CONTENTS WITNESSES Connor, John T., Secretary of Commerce; accompanied by James L. Parris, Assistant General Counsel; Anthony Bertsch, Assistant Administrator for Industrial Mobilization; and James F. Collins, Deputy Assistant Secretary for Domestic Business__ Dryden, Franklin B., Deputy Director, Office of Emergency Planning, DATA RECEIVED FOR THE RECORD Industry Evaluation Board: Products and plants of exceptional im- portance to national defense.. Response to questions submitted by the vice chairman_. Joint Committee on Defense Production: Reduction in stockpile objectives in 1958, excerpt from the eighth Estimates of losses on DPA programs reported to Congress in past Administrative and custodial expense of the Defense Production Act DPA inventory within stockpile objective as of June 30, 1965, table... III DEFENSE PRODUCTION ACT Progress Report-No. 45 MONDAY, OCTOBER 4, 1965 CONGRESS OF THE UNITED STATES, JOINT COMMITTEE ON DEFENSE PRODUCTION, Washington, D.C. The joint committee met, pursuant to notice, at 10:05 a.m., in room S-126, U.S. Capitol Building, Senator A. Willis Robertson (chairman) presiding. Present: Senator A. Willis Robertson, Representative Wright Patman (vice chairman), Senators Sparkman and Tower. Also present: Harold J. Warren, clerk and counsel; George T. Ault, professional staff member; and C. Oral Lambert, Jr., professional staff member. Chairman ROBERTSON. The meeting will please come to order. The Joint Committee on Defense Production, as many of you know, has the responsibility of reviewing the execution and administration of programs authorized in the Defense Production Act, The purpose of the mobilization program is to achieve preparedness for any emergency which could arise. The Defense Production Act recognizes the need for the development of preparedness programs in order to reduce the time required for full mobilization. The departments and agencies concerned have had recent experience in meeting emergency situations. This committee has received reports on any changes in requirements which have resulted from these emergencies. We have not encountered the problems that existed in earl er emergencies when the committee consulted with the departmenits and agencies frequently in an effort to find the means for solving problems and overcoming shortages. That is one reason, gentlemen, that we have not met very frequently in the last 2 or 3 years. Everything we thought was going along pretty well. We have invited the Honorable John T. Connor, Secretary of Commerce, to meet with us today. We also invited Gov. Buford Ellington, Director, Office of Emergency Planning, but he is unable to attend. We are glad to have Secretary Connor meet with the committ ee to discuss the status of industrial mobilization, the operation of the defense materials system, and other matters which may be of mutual interest. We also are glad to have Mr. Frank Dryden, Deputy Director of the Office of Emergency Planning; and Mr. William N. Lawrence meet with us. Mr. Lawrence is Chief of the Stockpile and Requirements Division of the Office of Emergency Planning. Our total mobilization effort is closely related to industrial production, and the Department of Commerce maintains day-to-day con 1 tact with industry. Secretary Connor has had valuable experience in both management and government, and I am sure his observations will be of interest to us all. Mr. Secretary, we are pleased to have you, and will you now proceed in your own way. STATEMENT OF JOHN T. CONNOR, SECRETARY OF COMMERCE; ACCOMPANIED BY JAMES L. PARRIS, ASSISTANT GENERAL COUNSEL; ANTHONY BERTSCH, ASSISTANT ADMINISTRATOR FOR INDUSTRIAL MOBILIZATION; AND JAMES F. COLLINS, DEPUTY ASSISTANT SECRETARY FOR DOMESTIC BUSINESS Secretary CONNOR. Thank you very much, Mr. Chairman. I have some aids with me today, and if I may, I would like to introduce them. Chairman ROBERTSON. Please do so. Secretary CONNOR. Mr. James L. Parris is Assistant General Counsel of the Department of Commerce. Mr. Anthony A. Bertsch is Assistant Administrator for Industrial Mobilization, and Mr. James F. Collins, is Deputy Assistant Secretary for Domestic Business. I have a short statement, and if I may, I would like to read it. Secretary CONNOR. Mr. Chairman and members of the committee, I am glad to appear at the committee's invitation to discuss our industrial mobilization activities under the Defense Production Act. The present system for defense priorities and allocations had its origin in World War II. The system was reactivated during the Korean war under the authority granted by Congress in the Defense Production Act. With the termination of the Korean conflict in 1953, the controlled materials plan, which, through the complete distribution control of steel, copper, and aluminum, had been the basic regulator of our wartime production system, was modified to eliminate controls directly affecting the civilian sector. This was done by the establishment of the Defense Materials System, which we called DMS, which consists of regulations providing for the allocation of steel, copper, and aluminum, and for the use of priorities exclusively for defense production, defense construction, and defense research and development programs. The 1953 revision was designed to accomplish three basic objectives. These were, first, to eliminate controls over the civilian sector; second, to maintain a flexible system to insure the prompt fulfillment of current defense programs; and third, to provide a base upon which any necessary degree of expansion of controls for defense needs could readily be accomplished. These purposes were consistent with and in implementation of the 1953 amendments to the Defense Production Act, particularly section 101(b) which provides that no controls should be imposed upon general distribution of materials in the civilian market except upon an express Presidential finding of necessity. In 1959 the DMS regulations were revised to simplify their administration, and the system of priorities and allocations has remained relatively unchanged since that time. The basic principles of our priorities and allocations system have in recent months been reexamined in the light of our current military and economic situation, and in my judgment our present system is adequate. As a result of experience gained in the 1962 Cuban crisis, the Department of Defense expanded its use of the facilities of the General Services Administration in the procurement of common-use items. In order to facilitate this procurement, a delegation was issued to the Administrator of the General Services Administration authorizing the use of priorities in procurement for military and related defense programs. The use of this priorities authority was initially limited to a procurement level of $300 million per year. This limit has been increased to $350 million per year because of the current escalation in South Vietnam. The impact of the current accelerated and increased military procurement early became evident in the expanded requirements for copper for ordnance items, primarily ammunition. Accordingly, we raised the military set-asides for copper-controlled materials to assure adequate availability for the expanded military needs. Increased materiel requirements for Vietnam also have had a noticeable effect upon our special assistance program for expediting defense deliveries. Our gross national product is nearly double that of 1952 and I have no doubt that our economy can absorb without difficulty the additional defense expenditures currently provided for the Vietnam conflict. There are situations in industry at the present time that require attention; for example, in the area of copper supplies. Some difficulty in prompt availability of copper can be expected to continue into the indefinite future even though increases in world copper production are expected over the next few years. use. The textile industry, which has been operating at virtually 100 percent of capacity for some time, is also one in which increased military procurement can impose strains upon production for civilian The military establishment has most wisely, however, adjusted its specifications to permit the industry to meet stepped up military requirements with minimum impact on civilian production. The tight situation in cotton textiles has been the result of two factors: first, the attrition in domestic production capacity over the past several years, and second, the demand for cotton textiles that resulted from the combined effects of one-price-cotton legislation, increased consumer expenditures for soft goods, and a more orderly import trade. We consult frequently with the Department of Defense and industry on the matter of textile procurement and we have been assured by the textile industry that military needs can be met no matter how much they may be stepped up in the future. Meeting this obligation will be facilitated by industry-Government discussions and further adjustments in specifications. In appraising our industrial mobilization readiness we must of course take into account inventories of Government-owned materials. Stocks of strategic and critical materials in excess of $8 billion have been accumulated under the authority of the Strategic and Critical Materials Stock Piling Act, the Defense Production Act, and the Agricultural Trade Development and Assistance Act. If future developments require, the President has authority to direct a release of materials from the national stockpile for defense needs. Quantities of most of the materials in the total Government inventories exceed the stockpile objectives for the materials. These |