MEASURES WHICH MIGHT BE TAKEN TO ALLEVIATE A SCARCITY OF RAW MATERIALS IN WAR TIME1

1. Subsidize research.

2. Keep industry acquainted with emergency raw material requirements.

1. Secure necessary appropriation for purchase. 2. Provide for adequate storage facilities. 3. Provide for rotation of stock where necessary.

1. The writer is indebted to Mr. G. A. Roush for the ideas expressed in this table.

See G. A. Roush "Strategic Mineral Supplies", 1939, pages 20 ff. For the tabulation itself, the writer takes full responsibility.

In addition to those measures tabulated above, the usual provisions for security against sabotage and the possible invasion of an aggressor, principally by air and naval raid, must be made. Such organizations as the Federal Bureau of Investigation, the State Guard and Home Guard forces must be brought into the picture as rapidly as possible.

The timing of these control measures is all important. We have yet to discover the secret of the miraculous "dragon's teeth". Such a program as has been outlined cannot be accomplished in twenty four hours, or weeks or even months. We must recognize this problem as one vested with the national security, and as such, is and will remain, a determinant of our national policy. In importance it far out-rates the "Open Door" or "Freedom of the Seas" or any other well known national attitude.

ness.

MEASURES TAKEN BY THE UNITED STATES TO
IMPROVE ITS RAW MATERIALS POSITION.

The natural deficiency of the country has necessitated action by the United States towards strengthening its raw material weakThat this problem was recognized as a definite weakness was proven by our experiences in World War I. To quote from the conclusions of the War Industries Board Report, 1921: "Second. During the war the country was constantly threatened with a shortage in available supply of nitrogen, manganese, chrome, tungsten, dyestuffs, coal-tar derivatives, and several other essential materials. These materials had always been imported into the United States and their production never developed, although sources for most of them exist here. The Government should devise some system for protecting and stimulating their internal production."

As early as 1922, our tariff policy included protective features designed to stimulate domestic production of strategic raw materials. The encouragement given to the domestic producer by this method has been partially responsible for the relatively few items now classified as strategic and critical. However, the tariff has not been completely successful, as our experience with manganese will illustrate. Domestic producers claimed that under a duty of one cent per pound of metallic manganese, domestic mines could supply from 50 to 75 per cent of the annual requirements during the first few years and eventually the domestic mines would be able to supply an entire yearly output. However, despite the one cent duty established by the Tariff Act of 1922, domestic industry at

no time contributed more than 11 per cent of domestic requirements and the average for 16 years (1923-1938) was only 5 per cent despite the fact that the protection afforded by the tariff ranged from 50 to 100 per cent ad valorum.

In recent years, our growing concern over this problem has been evidenced by a series of legislative enactments. The substance of these acts follows:

1. Tin Protection Act.-This act, approved February 15, 1936, provided for the protection and preservation of domestic sources of tin and was the first move in the direction of conserving the domestic supply, although its primary purpose was more concerned with foreign economic sanctions than domestic protection. Under it, exports of tin scrap were subject to export licenses beginning in April, 1936.

2. The Navy Appropriation Act of 1938 included a fund of $3,500,000 for an accumulation by that Department of reserve supplies of strategic and critical raw materials. Additional funds amounting to $500,000 in each of the next two years were provided/ in a similar manner and by early 1941 over $4,000,000 had been expended under the Navy Department program.

3. Public No. 117-Strategic Materials Act. This act was approved June 7, 1939. It provided for the expenditure of $100,000,000 over the period June 30, 1939-June 30, 1943 from funds not otherwise appropriated as authorized by the Congress. This act designated the Army and Navy Munitions Board as the agency which would determine what materials should be classified as strategic and critical and purchased under its provisions. The Procurement Division of the Treasury Department was designated as the purchasing agency. Provision was also made for the expenditure of $500,000 per year during the same period by the Bureau of Mines and the Geological Survey for exploration of new sources of materials.

In accordance with the above legislation, Congress has appropriated, to continue available until expended, a total of $70,000,000 enacted as follows:

$10,000,000

12,500,000

Public, 361, 76th Cong., approved Aug. 9, 1939 Public, 442, 76th Cong., approved Mar. 25, 1940 Public, 667, 76th Cong., approved June 25, 1940.... 47,500,000 Under Public 361 and Public 442, invitations to bid were prepared and forwarded to individuals and corporations who had originally requested an opportunity to bid on Government require1. See Appendix "A", page 29, for complete text of Public 117.

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ments of strategic and critical materials. Awards were made to the lowest bidders. Under Public 667, Seventy sixth Congress, invitations to bid were prepared in the usual manner on the chief commodities and the balance under consideration were negotiated directly with producers frequently with the assistance of the State Department. Offers received were compared with market quotations, where available. If not available, offers were analyzed and advice obtained from the Bureau of Mines and Office of Production Management. Before acceptance of offers, they were approved by the Director of Procurement, the Coordinator of Defense Projects, and the Secretary of the Treasury.

4. Public No. 664. Amending the Reconstruction Finance Corporation Act.-The purpose of this act was to ease the difficulty which the Procurement Division experienced in obtaining materials. It authorized the Reconstruction Finance Corporation to purchase the capital stock of or make loans to, any corporation engaged in the production, acquisition or storage of raw materials.

5. Public No. 703.2-In order to limit and direct the flow of materials from the United States, either in raw or finished form, Section 6 of this bill provided for the establishment of a licensing system for the export of materials or fabricated goods. This acted to prevent the goods from leaving the country if needed therein and also permitted the government to direct our exports so that they would aid our allies or friendly neutrals (transfusion) and be denied to our enemies (strangulation).

6. Public No. 784.8-Approved September 16, 1940.-In order to ease the credit of producers who were expanding their facilities to meet war demands for raw materials, and to encourage the entrance of new producing areas and companies, the Reconstruction Finance Corporation was authorized to grant loans to these companies when the expansion would be justified by the output. These loans were initially limited to a total of $10,000,000 by the provisions of this act.

7. Public No. 829, 76th Congress.-Requisition Act. The Control of the export of vital materials through an export licensing system acted to prevent these materials from leaving the country, but did not guarantee that they would find their way into full utilization in the Defense Program. To provide the necessary power to take over stocks of materials which had been denied 1. See Appendix "B", page 31, for complete text of Public 664. 2. See Appendix "C", page 32, for text of Section 6, Public 703. 3. See Appendix "D", page 33, for the text of Public No. 784.

4. See Appendix "E", page 34, for the text of Public 829, 76th Congress.