Impact of defense expenditures

During the fiscal year 1967, the Office of Emergency Planning initiated a series of studies designed to measure the impact on the economy of various levels of defense expenditures. These studies calculate the impact on specific industries of alternative levels of economic activity related to a step-up of the Vietnam conflict or a return to

peace.

Southeast Asia shipping program

The Maritime Administration reports that the Southeast Asia support program placed an urgent and expeditious logistical supply requirement on the Department of Defense. This support requirement was assigned to the Military Sea Transportation Service to formulate and operate. The task of supplying the sealift capability was assigned by the Military Sea Transportation Service to the Maritime Administration in July 1965. From the seven national defense reserve fleets, 161 ships were withdrawn and reactivated periodically, with the last group delivered in March 1967, to the 40 private shipping companies acting as general agents for the Government. These ships plus 11 additional active ships comprised the 172 general agency sealift fleets operated for the Military Sea Transportation Service until March 1967. From March to the end of the fiscal year 1967, six ships were withdrawn from the program due to enemy damage, extensive repairs, and so forth, leaving an active fleet of 166. The Maritime Administration reports that the coordination of this program has produced noticeable improvements throughout the entire Vietnam operational area during the fiscal year 1967. During the period from July 1, 1966, to June 30, 1967, approximately 8.9 million measurement tons of vital military cargo was sealifted from the United States to the several Vietnam ports, of which nearly 34 percent was carried by general agency agreement ships. This sealift mission required the 172 ships mentioned above to sail approximately 53,000 voyage-days, averaging 16,000 miles per voyage of 90 days' duration.

Alloys and special property materials

The Business and Defense Services Administration reviews annually, for the Office of Emergency Planning, the potential wartime supply requirements situation for high-heat alloy and special property materials which might be in short supply and for which stockpiling might be feasible. The Business and Defense Services Administration reports that the wartime circumstances of 18 such materials were examined during the fiscal year and that none appeared to be in a deficit position when related to reasonably firm requirements. Aluminum sales

The reports of the Office of Emergency Planning and the General Services Administration for inclusion in the 16th annual report of this committee set forth the contractual arrangements entered into between GSA and the aluminum producers covering the sale of 1.4 million short tons of aluminum over a period of years from the Defense Production Act inventory and the national stockpile. The memorandum of understanding was dated November 23, 1965. The participating producers agreed to purchase a combined total of 150,000 tons of aluminum for the period November 1, 1965, to December 31, 1966, and

100,000 tons annually thereafter, or if Government orders in any such period are greater, a quantity not in excess of 200,000 tons in any such period. Favorable consideration was given to participating producers in Government purchases of aluminum for end products acquired under Government contracts. Participating producers are permitted, at any time, to accelerate purchases and certain deferral of obligations may be exercised providing all obligations to purchase during each successive 4-year period are fulfilled by December 31, 1969 (the end of the first period), and during each successive 4-year period not later than the end of such period.

The Office of Emergency Planning reports that sales totaled 43,711 short tons, valued at $21.7 million, during the period from January 1, 1967, through June 30, 1967. This compared with 83,875 tons, valued at $41.3 million, for the previous 6 months. During the fiscal year 1967, producers purchased 127,586 tons, valued at $63 million. During the 7 months that the program was in effect in the fiscal year 1966, the producers had purchased 273,419 tons of aluminum, valued at $134.4 million.

Aluminum set-asides

The aluminum set-aside for each quarter during the fiscal year 1967 was maintained at 300 million pounds, or approximately 13 percent of total industry shipments during each quarter as compared with 8.5 percent during the fiscal year 1966. The Business and Defense Services Administration reports that the order boards of four producers of heavy aluminum extrusions for defense purposes was scheduled during the first calendar quarter of 1967 in consultation with the company and the Army. The installation of new equipment by this producer has eliminated the need for such scheduling. In cooperation with the Department of Defense and the industry, the Business and Defense Services Administration scheduled the entire production of three forging plants for 10 months in order to insure timely shipments of the most urgent Department of Defense requirements.

Copper set-asides

The set-aside for domestic refined copper was increased from 18 percent in the fourth quarter of 1966 to 26 percent in the first quarter of 1967, based on the average monthly production during 1965. The setaside for domestic refined copper for the second quarter of 1967 was increased to 29 percent of the average monthly production during 1965 and reduced to 26 percent for deliveries beginning with the third quarter of 1967.

On December 2, 1966, the set-aside for ammunition strip was increased from 26 percent for the fourth quarter of 1966 to 27 percent beginning with the first quarter of 1967. On May 15, 1967, this setaside was reduced to 25 percent beginning with the third quarter of 1967.

Nickel set-asides

The Business and Defense Services Administration established a set-aside of primary nickel for defense needs in an amount equal to 25 percent of the monthly deliveries of U.S. suppliers of primary nickel for the first 6 months of 1966, the initial set-aside being effective for the month of August 1966 and applied to three U.S. suppliers.

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When the production of nickel in Canada continued on a curtailed basis after the settlement of a strike, the 25 percent set-aside was continued for the months of September, October, and November 1966. When nickel was released from the national stockpile on November 3, 1966, under Public Law 89-740, the December 1966 set-aside was reduced to 12.5 percent of the monthly deliveries of U.S. suppliers for the first 6 months of 1966. The 12.5-percent set-aside was continued for the months of January, February, and March 1967. The April 1967 set-aside was increased to 25 percent of the monthly deliveries of U.S. suppliers of primary nickel for the first 6 months of 1966, the distribution of the 24.5 million pounds of nickel authorized for sale under Public Law 89-740 having been completed. The 25-percent set-aside was continued for the months of May and June 1967. Steel set-asides

The defense set-asides for steel controlled materials for the fourth quarter of 1966 were about 6 percent of total industry shipments for that quarter. The set-asides for the first quarter of 1967 were about 5.5 percent of the total industry shipments for that period. The set-asides of steel mill products for the second and third quarters of 1967 were about 6 percent of total industry shipments for each period.

Future requirements for metals

The Department of Defense reports that substantial new uses of beryllium metal, principally in missiles and space vehicles, are forecast to occur over the next several years. Since considerable excess capacity now exists, no shortage is anticipated.

U.S. dependence on foreign sources for metals and minerals

Figures furnished by the Department of the Interior reveal that the United States was dependent on foreign sources for 100 percent of the beryllium, chromite, columbium, tantalum, and tin consumed in 1966. The dependence on foreign sources in 1966 for mica (sheet) was 99 percent, the dependence for manganese ore of plus 35 percent manganese and for rutile was 98 percent, 97 percent of the platinum, and 95 percent of the antimony consumed. We were dependent on foreign sources for 92 percent of the nickel consumed and for 91 percent of the asbestos and cobalt. The dependence on foreign sources for aluminum (bauxite) amounted to 87 percent. The United States was dependent on foreign sources for 77 percent of the fluorspar and 74 percent of the silver consumed in 1966. Materials for which we were from 52 to 62 percent dependent on foreign supplies for 1966 were cadmium, lead, mercury, tungsten, and zinc. Dependence on foreign supplies also included 35 percent of the iron ore, 25 percent of the selenium, and 19 percent of the copper.

Of the 30 selected metals and minerals listed by the Department of the Interior, the United States was more dependent on foreign sources in 1966 than in 1965 for 12 of the materials listed, less dependent on foreign sources for four materials listed, and the percentage of dependence remained the same for 14 materials. These figures also reveal that of the 30 metals and minerals listed, the United States was more dependent on foreign sources in 1965 than in 1964 for 12 of these materials, less dependent for seven, and the percentage of dependence remained unchanged for 11 of the materials listed in 1965 is compared to 1964.

Availability of materials

The Department of the Interior states that for some materials the disposal of surplus inventories provide an adequate defense against current dangers of shortages. In other instances, it is thought that industry and Government must search for other solutions. The Department of the Interior has not found it necessary to use the priorities and allocations authorities of the Defense Production Act for the mineral raw materials for which it has mobilization responsibility, and does not foresee any immediate need to institute controls over the distribution of ores and concentrates.

Consumption of metals and minerals

A recent estimate by the Bureau of Mines shows an increase in per capita consumption of metals and minerals-excluding fuels-from $53 in 1965 to $72 in 1980.

Mineral technology

In a hearing before this committee near the close of the fiscal year, the Assistant Secretary for Mineral Resources of the Department of the Interior was asked whether there had been an improvement in the materials area in providing people who are especially trained to identify, evaluate, and translate new knowledge that is being acquired into useful technologies, and whether there is a problem in obtaining highly trained personnel. It was stated that the Engineering Manpower Commission had developed figures which revealed that in five fields of vital importance to mineral technology the enrollment in the third through the fifth year of undergraduate work dropped nearly 47 percent between 1955 and 1965. The five fields covered were metallurgy, petroleum, mining, geology, and geophysics.

Stockpile objectives for nuclear war

In January 1967, the Office of Emergency Planning announced nuclear war stockpile objectives for all strategic and critical materials included in the national stockpile. The nuclear war objectives for the basic materials are less than or identical to existing conventional war stockpile objectives, with the exception of opium, where the nuclear objective is higher.

Industrial facilities and plant equipment

A number of package plants and standby lines were reactivated involving the use of some 9,314 machines with an estimated acquisition costs of $101 million. In addition, some 4,535 items were loaned from package plants for use on other programs. The Department of Defense states that the use of this layaway equipment contributed materially toward the ability to accomplish early production. At the start of the reporting period, in September 1966, there were 23,602 items of industrial equipment in the general reserve having an original acquisition cost to the Government of $239 million. During the period, 8,576 items having an acquisition cost of $93 million were made available to users from the reserve. These shipments were offset by receipts into the reserve of 7,960 items returned from use. The reserve as of June 30, 1967, contained 22,986 items having a value of $211 million. The currently approved package plants and standby lines, which are required for specific item mobilization production, contain 31,609 items of plant equipment. This includes equipment in plants now in active use.

Machine tool trigger program

Under the machine tool trigger program authorized in the Defense Production Act, 75 contracts have been executed providing for the production of 11,326 tools valued at $217 million. Production under these contracts does not commence unless "triggered" by the Government in the event of a national emergency. These contracts are reported to be under frequent review and revisions are made as required to reflect changes in model specifications, technological advancements, and current price levels.

Requirements for nuclear war

During the year ending June 30, 1967, the Business and Defense Services Administration, Department of Commerce, completed estimates of mobilization requirements in a nuclear-attack war for 76 of the 77 items in the national stockpile, plus a similar analysis of four groups of steel additives. The estimates were based on new guidelines established by the Office of Emergency Planning in September 1966. Requirements for conventional war

The Office of Emergency Planning developed new guidelines for the preparation of requirements estimates for a conventional war, which were made available to the Business and Defense Services Administration in July 1967, for use in the fiscal year 1968. The Business and Defense Services Administration reports that estimates of conventional war requirements for seven materials have been made, and it is expected that estimates of the conventional war requirements for all stockpile items will be prepared in the first 9 months of the fiscal year 1968.

Stockpile procurement directive

On September 7, 1966, the Office of Emergency Planning issued its strategic stockpile procurement directive for the fiscal year 1967. The directive was amended on November 17, 1966, and February 10, 1967, and May 26, and June 23, 1967.

The amended directive provided for the acquisition of 13 strategic materials. This included the cash purchase of jewel bearings and copper. Materials to be acquired through upgrading were: Oxygen-free high-conductivity copper, morphine sulfate, hydrogen-reduced tungsten powder, and ferromanganese. Materials to be acquired through the barter program of the Commodity Credit Corporation were: chrysotile asbestos, low iron; corundum; iridium; palladium; quinidine; rutile, and selenium.

Purchases of materials

During the fiscal year 1967, the General Services Administration continued to acquire jewel bearings, the only commodity involving cash purchase, for the stockpile from the jewel-bearing plant in Rolla, N. Dak. A new addition to the plant was dedicated on May 28, 1966, which plant is a Government-owned facility operated by the Bulova Watch Co., Inc., under a contract with the Government.

In the reporting period, contractual arrangements were completed for the acquisition by upgrading of 34,233 pounds of morphine in the form of morphine sulfate; 3,000 short tons of oxygen-free high-conductivity-type copper; and 250,000 pounds of tungsten metal powder, hydrogen reduced. Excess pig tin, tungsten concentrates, and gum