A second aspect of the bill that I find some difficulty with is the inclusion of "products" as well as "material and resource" in the system. Use of the word "product" seems to make the system impossibly all-inclusive. The extent to which so-called renewable resources are to be included in the system is unclear. Section 3(f) makes reference to "forests" but does not refer to agricultural commodities. A product usually refers to a commodity into which some "value added" has been incorporated into the original raw material. What kinds of products are in question, and what criteria are to be used in deciding whether a product is to be included in the system? For example, there are certain products derived from raw materials such as gasoline, jet fuel, plastics, metallurgical coke, synthetic fibers, sulphuric acid. Is it the intent of including "products" in the list to make sure that these derived materials are considered, and that certain kinds of shortages don't appear because of inadequate processing capacity under U.S. control? Would the list include such items as fertilizers, pesticides and herbicides, drugs derived from natural products, etc.? It seems to me there should be a section of the bill that sets out better criteria for what should or should not be included among the "product, material, and resource" items to be contained in the information system.

The bill is very confusing with respect to the relation between the Bureau of Materials Forecasting and the information system mandated to be established by the President. Section 4(b) (3) seems to locate the information system within the Bureau, but leaves this somewhat up in the air with the phrase "to the extent practicable." Is this something analogous to the relationship between CEQ and EPA? However, the bill does not create any Executive Office agency analogous to CEQ, and seems to leave the whole question of organization and responsibility largely to the discretion of the President. Section 4(b)(2) does provide a somewhat vague statutory base for some kind of Executive Office Agency, but it is very vague. If this is going to be different from the Bureau, and is going to have the visibility apparently desired by the authors of the bill, then will it not require some sort of statutory office, such as a Council on Resources? An agency which develops policy options for the President usually finds difficulty in surviving within a single department because these options usually impinge on the business of several Cabinet departments or independent agencies. In the case of resources, for example, many of the options involved will have very strong foreign policy implications and may in fact require diplomatic initiatives or negotiations with foreign countries. Yet it would be difficult to ensure representation of the necessary foreign policy competence in a Bureau in the Department of Commerce.

A good illustration of the problem is, perhaps, the case of platinum. If 1978 auto emission standards are implemented, it will about double U.S. needs for importing platinum. What are the foreign policy implications of this? Will we face a platinum OPEC? Or should we have contingency plans to relax the standards in case of a cut-off of supply or a large increase in price? Or should we insist on the development of some alternate technological strategy for meeting emission standards, even at the price hikes on foreign supplies? It is very doubtful to me whether a Bureau in the Commerce department can successfully recruit the variety of expertise, even as consultants, to study such complex interactive issues.

Who is actually going to exercise the range of powers set forth in section 4(d)? These powers are given to the President, but who will actually exercise them? Who will be accountable when the GAO exercises its oversight (Section 11)? It seems to me the Congress would be creating a very weak agency to do a very big job.

And in fact the bill seems to imply a degree of national planning which may be impractical, even if conducted by a much stronger agency. Section 2(a) (7) implies that systematic analysis by the federal government may be necessary to avoid shortages and market imbalances. In fact, such analysis conducted in a highly political environment may exacerbate rather than solve the problemnot necessarily, but it could. Policy options inevitably impinge on special interests, hurt some interests and advantage others. In the field of energy we appear to have reached a state of national paralysis because of our inability to reconcile three conflicting interests-environmental protection, low prices to consumers, incentives to investors to increase supplies. Our problems in energy appear to stem not from inadequate analysis, but from our inability to agree on our priorities among many conflicting interests and values. Thus, while I am all for devel

oping more information and analysis in other resource fields, I do not share the optimism implicit in the bill that this information and analysis will contribute much to the resolution of political conflicts, especially if the analysis is carried out by a very weak agency with low level staff buried somewhere in the Executive Office.

Senator TUNNEY. Mr. Strauss.

STATEMENT OF SIMON D. STRAUSS, EXECUTIVE VICE PRESIDENT, ASARCO INC., AND CHAIRMAN, COMMITTEE ON MINERALS AVAILABILITY, AMERICAN MINING CONGRESS

Mr. STRAUSS. Senator, my name is Simon D. Strauss, I am executive vice president of ASARCO Inc., formerly American Smelting and Refining Co. Perhaps that is why the name seemed unfamiliar to you. Senator TUNNEY. Yes.

Mr. STRAUSS. ASARCO Inc. is an organization active in the mining and processing of some 24 mineral commodities.

I appear on behalf of the American Mining Congress today, a trade association devoted to the mining industry of the United States. I serve as chairman of the Committee on Minerals Availability of the American Mining Congress.

I welcome this opportunity to participate in hearings dealing with problems of materials management, materials information systems, and material research and development.

I understand that the hearings are designed to provide input to the work of the National Commission on Supplies and Shortages and deal in part with two bills which are before your committee, S. 1410 and S. 1415.

Since the National Commission on Supplies and Shortages has only begun its work, the American Mining Congress feels that it would be premature to enact such bills as S. 1410 and S. 1415 until the Commission has had time to focus on the issues covered by the substance of the proposed legislation.

We have been advised that the National Commission will seek advice and counsel from, among others, the U.S. mining industry in the preparation of its report. We look forward with interest to submitting our views in detail in regard to this country's materials problems.

The American Mining Congress recognizes the desirability for a coordinated approach to gathering and recording information already being collected by various agencies of the Federal Government.

However, the legislation before you contemplates superimposing additional systems for gathering and disseminating materials information.

Frankly, so many Government departments and agencies are already involved in the materials problem that we question whether the addition of still a new organization will improve matters.

Our observation has been that proliferation of agencies, far from expediting consideration of grave problems of national interest, tends to delay decision and to frustrate action.

Furthermore, some of the legislation proposed seems to us to give far too much discretion to appointed Government officials in the securing of information of a confidential nature from private enter

prises which these officials could subsequently make based on unilateral determinations. This appears to us to be a further invasion of the right to privacy by Government, a subject already causing grave concern in many quarters.

In addition to these comments on the two bills, we would like to discuss some aspects of the materials scene as we see them today.

The administration and the Congress have been properly concerned over the consequences of the quadrupling of price for crude oil unilaterally imposed on world trade by the Organization of Petroleum Exporting Countries.

Fears have been expressed that comparable actions might be taken by foreign suppliers of other materials, thereby increasing U.S. consumer costs and adversely affecting the U.S. balance of payments.

While no one can gainsay the possibility that in certain cases such actions may be undertaken and may even, for short periods of time, achieve a certain measure of success, we believe a widespread repetition of the oil experience in other materials is unlikely.

The principal impediments to international trade in nonferrous metals are nontariff barriers, differing antimonopoly regulations in the leading industrialized countries and various manifestations of governmental interference with normal business activities.

To an increasing extent governments other than the United States are taking over control of their export trade in raw materials and in many cases are responsible for actual marketing of these materials. This causes serious problems for U.S.-based private enterprise.

At the time of the oil action there were widespread predictions, for example, of similar actions by exporters of iron ore, copper, mercury, tin, bauxite, and phosphates, among others. In fact, only in bauxite and in phosphate has there been any success in unilaterally imposed higher prices.

As to copper, the organization known as CIPEC, which at that time included four of the major copper exporting countries, has repeatedly stated its intention to control or "stabilize" the price of copper. Yet that price has dropped on the world market from a high of $1.50 a pound in April 1974 to its present level of slightly over 50 cents a pound.

An organization representing the chief exporters of mercury announced its intention to hold the price of that metal at something over $300 a flask. Its present price is in the neighborhood of $125 a flask. The iron ore exporters have had numerous talks but so far have concluded that concerted price action would be inappropriate.

The tin exporters are part of an International Tin Agreement, which has attempted to stabilize tin prices, but with little success. The price of tin in early 1974 reached a high equivalent to $4.75 a pound. Currently it is something under $3 a pound.

As to bauxite, one leading exporter, Jamaica, unilaterally imposed a very high rate of export tax in 1974. This has greatly increased the cost of Jamaican bauxite to the buyers in the United States and elsewhere. Other bauxite exporters have taken somewhat less drastic steps. Jamaican exports of bauxite are declining while certain of the other exporting countries are increasing their sales even though bauxite consumption has dropped.

Only in the case of phosphates, of which Morocco is by far the world's largest exporter, has there been a clear record of a sustained artificial increase in price. The near monopoly is the obvious explanation.

We believe that the circumstances which have thus far enabled the OPEC countries to maintain a greatly increased price for crude oil do not apply to most other materials. If the committee is interested, we are prepared to discuss the reasons why the situation in other minerals differs so greatly from the situation in petroleum.

A second point in the proposed legislation is the desirability of making long-term forecasts, including projections of major long-term shortages. There appears to be a belief that if only sufficient information can be put together the future can be accurately predicted. With all due respect, we must point out that many forecasts made in the past after long and careful study have drawn erroneous conclusions. Let me cite a specific example. In 1950 President Truman appointed a Materials Policy Commission, consisting of five distinguished citizens and I should say very distinguished citizens, because they certainly were-whose competence and intelligence no one could have questioned then or would question now.

They assembled a staff of experts who were similarly competent to make studies of the outlook for material resources. The data which they prepared in the course of a 2-year study covered the period from 1950 to 1975. Their conclusions were published in June 1952.

Just one example. In chapter 5 of volume 2 of the Materials Policy Commission report, which incidentally was referred to as the Paley report, since William S. Paley was the chairman, the flat statement was made that because of an expected leveling out of domestic production of copper, by 1975, "the United States will have to increase its imports greatly from other Free World sources, possibly more than doubling copper imports by 1975 to the neighborhood of 1 million tons."

This figure referred to the fact that in the year 1950 the net imports of copper, that is to say the imports in excess of exports, amounted to 448,000 short tons.

While the final figures are not available for the year 1975, a reasonable estimate is that U.S. net imports this year will not be more than 200,000 tons, or only one-fifth of the estimated level. Instead of more than doubling U.S. dependence on imports, that dependence has been cut by more than half.

Why did this happen? It happened because, contrary to the best opinion available in the United States in 1950-51-and this was both governmental and the private sector; I make no distinction-this country's capacity to produce copper from domestic sources has more than doubled during this 25-year period.

The Paley report had concluded that "a long-run domestic mine production capacity of 800,000-tons a year seems the best than can safely be expected."

That deals somewhat with the professor's point about alternatives. Actually the U.S. copper industry now has a mine capacity to produce in excess of 1.8 million tons a year. Because of the current recession in the economic cycle this year's production will fall substantially below that capacity, but the potential is there.

I want to emphasize that I do not intend to appear critical of those who prepared the Paley report. They acted on the best information available at the time. But, contrary to their expectations that there would be few new discoveries of economic copper deposits in the United States, the last 25 years has seen a vast expansion of the copper producing potential of this country, with the result that the United States is more nearly self-sufficient in the production of copper than of any other one of the major metals.

Let me make it very clear that the mining industry recognizes the need for continued studies to forecast future trends. However, the example cited with respect to the copper position should demonstrate to the Congress and to the administration officials alike that forecasts are not infallible.

And in developing public policy we have to be careful how we use forecasts.

This brings me to the point that if the Government forecasts a potential shortage in some material, that forecast may well tend to become a self-fulfilling prophecy, at least over the near term.

The panic buying and sharply rising prices that were experienced in the markets for most materials during the late months of 1973 and the early months of 1974 were the result of a widespread belief that the industrial boom then underway and the likelihood of effective cartel action in many materials would cause permanent shortages and constantly rising price levels.

As a consequence fabricators and manufacturers of materials, to hedge against such shortages and rising prices, built up their inventories, doing so at a time when in fact the demand for finished goods was already beginning to decline, that is to say, demand for items such as automobiles, electrical appliances and residential housing.

The recession which was clearly underway by late 1974 and continued through most of 1975 was at least in part caused by a sudden about-face on the part of industrial buyers of raw materials. Finding in mid-1974 that supplies were adequate, they then began to liquidate inventories. For many months consumers have been buying smaller quantities of materials than have actually been consumed in the production of finished goods.

In other words, they have been destocking.

The individual businessman customarily makes his own judgments as to whether there will be shortages or surpluses of the materials he requires in his business. However, if a Government agency forecasts an impending shortage in a given material, will this not inevitably cause a rush by the users of that material to purchase more than they really need?

A simple and universally recognized instance of an artificially induced shortage occurred during 1974 when the rumor was spread that there would be a shortage of toilet paper. The rumor for a time did create the shortage, because every housewife went out and bought what she really didn't need, but a shortage never really existed.

It seems to us in the mining industry that the Commission on Supplies and Shortages will need to ponder very carefully the advisability and the circumstances under which official Government forecasts of impending shortages should be issued.