throughout Zambia. Together, these mines account for one-quarter of the free world supply of new copper-about 1 million short tons. I might make a comment on that, Mr. Chairman. This was prepared about midweek of last week and since then we understand that this strike in Chile was settled on September 30. Therefore, we are without that problem but still have the problem in Zambia where its annual output is around 700,000 tons.

Chairman ROBERTSON. Good.

Mr. DRYDEN. On the consumption side of the ledger, there are other problems. There is a shortage of capacity for the production of extra fine gages of magnet wire. Orders are being taken subject to 8- to 12-month delivery.

Copper tubing is in short supply and threatens to become even tighter. While this shortage derives from housing and other construction, and the demand for air conditioning, it is, and will be, affected by recent and future activity in water desalination programs. It is estimated that each 100 million gallons of daily capacity established for water desalination will require 20 million pounds of copper or cupronickel tubing.

Recent ammunition requirements have created priority demands for copper. These requirements consume large quantities of copper, and tend to displace nonmilitary orders at the mills because all fabricating mills are required to accept the priority orders up to prescribed percentages of their capacity. Set-aside percentages may have to be increased soon.

A fourth problem derives from the current change of coinage to the cupronickel/copper laminate, which is 90-percent copper. Demand for copper for this purpose should present no problem for a period of 3 years because of the aforementioned release from the national stockpile. The new coins, however, will require either one or the other of two specialized types of copper for which productive capacity is limited.

We are watching this situation.

ALUMINUM LANDING MATS

Generally speaking, stepped-up military procurement for the Departments of the Air Force and the Navy has not as yet caused appreciable distribution problems or production scheduling, with the exception of production of aluminum landing mats for use in Vietnam. The problem encountered here was that large presses used in extruding the mats have been fully scheduled with rated orders, including some aircraft orders. With the sudden increases in landing mat requirements, it was necessary to ask four companies involved to submit their monthly order boards to the Department of Defense for recommendations concerning their order of importance. As soon as word is received from the Department of Defense, a rescheduling directive will be issued by BDSA so that defense orders can be rescheduled in order of urgency.

In order to ease this problem, the Department of Defense is changing the design of the mat for production on smaller presses. I am also happy to report that the Department of the Army is now procuring steel landing mats which do not present any production problems.

There are other production problems to be covered more extensively in the BDSA report to you. They include a possible shortage of pro

duction facilities for four important defense related products-aluminum atomized powder, hexamine, sulfuric acid (40 percent oleum grade) and barbed wire. There are also hints of possible problems in grey iron foundries capacity and the production of heavy truck axles.

I can report that Hurricane Betsy had no serious national economic effects upon defense production facilities. Although the storm caused heavy damage to some petroleum facilities, it did not leave a regional or a national petroleum problem. In addition to large petroleum inventories (about 79 days' supply), a substantial surplus of production and refining capacity can readily make up most of the production lost in the storm.

But selective defense production problems exist, and increased production may gradually absorb much excess capacity.

But there is an important countervailing factor. Industry is adding significantly to its capacity this year. Spending for capital expansion for 1965 should be about $50.9 billion, an increase of $6 billion over 1964's record investment of $44.9 billion.

This rapid expansion of capital plant and equipment should help cushion the impact of increased defense production requirements. It should also help ease upward pressures on the price structure.

MANPOWER

With respect to defense production manpower, the Economic Surveillance Committee has investigated a reported shortage of skilled foundry workers developing in New York State. We are presently probing this problem with the Department of Labor and other sources.

Because of the general shortage of skilled manpower, the Selective Service System is continuing its program of granting liberal draft deferments to apprentices employed in critical occupations. Included in this list are a number of machine tool skills.

We are presently investigating reports of general shortages of skills in certain geographic areas. We want to learn particularly if shortages of defense production skills are developing in areas of general labor shortage as defined by the Department of Labor (1.5 percent or less of total labor force unemployed in a particular area).

The total manpower picture is good. It appears that the defense buildup will add only fractionally to total employment. But in areas of heavy defense production, the already short supply of skilled manpower may get serious.

PRICES

So far, prices have remained fairly stable. There is no evidence of inflation. However, we are beginning to feel the impact of the buildup in a few selected areas. If the current strong demand for both labor and goods should increase markedly, the economy may experience inflationary pressures.

I mentioned earlier the increase in the price of copper. Any further tightening in supplies of this metal due to incipient labor troubles or due to pressure from the Chilean Government could set the stage for higher producer prices. But copper companies are hesitant to raise their prices further because they would give added impetus to the inroads of competitive substitutes, both metallic and nonmetallic.

The copper price situation is far from satisfactory. Because of copper's important role in defense production, we are keeping an especially close watch on the situation.

In addition to copper and some other metals, there has been a scattering of price increases for industrial items including sulfuric acid components, acetic acid, paperboard, electrical capacitors and conductors, machine tools, heating oil, and leather. In the retail price area there have been increases in the price of shoes, refined sugar, paper products, clothing, and, of course, some farm products.

There have been, however, numerous compensating factors. For instance, wholesale prices in contrast to the fifties have been extremely stable. The sharp increases in the prices of farm products and processed food, which caused a significant rise in the wholesale price index in the past year or so, have recently flattened out. The factors that caused the movement, namely an undersupply of cattle, hogs, fruits, and vegetables, have been or are being corrected.

DEFENSE MATERIALS SYSTEM

When the Korean emergency ended, a basic question faced Congress; namely, should the U.S. Government retain the basic structure of the controlled materials plan (CMP) used during World War II and the Korean war as a preparedness measure. Your committee decided the system should be retained, but to limit the use of priorities and allocations to Defense and Atomic Energy Commission orders and subsequently to National Aeronautics and Space Administration orders. Events have fully justified the wisdom of this committee. The name of the modified controlled materials plan was changed to the defense materials system. During the 12 years of operation, the DMS has proven its worth. With the advent of the cold war and its varied degrees of escalation, the DMS has provided for every urgent defense need. Even in periods of relative calm, special urgent orders, such as those carrying DX ratings for the missile and space programs, have been delivered on schedule.

As the Vietnam situation became intensified and our commitments became heavier, the use of priority ratings has become absolutely vital to delivery of end items. We believe that the defense materials system and priorities and allocation authorities currently in effect under the Defense Production Act are sufficiently flexible to meet substantially increased military demands upon industry. The rules and procedures for the allocation of the controlled materials are set forth in DMS regulation 1, and those for the establishment and use of priorities under the defense materials system are included in BDSA regulation 2. These are supported by several M orders which establish special rules in the placing, accepting, and scheduling of rated orders to minimize disruption to normal distribution of controlled materials and certain critical components (such as electronics) and end items (such as construction machinery). A review of the impact of the currently approved $1.7 billion increase to the Department of Defense recently approved by the Congress did not reveal any serious production problems. There have been some dislocations in current production schedules due largely to the expediting of deliveries by DOD. But the problems are temporary and are being resolved.

We feel that the flexibility provided under the present DMS will allow us to take care of a substantial increase in defense spending without disrupting the civilian economy.

In the event we find that military orders are causing severe dislocations of the civilian economy, you may rest assured we will seek the advice of this committee before any controls are imposed on the economy.

Before leaving this subject, I would be remiss if I did not mention the exceptionally fine handling that BDSA has provided for the priorities and allocations authorities of the Defense Production Act.

OFFICE OF DEFENSE RESOURCES

Over the past few years, the Office of Emergency Planning has felt that the Government lacks a clearly defined system for the central management of resources under emergency conditions, including nuclear attack. Such a system would clearly be necessary to any effective mobilization of the Nation's economic resources to support even a fairly large-scale conventional war effort, as it was in the past. OEP has developed a concept for an Office of Defense Resources to be activated in an emergency by the President. It has been approved by President Johnson, and he has directed that it be implemented.

Essentially ODR is a standby system and organizational structure to insure that, in an emergency, resources are used with maximum effectiveness. Under this system ODR would provide the central resource management for which there is no peacetime counterpart.

The ODR will operate, on behalf of the President, at the apex of a Government-wide resources management structure, in which the Federal agencies would be responsible for carrying out their assigned responsibilities. It would review claims for resources and estimated resource availability, and advise the President with respect to feasible courses of action.

OEP attaches a high priority to the development of the ODR and recently has intensified efforts to speed the establishment of a standby capability. The President could also activate ODR in a limited war to carry out central resource management functions. OEP is now reviewing authorities and policies in effect since the Korean emergency and determining what additional measures and readiness actions would be required to support a limited war mobilization under the ODR concept.

With respect to a nuclear war situation, several factors make a standby system important if not critical.

1. In previous emergencies there was time after declaration of war to develop the necessary resource control mechanisms. Our allies fought holding actions while we mobilized. This will not be the case in a nuclear attack. The ODR must be ready to function immediately.

2. În previous emergencies the economy was intact. It could accommodate all demands and tolerate waste and delays. In the postnuclear attack, conditions will be different. We must not only avoid waste of resources and delays in postattack operations, but also remedy any potential unacceptable deficiencies identified in preemergency analysis.

Changed conditions as cited above, plus recent technological advances in data handling, have made it both necessary and feasible to develop emergency operational plans and procedures to cope with the situation.

STATUS OF STANDBY PREPAREDNESS MEASURES

In March, Director Ellington approved the 1965 issue of "Guidance for Nonmilitary Planning." This guidance was prepared by a Presidentially established committee and is classified. It treats the full spectrum of emergencies, both declared and undeclared, which may face us over the next decade. Without minimizing the problem of coping with general (nuclear) war, it calls attention to the variety of demands that may be placed upon civil emergency preparedness by international tension and limited war.

I mention this new guidance because it further underscores the requirement that emergency preparedness develop and have in being a full range of standby measures, including proposed legislation as well as executive branch orders.

A primary step is the recent issuance by OEP of the "Digest of Federal Executive Branch Nonmilitary Emergency Measures." This is a classified document. If the committee desires more information, it can be made available in an executive session. It contains a wide variety of emergency action measures from which national decisionmakers could select those nonmilitary responses appropriate to the specific emergency. Some actions, of course, would be required only in a general war with nuclear attack on this country. Others could become necessary at some stage of escalation short of general war. Many of the possible responses are already authorized by existing statutes such as the Defense Production Act of 1950, as amended, or the Federal Civil Defense Act of 1950. Others require special authorization either by legislation, if Congress is in session, or by Presidential order if not. In the latter case, legislative authorization would be sought as soon as the Congress could be convened. Many of the standby implementing documents, including drafts of proposed legislation, are complete. Some, including procedures for establishing the Office of Defense Resources, are in an advanced stage of preparation. Reviews and revision of standby documents to assure current application is a continuing process.

In further preparation for the operations of ODR, as approved by the President June 30, 1964, a series of subordinate implementing documents are being developed. Just this month, the Director of the Office of Emergency Planning issued "The Manual for Regional Emergency Operations-Office of Defense Resources." This unclassified document covers the mission and concept of operations of ODR at regional level.

Finally, on the status of emergency measures, I call attention to the copy of the "Code of Emergency Federal Regulations" issued July 1, 1965, by the National Archives and Records Service of the General Services Administration. This issue contains orders and regulations of the Department of the Treasury, the Post Office Department, the Civil Service Commission, the Federal Reserve System, the Housing and Home Finance Agency, the Interstate Commerce Commission, the Federal Home Loan Bank Board, and the Railroad Retirement Board. As the unclassified emergency orders