I stated in a public statement that, with the facts that have been presented to us at the hearing, if there had been no intervening developments, such as the Suez Canal and the Iraq situation, I would have no alternative but to certify to the President that the import situation constituted or threatened to impair our national security. I would be very happy to supply for the record-it might be a summary of the type of information that was presented at the hearing. I would say this, they are obviously outdated, and I doubt that we will ever again get a pattern comparable to that pattern, because of the intervening developments. But I would be very happy to supply it for the record.

Senator DIRKSEN. Well, recognizing the fact that the data may be rather archaic by now, I still believe it would be useful, because it would give us some hint of what the situation was as late as November of 1956. So a summary statement, Mr. Chairman, I think, might be useful for the record.

Mr. FLEMMING. Senator Dirksen, we will take information presented at the hearing and submitted subsequent to the hearing by the companies, and will summarize it in an exhibit and make it available for the record.

« PreviousContinue »