In commenting about these stabilization prices I would like to document what might be called a series of base points for prices which have, in the past, been established by governmental action-either by the Executive or by the Congress.

(1) Under authority granted by the Congress, the executive department, through the Office of Price Administration, placed the premium price plan in effect during World War II. This caused an average price for the period February 1, 1942, to June 30, 1947, of 9 cents for lead and 11 cents for zinc. It is unnecessary for me to make any comment concerning the increases in cost of production during these 10 years following World War II. However, converting these 2 prices to a 1958 base would result well in excess of 20 cents for both metals.

(2) By action of the Congress (Public Law 725, 80th Cong.) the duties on imported lead were suspended from June 20, 1948, to June 30, 1949. During this period the price of lead averaged over 182 cents. Noteworthy, zinc duties were not suspended and the price for zinc during this same period averaged 15 cents.

(3) Again under authority granted by the Congress, the executive department, through the Office of Price Stabilization, imposed price ceilings on lead and zinc January 26, 1951-17 cents for lead and 171⁄2 cents for zinc. On October 2, 1951, these ceiling prices were advanced to 19 cents for lead and 1912 cents for zinc. It was during this period that foreign producers averaged prices of 3 cents to 4 cents above the ceiling prices set for United States producers.

(4) By action of the Congress duties on lead and zinc were suspended (Public Law 257, 82d Cong.) from February 11, 1952, to March 31, 1953. This suspension, however, was qualified and the duties were to be reimposed if the price of either metal dropped below 18 cents. The duty was reimposed for lead June 26, 1952, and reimposed for zinc July 24, 1952.

(5) By executive department action following the Tariff Commission's decision of May 21, 1954, acquisitions of lead and zinc by the defense stockpiling program and by barter caused lead and zinc prices to rise. For 16 months, due entirely to this governmental program, the price of lead was steady at 16 cents and zinc steady at 132 cents. It is well to remember that this action was taken by the President in lieu of action for increased duties. The fact that these prices were wholly supported by the Government is clearly indicated when in May 1957, with the abrupt announcement that barter was being stopped, the price of both metals plummeted.

(6) The legislation proposed by Secretary Seaton before this committee last June proposed to suspend duties above prices of 17 cents for lead and 1412 cents for zinc. At any point where duties are suspended there is the clear implication that at these prices or above the industry would be in a satisfactory position, but below these prices needs tariff protection. Not only did Interior support this legislation before Ways and Means and Senate Finance, but the Departments of State, Defense, Commerce, Treasury, and Labor, and the Office of Defense Mobilization urged the enactment of legislation containing these peril-point prices.

(7) The best evidence available by which the adequacy of Interior's proposed 1434 cents and 1234 cents prices can be judged is the cost-of

production data and study presented to the Tariff Commission last November. Our committee assembled cost-of-production data on about two-thirds of the lead and zinc mined in the United States during 1956, and also, during the third quarter of 1957. We presented to the Commission data which showed that in 1956 a little over half of the lead and zinc ore was produced at a profit. This included 174,000 tons of lead and 151,000 tons of zinc. But mined at a loss during this year, during which time the Government supported prices of 16 cents and 1312 cents, were 57,000 tons of lead and 206,000 tons of zinc. Our data for the third quarter of 1957, during which time lead was at 14 cents and zinc at 10 cents, showed only about 40 percent of the lead and zinc was produced at a profit. It must constantly be borne in mind that, except for the wasteful and uneconomic practices of upgrading ore-leaving behind normally good ore-and curtailment of development and exploration, little if any of the output during July-October 1957, would have been at a profit.

Since these cost studies were submitted to the Tariff Commission, the price of lead has declined an additional 3 cents. With today's prices of 11 cents for lead and 10 cents for zinc we doubt if any lead or zinc is being mined at a profit. We believe this is true, despite continued efforts to reduce costs by further drastic cuts in vital exploration and development programs and continued upgrading the values of ore produced. This cost-of-production study showed conclusively before the Tariff Commission the need for 17 cents and 142 cents. We would note that this study was not challenged by the Commission nor, for that matter, was it challenged by opposition witnesses at the hearing.

The eighth point we have now, before us is the documentation and the testimony of Mr. Droubay yesterday and Mr. Romney's statement today.

Thus, the examination of not only the industry's cost-of-production data but, perhaps most important, the record of prior governmental determinations both by the executive department and the Congress provides only one conclusion: Prices of 17 cents and 1412 cents are absolutely necessary to get this industry back on its feet.

Stabilization tonnage for United States producers: Stabilization payments are proposed on an annual rate of 350,000 tons of lead and 550,000 tons of zinc. We agree that 350,000 tons of lead is a reasonable expectation for United States mines and past production records substantiate this figure. However, in the case of zinc we believe this figure should be 600,000 tons-again based on past production records. We do not see why the zinc-mining phase of our industry should be frozen at its recent very unsatisfactory levels. It seems unnecessary to take the depressed conditions of the zinc-mining industry during the last 5 years and impose them on even a semipermanent basis.

We do recognize, however, that the executive department is acknowledging that the United States producers should have a fair share of their own market and, regardless of our different opinions concerning the mechanism to accomplish this, we are heartened to see this type of policy recognition.

Amount of stabilization payments: It is our understanding from discussions with members of the Interior Department's staff that the

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stabilization payments of S. 3892 were calculated by estimating that the average United States producer of lead and zinc would receive payments until the United States price declined to 104 cents for lead and 814 cents for zinc. You will note this is a 42-cent spread between an anticipated floor price and the proposed ceiling price of 1434 cents and 1234 cents.

We also understand that should the United States price drop below these floors there would be no stabilization payment, on the average, to United States producers. With the required ceiling prices of 17 cents and 142 cents it is very obvious that the stabilization payments would have to be increased. A stabilization payment in an amount of 4 cents on each metal would be required.

Using the Department of Interior's method of calculation this would protect the United States miner to a floor of 11% cents for lead and 714 cents for zinc. We have a very specific reason for this type of suggestion. Supported by the Tariff Commission's findings in both of the escape-clause cases and further supported by our cost-ofproduction data presented to the Commission, the zinc-mining part of our industry is in worse shape than the lead-mining industry, although, of course, both metals are in a desperate situation.

Acknowledgment is overdue of the disastrous conditions in the zincmining industry. More adequate stabilization payments would have to be available for both metals with zinc receiving protection to a lower United States price.

Excessive stocks in hands of United States producers: Any solution to the problems of the United States lead-zinc industry must take into account the very excessive producers' stocks. In our judgment some method of acquisition of these stocks is a necessity. We think that 100,000 tons of lead and 200,000 tons of zinc must be acquired by some means and taken off the United States market. It is the only method by which we see that the slate could be wiped clean, and United States producers would have an opportunity to get their business and operations back to some degree of normality. This acquisition should take place in a period not to exceed 1 year and at regular reasonable rates of delivery and be limited to material in the hands of domestic producers prior to June 1, 1958. The above noted tonnage should be acquired at the average E & MJ monthly prices but at not less than 13 cents for lead and 10 cents for zinc.

Annual appropriations by Congress: We continue to be concerned about the problem of obtaining annual appropriations. This is no small apprehension on our part as mentioned in our previous testimony. We would urge the departments concerned to explore any possible avenue of budgetary controls or fiscal policy in order to arrive at a solution whereby this appropriation problem could be avoided. As we mentioned in our prior testimony prudent investors and prudent operators, even if the changes we have suggested to this point are accepted, will have an almost impossible task of proceeding to plan 2, 4, 5 years hence for vital development and exploration programs. Even more important, the current rate of development and exploration, under a stabilization plan, would leave many producers in doubt as to what wise policies would be for their properties.

To summarize:

(1) We continue to believe the most fair and effective solution would be legislation providing for duty-free imports of needed lead and zinc with peril-point prices of 17 cents and 1412 cents and a 4-cent import tax payable only if unneeded imports forced United States price to decline below these peril points.

(2) The past record of governmental action by the executive department and by the Congress, together with the recent industry costof-production data presented to the Tariff Commission, prove beyond any doubt that prices of 17 cents for lead and 142 cents for zinc are necessary and reasonable.

(3) The expectation of 350,000 tons a year for lead from United States mines is reasonable but the expected annual zinc tonnage should be 600,000.

(4) The amount of 4 cents must be available for each metalwhether as an import tax or as a stabilization payment.

(5) Acquisition of excess stocks is necessary and we urge as a single objective, that 100,000 tons of lead and 200,000 tons of lead and 200,000 tons of zinc be absorbed in not less than 1 year.

(6) Some method be found to preclude the problem of annual appropriation if it is intended to truly stabilize domestic lead-zinc min

ing.

Thank you, Mr. Chairman, and gentlemen.

The CHAIRMAN. Thank you, Mr. Schwab.
Any questions, Senator Malone?

Senator MALONE. Mr. Chairman, it is past 12 o'clock. And if I might ask 3 or 4 questions, I would suggest that we defer them until 2 o'clock or whatever time the chairman would like to meet this after

noon.

First I would like to announce that the vote to substitute the Simpson amendment was lost 268 to 146. The motion to recommit the bill in the House was lost 243 to 137. Then the bill passed 317 to 98 votes. I would say to you now-I think you know that-that the only body that stands between the mining industry and utter oblivion is the United States Senate, which will probably act one way or the other on this measure within the next 30 to 60 days.

What applies to mining applies to all other industries produced commercially in the United States.

Now, you said in your testimony-or at least Mr. Romney didthat your costs had increased. I suppose it has increased in accordance with the inflation. Inflation has been going on since 1933 and has not been abated one iota under any administration since that

time.

There is no sign of it being abated. The billions to Europe to build these plants to compete with you is still going on, as you heard last week. The inflation about which you complain is continuing, and the trade bill has again passed the House, 5 years' extension, with another reduction of 25 percent in the tariffs, which means, as far as the House is concerned, a free trade policy for the next 5 years is to be continued.

Now you quote the Tariff Commission rather liberally. What authority do you think, under the present situation as just extended by the House, does the Tariff Commission have?

Mr. SCHWAB. No more nor no less, Senator, than they do today, except as I understand the bill which passed the House, there is the provision for a two-thirds overriding veto, it might be called, of any Presidential action on any Tariff Commission decision.

I think essentially it is the same as it has been.

Senator MALONE. In other words, the President can continue as he has in the past, as testified to by Secretary of State, to trade any industry, or any part of an industry, to foreign nations if he believes it will further his foreign policy.

Is that true?

Mr. SCHWAB. It seems that way to us, sir, yes.

Senator MALONE. That is what Mr. Dulles, Secretary of State, testified to before our committee. He also testified before the committee that this must be a permanent policy; that the billions to Europe must be a permanent policy.

Therefore I think you are right up against a principle of operating this Government on foreign trade. The principle of free trade, virtual free trade and of course you understand that if the duty is 1 percent under what it can be produced and shipped to this country, and low water transportation, then you either have to meet that cost or restrict your production.

Isn't that true?

Mr. SCHWAB. That is true, sir.

Senator MALONE. Mr. Chairman, I think these are two fine witnesses. And I think they are going to make a good record.

The only thing before we start at 2 o'clock, I would like for you to consider what I am about to say. And that is as far as I know-I have only been here 12 years-there is nobody east of the Potomac or the Hudson Rivers that wants you in business. And when you suggest any specific-I call them patent medicine remedies-of having a certain fixed point below which there would be a tariff, and above which there would be none, what would adjust that particular point that you suggest? How would that be suggested when the competitive nations manipulate their money in-manipulate the value of it in terms of the dollar to obliterate that so-called peril point.

Mr. SCHWAB. Well it is always subject to that hazard, Senator. There is no question about it.

Senator MALONE. There is an immediate hazard, between the 4 hours.

Mr. SCHWAB. Perhaps that could be.

Senator MALONE. Then you are suggesting a remedy here if we would live with this thing that would have to be applied to all other industries, would it not-production?

Mr. SCHWAB. I believe so, Senator. In general, as you are well aware, we have tried to follow a program here; there have been suggestions made to our industry; very specific suggestions last year. We have tried to get those suggestions in the form of legislation. However we haven't had much luck.

Senator MALONE. Do you anticipate any luck?

Mr. SCHWAB. No, sir, not very much.

Senator MALONE. I am a born optimist. I think we can whip this thing. Do you know what happens if we do whip it in the Senate and do not extend it, this 1934 Trade Agreements Act, laughingly