prices chrome exporters choose to charge us. It gives us the option to refuse to purchase chrome that it not offered at a reasonble price. The Arab oil embargo and the subsequent price rise by fiat of the OPEC cartel have shown the dangers of not maintaining adequate stockpiles of critical imported materials. In the case of chrome the supporters of H.R. 1287 have apparently chosen to ignore these dangers. Can the American people afford to do likewise? VI. FERROCHROMIUM AND RHODESIA The main end use of chrome in America is stainless steel. Metallurgical grade chromite ore cannot be turned directly into stainless steel. It must be turned into ferrochromium. One of the major economic trends of our time is the move by developing countries to process the raw materials they export, thus generating more foreign exchange. This is apparent in Mideast where the oil exporters are involved in a major refinery building program. It is apparent in Africa and the Caribbean where Guinea and Jamaica have announced plans to build huge plants that will convert bauxite into alumina for export. Rhodesia and South Africa have followed this trend. Both have built major ferrochromium plants. Needless to say it is cheaper to process a raw materrial near its source than thousands of miles away. Thus the processing industries of the producing countries will be able to undercut the processing industries of the consuming countries. It is also important to note that it is more profitable to export a semi-finished product than a raw material so the producers are likely to emphasize the export of the former at the expense of the latter in the future. What all this means is a change in the world economic order. It means more money flowing from the more advanced nations toward the developing world. The rise of the Rhodesian ferrochromium industry is part of this change. It is not due to "slave labor" as supporters of H.R. 1287 claim. According to the London Economist the black workers of Rhodesia are among the highest paid in Africa. The price difference comes from the low costs of transportation and the cheap hydro-electric power generated by the Kariba Dam. Cutting America off from chrome and ferrochromium from Rhodesia will not save the U.S. ferrochromium industry. South Africa is engaged in a massive expansion of its ferrochromium facilities. It's unlikely the Russians will stay out of such a profitable business for long. Sanctions failed to help the U.S. ferrochromium industry in the past. While they were in effect, the U.S. production of ferrochromium fell from 313,793 short tons in 1967 to 244,030 short tons in 1971, the last year of the sanctions. The repeal of the sanctions raised U.S. ferrochromium production to 304,952 tons in 1974. It's difficult to see how their restoration will be of much help in this area of the economy. VII. RHODESIAN SANCTIONS AND U.S. UNEMPLOYMENT While it's unlikely that the passage of H.R. 1287 would do much good for workers in the American ferrochromium industry, there is serious evidence that this bill will be a disaster for workers in the U.S. stainless steel industry. According to a detailed study of the situation by the Center for Advanced International Studies at the University of Miami, a renewal of U.S. sanctions against Rhodesia would reduce the amount of work in the American stainless steel industry by 2,000,000 manhours. Thus, it is likely that the passage of H.R. 1287 would accentuate the worse aspects of the present "stagflation". It would increase both inflation and unemployment. VIII. WILL TRADE WITH SOUTHERN AFRICA LEAD TO EMBARGOES FROM BLACK AFRICA? This is a possibility but not a very likely one. In the eyes of black Africa the U.S. is not the major violator of the sanctions. At the annual meeting of the Organization of African Unity in 1974 Japan was named as the "most notorious sanctions buster". France was labeled as the second biggest villain. The black African states do not like the fact that in 1971 America joined Switzerland and South Africa in openly repudiating the U.N. sanctions but they are well aware of who is doing the most sanctions breaking. The black states have shown little inclination to go beyond rhetoric in punishing western states for their trade with southern Africa, France, for instance, has very good relations with black Africa. French corporations today dominate the Nigerian auto industry. Yet France is also the major supplier of foreign arms to South Africa as well as a violator of the Rhodesian sanctions. Furthermore, we should not allow American policy to be changed by foreign economic blackmail. Rather than dumping raw material stockpiles as Nixonomics decried to cover up a failure to fight inflation, we should build up stockpiles of raw materials we lack at home and institute a strict recycling program to make the most efficient use of what we do import. We should try to diversify our sources of raw materials giving particular preference to those nations who pursue generally friendly policies toward the U.S. Appeasement has never been a very good method of dealing with aggression-be it military or economic. IX. CONCLUSION Should the House vote to impose sanctions on Rhodesian chrome it will be engaging in what The Washington Star-News has quite rightly called an “exercise in selective morality". Can a morality that is selective be much of a morality at all? Does anyone really believe that the Soviet Union is morally superior to Rhodesia? While we are not only trading with the Russians but also granting them massive low-interest credits and, at one point, even offering to sell them police equipment to help them crush domestic dissent, can we really find a "moral" argument for not trading with Rhodesia? Is it logical to consider the Soviet Union a reliable source for a strategic raw material when it breaks agreements with us within months of signing them? Is it practical to cut the U.S. consumer off 67% of the world's reserves of metallurgical chrome? Should we fuel the present high rate of inflation in America by actions which will most surely drive up the price of a commodity we import? We think not. We most strongly urge the House to kill the Rhodesian chrome bill when it reaches the floor. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON SEAPOWER AND STRATEGIC AND CRITICAL MATERIALS, Washington, D.C., Tuesday, July 22, 1975. The subcommittee met, pursuant to adjournment, at 10:18 a.m., in room 2118, Rayburn House Office Building, Hon. Charles E. Bennett (chairman of the subcommittee) presiding. Mr. BENNETT. Our committee will come to order. The first witness this morning is Hon. Samuel B. Sherwin, Deputy Assistant Secretary of Commerce for the Bureau of Domestic Commerce. STATEMENT OF SAMUEL B. SHERWIN, DEPUTY ASSISTANT SECRETARY OF COMMERCE FOR THE BUREAU OF DOMESTIC COMMERCE Mr. SHERWIN. My name is Samuel Sherwin. I am Deputy Assistant Secretary of Commerce for the Bureau of Domestic Commerce. I appreciate this opportunity to present the views of the Department of Commerce on H.R. 1287, a bill "To amend the United Nations Participation Act of 1945 to halt the importation of Rhodesian chrome." H.R. 1287 has a twofold objective. First, it would in effect, repeal the application of the Byrd amendment [section 10 of the Strategic and Critical Materials Stockpiling Act] which, as of January 1, 1972, voided the U.S. prohibition on imports of strategic and critical materials (principally chrome) from Rhodesia. In addition, the bill includes a provision which would further prohibit the importation into the United States of any steel mill product, regardless of source, containing chrome of Rhodesian origin. The administration supports the reimposition of the U.S. embargo on Rhodesian chrome on foreign policy grounds. The President indicated in his state of the world address on April 10 that we are developing closer relations with Africa. The U.S. failure to fully adhere to the United Nations sanctions against Rhodesia could prove to be an impediment to such improvement. Reimposition of the U.S. embargo on Rhodesian chrome, while returning the United States to full adherence to the U.N. sanctions program, also has economic implications for this Nation. Before addressing myself to the second part of H.R. 1287, therefore, I should like briefly to set forth for this committee's consideration some of the principal economic considerations regarding chrome. My comments should, of course, be viewed in the broader foreign policy context which I have already outlined. There are three types of chrome ore-metallurgical, refractory, and chemical. Metallurgical grade is by far the principal type, accounting for some two-thirds of the total world production. The bulk of the chrome ore mined in Rhodesia is metallurgical, and my comments focus on that grade. The United States is totally dependent on imports for new supplies of chrome, which is an essential raw material of the steel industry. The major products requiring chrome in their manufacture include stainless steels, structural and engineering steels, tool and die steels, and many alloy steels. These are used to a great extent by the defense, transportation, energy and chemical sectors of the economy. In the 3 years since the Byrd amendment became effective, U.S. demand for chrome on the basis of contained metal in ore and imported ferroalloys was met by average yearly imports of 303,000 tons, strategic stockpile releases of 18,000 tons, and withdrawals from industry inventories of 47,000 tons. The principal foreign suppliers and their share of U.S. imports over these 3 years were: U.S.S.R., 37 percent; South Africa, 19 percent; Rhodesia, 15 percent; and Turkey, 13 percent. Rhodesia has been a significant supplier to the world market and has 67 percent of the known world reserves of metallurgical grade chrome ore. Any significant impediment to the flow of Rhodesian chrome to the world market, therefore, can reasonably be expected to result in a higher world price structure for chrome than might otherwise occur. The state of worldwide and U.S. demand will also have considerable influence on the price of chrome. There are other factors which should be taken into consideration in evaluating the implications for the U.S. economy of cutting off chrome supplies from Rhodesia; these include the following: (1) Authorized disposals from the strategic stockpile ceased as of mid-1974; additional withdrawals from the stockpile would be subject to congressional authorization. (2) While preliminary information indicates that domestic industry inventories of chrome are recovering, at the end of 1974, they were at the lowest level in the past 15 years. (3) Domestic demand for chrome may be expected to increase with the predicted general turnaround of industrial production later this year. (4) Shifting to alternate sources of supply might be difficult and costly because of the possible need to adjust production processes and to establish new trade patterns in the face of forward commitments by existing suppliers. The second part of H.R. 1287 would in effect go beyond the requirements of the U.N. sanction and add a secondary U.S. embargo to the original embargo by imposing a further restriction on the importation from any country of steel mill products containing chrome of Rhodesian origin. This prohibition would be administered by requiring countries exporting steel mill products to the U.S. to provide certification that such products do not contain Rhodesian chrome. We appreciate that this secondary restriction is aimed at discouraging circumvention of the embargo and insuring that U.S. producers of chrome-bearing steel mill products who will be precluded from using Rhodesian chrome are not placed in a competitive disadvantage by foreign suppliers of such products who have access to Rhodesian chrome. This recognizes the fact that Rhodesia has continued to ship its output of chrome ore and ferrochrome into the world market despite the U.N. embargo. At the same time we see very significant problems arising from the implementation of the provisions in question. The implementation of the secondary embargo could well place a burden on trade and create problems both domestically and in the foreign trade sphere. Obviously, if the Secretary of the Treasury is charged with the responsibility of administering an embargo on imports of steel mill products containing Rhodesian chrome, he will discharge this responsibility to the best of his ability. Under section 2 of the bill, the United States could be accused of erecting a nontariff barrier to trade by countries whose steel mill products were denied entry. The problem is significant because of the magnitude of trade involved and the large number of supplying countries. An estimated $350 million of chrome-bearing steel mill products from over 30 countries may be affected. The principal sources of these imports are Japan, Sweden, Canada, and the United Kingdom. The embargo on Rhodesian chrome content, of course, would apply equally to all supplying countries. Despite our reservations regarding the additional restrictions, however, we feel on balance that they would be consistent with the original embargo and we would not object to their being adopted, subject to the judgment of the Department of the Treasury as to their feasibility. In conclusion, Mr. Chairman, despite the difficulties outlined above, the Department of Commerce supports the repeal of the Byrd amendment. Thank you very much. WRITTEN STATEMENT OF SAMUEL B. SHERWIN, DEPUTY ASSISTANT SECRETARY OF COMMERCE FOR THE BUREAU OF DOMESTIC COMMERCE Mr. Chairman and Members of the Subcommittee, my name is Samuel Sherwin. I am Deputy Assistant Secretary of Commerce for the Bureau of Domesic Commerce. I appreciate this opportunity to present the views of the Department of Commerce on H.R. 1287, a bill "To amend the United Nations Participation Act of 1945 to halt the importation of Rhodesian chrome." H.R. 1287 has a twofold objective. First, it would in effect, repeal the application of the Byrd Amendment (Section 10 of the Strategic and Critical Materials Stockpiling Act) which, as of January 1, 1972, voided the U.S. prohibition on imports of strategic and critical materials (principally chrome) from Rhodesia. In addition, the bill includes a provision which would further prohibit the importation into the United States of any steel mill product, regardless of source, containing chrome of Rhodesian origin. The Administration supports the reimposition of the U.S. embargo on Rhodesian chrome on foreign policy grounds. The President indicated in his State of the World address on April 10 that we are developing closer relations with Africa. The United States' failure to fully adhere to the United Nations sanctions against Rhodesia could prove to be an impediment to such improvement. Reimposition of the U.S. embargo on Rhodesian chrome, while returning the United States to full adherence to the UN Sanctions Program, also has economic implications for this nation. Before addressing myself to the second part of H.R. 1287, therefore, I should like briefly to set forth for this Committee's consideration some of the principal economic considerations regarding chrome. My comments should, of course, be viewed in the broader foreign policy context which I have already outlined. There are three types of chrome ore-metallurgical, refractory and chemical. Metallurgical grade is by far the principal type, accounting for some two-thirds of the total world production. The bulk of the chrome ore mined in Rhodesia is metallurgical and my comments focus on that grade. The United States is totally dependent on imports for new supplies of chrome, which is an essential raw material of the steel industry. The major products requiring chrome in their manufacture include stainless steels, structural and en 56-945-75 |