Above all things we must cease being dependent for the basic materials of warfare on areas from which, if metals are available, we do not need them and from which, if we really need metals, we will not be able to get them.

Mr. RIEHLMAN. My colleague has suggested that you give us a brief and concise digest of your remarks that you have here so that we will be prepared to ask any questions that we have, and then go on with whatever suggestions you have.

Mr. WILLISTON. All right.

Mr. Chairman, I think my statement was a statement of the difficulty of the small miner in operating a small mine when he did not know what Government policy was. I have done over the last 10 years a considerable amount of endeavoring to find out what Government policy with regard to minerals was. This paper is in part the result of it. I can condense it briefly, the policy for the last 15 years of the United States Government originated in the State Department and was that we should increase our proportion of metals used in the United States from foreign sources. Naturally, if you increase the percentage from foreign sources, you decrease the percentage from domestic sources.

The Treasury Department adopted that policy in fighting depletion allowances. The State Department encouraged production from abroad. The Interior Department denied, through the Bureau of Land Management, access to public lands. The Justice Department refused to aid in the prevention of dumping from abroad. So the conclusion of the whole statement might well be said that the policy of our Government has been to reduce domestic production of metals and to increase the importation of foreign metals. Even the last directive of the Office of the Defense Minerals Production in February 1951 was to the effect that we should take no steps to increase production of any metal that was not in worldwide short supply. That directive still stands. It has never been changed since February 1951.

That, I think, is a digest of what I have to say there, with a little more detail, a little more explicit examples. There are quotations even from the Mutual Security report of Mr. Bell's committee which, by the way, was prepared and written by an economist which they saw fit to borrow from the International Monetary Fund, which is a creation of the United Nations.

So we have our last national policy as drawn and published by the Government as written not by an employee of the United States Government as such but by an employee of the United Nations. It goes a little bit to extremes. His recommendations, and they were the last policy expressions made, were that if we supply most of our metals, we need no tariffs; if we don't supply most of our metals, we should take tariffs off.

The net result was we should have no tariffs, we should have free trade. I might add that in 1939 we were self-sufficient in copper, lead, and zinc, and some other metals. In general, we import from abroad 40 percent of our metallic requirements. In the strategic metals it is an even greater percentage, about 80, 90, and even 100 percent.

Mr. RIEHLMAN. Could I ask a question at that point? Our consumption has increased tremendously since that time, has it not?

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Mr. WILLISTON. It has. Partially due to war_requirements and partially due to the postwar metal requirements. I think the overall consumption is a peak, a lump, on the upward trend, and that it would not continue at the increased rate that it has for the last few years. The result of these various phases on the domestic mining industry is this:

Costs of production within the United States are three times what they were in 1939. The prince of the metals involved is not as great as the increase in cost. It is roughly two times the price of 1939. Therefore the mines of the United States, due to increase in costs, have all been turned into marginal mines with the exceptions of the open-pit coppers and some things like molybdenum in the United States and nickel in Canada.

If we were assured of peace for the next 20 or 30 or 40 years, I would say that it might be a debatable subject as to whether we should abandon our domestic mining and import all of our metals from abroad. But it is rather clearly the case that we are not assured of peace for the next 20 or 30 years. If we are not assured of peace, then we must be prepared to whatever extent possible to supply the metals for our wartime and essential peacetime requirements in an uncertain period. We found during the Korean trouble that we cannot count on sources from abroad. When we needed lead, we didn't get it. We didn't get it. When we needed copper from abroad we didn't get it. When we needed tungsten we didn't get it.

Now the metal which we did not get in 1950 and 1951 is coming into this country to break the market and close the domestic mines. As I see it, there are about 4 broad possible solutions to this problem5, exactly. One, we can do nothing about it. Let the domestic mining industry go dependent on foreign sources, which, in the event of war, we clearly will not get. I think that policy leads to national suicide.

Second, is a price-stabilization scheme for metals similar to that used for agriculture. There is a bill in the Senate proposed by Senator Johnson of Colorado which follows that general line. It calls for an appropriation from the national funds of some $6 billion, I believe. It would be tremendously expensive in the first place. It has certain advantages, it has certain disadvantages. The advantages are it would do the job and probably 50 years from now you might feel that those metals were purchased cheaply. On the other hand, the cost of carrying such a load year by year would be roughly 3 percent of the amount invested plus a 1 percent carrying charge for warehousing, or 4 percent of the total investment.

If it ran 6 or 10 billion dollars, it would cost roughly $500 million a year to support such a program. I think the country can't support it, and I think there must be a cheaper solution.

The third would be a resumption of the premium-price plan as it was utilized during World War II. It, too, would do the job, but I think there are some serious objections to it.

First, the premium-price plan as it was used in World War II, and as it is proposed in the present Murray bill, is distinctly a cost-plus operation. I think the Congress is quite familiar with the disadvantages of cost-plus contracts. It means the delegation of authority to some bureaucrat who will be given the automatic power to set a price for each metal for each individual mine. He will have the power

of life or death over that mine and no two prices will be the same. It means insofar as the industry is concerned that the man with the best representation in Washington gets the best break. There are no incentives to efficiency and there are no incentives to exploration.

It would do the job in a way, but I think it is a very unsatisfactory way of doing it.

The fourth alternative goes along the historic path of tariff protection. As I pointed out, in 1939 we were self-sufficient in copper, lead, and zinc, with roughly a 30 to 40 percent tariff on each one. At the present time, only one tariff on a metal is above 10 percent, and that happens to be on molybdenum, which is a percentage tariff, not a fixed rate tariff, and we are self-sufficient in molybdenum.

The rest are all below 10. No tariff on copper, 7 percent on zinc, 9 percent on mercury, 22 percent on antimony, approximately 12 percent or 2 percent on manganese, nothing on chrome. Those are some examples.

If those tariff rates were to have any relation to historic tariff rates, unquestionably we would have a much sounder domestic industry. There are certain disadvantages to that. If you go on the basis of ad valorem tariffs, percentagewise, that will increase the cost to consumers of the metals consumed. Actually, I don't think it is a serious objection but it would be opposed by the manufacturers.

I think the cost of doing without in the first 8 years has been far greater than any tariff would have cost. I think in the long run those manufacturers would have been ahead of the game because they would have had supplies of metal when in the last 10 years they had to do without.

A second type of tariff protection is the sliding-scale tariff. When prices go down, the rates go up. That tends to stabilize these various metal prices at more or less a fixed point. It is an advantage over the first type in that the cost to the consumer does not increase at a fixed percentage at all times. If the price of the metal goes up, the tariff goes down, so it tends to stabilize the price. It has a disadvantage in the fact that there, again, it will require a different percentagewise figure for each and every metal.

We must remember that it is not only lead and zinc that are in bad condition at the present time, but almost all of the metals. Copper, not yet, but we can even see the handwriting on the wall for copper. The third possible type of tariff would be where we will say a flat 10 percent tariff would be put on all metals and the proceeds of the tariff received on imports would be distributed to the primary producers of that commodity within the United States. That was suggested some 4 or 5 years ago as the San Francisco plan and I think should be put in since these hearings are in San Francisco. It has certain disadvantages. The disadvantage that you might say exists is that it does have a slight trace of subsidy in it. But in this case the subsidy is not paid by the United States Government but paid by the foreign producer. If we took, for example, a metal, three-fourths of which was imported and one-fourth which was produced domestically, then the tariff on three-fourths or 30 percent would be given to the domestic producer. If the producer increased, the receipts would decline. And if we were self-sufficient in a metal, it would get nothing. On the other hand, if a foreign producer endeavored to break the domestic producer and ran imports up to 9 to 1 or 10 to 1, then the

domestic producer would receive 10 times the tariff and it would be impossible to run any mineral industry as such completely out of business. It is the cheapest of the group. It is the nearest automatic of the group. It requires no bureaucratic interpretation, and it is self-adjusting. I would hope that the committee might think it worth while to investigate that as possible alternative to some of these others. But in any event, attacking the problem along the lines of the tariff would be cheaper to the United States Government, cheaper to the taxpayer, and much clearer to the operator than almost anything else I can conceive. I think that is all I have to say. If there are any questions, I will be glad to try and answer them.

Mr. RIEHLMAN. Mr. McCulloch?

Mr. McCULLOCH. I understand from what you have said that you personally prefer tariff protection in the nature of a sliding-scale tariff.

Mr. WILLISTON. Some sort of a sliding-scale tariff, yes.

Mr. McCULLOCH. Would you have any idea or even a guess as to what such a program would cost per year or over a period of a decade? Mr. WILLISTON. Well, if it comes as tariff, it costs the United States Government nothing. That is, it will be paid the consumer of those metals. My personal feeling is that there will be no cost to the consumer for this reason: The continuance of availability of metals at a relatively reasonable price, a basic industry capable of expansion within the United States would even off-the-market-demand picture so that any slight additional cost in metals that the consumer would pay would be saved by their no longer being required to switch from this metal to that or to do without or to curtail production here in times of an emergency.

I think the cost, while it is difficult to state, to the consumer would be small. If you take, for example, copper wire, which is almost the cheapest manufactured commodity there is, it costs roughly $10 for 9 pounds, as a manufactured insulated wire, ordinary house wire. The cost of the copper in there to the miner, whether it is 25 or 30, would be 9 cents differential on 9 pounds, or 45 cents. It is a small part.

If you buy bare copper wire in small sizes, it costs you over $2 a pound, and whether the producer of the copper gets 25 or 30 cents hardly makes any difference in the retail price, because there is far more markup from jobber to retailer many times over than in the total costs of the bare copper wire. If you take an automobile, there are 25 pounds of nonferrous metals excluding the storage battery in an automobile. Whether it sold for 25 cents or 30 cents would be 5 cents a pound on 25 pounds, or $1.25 difference in a $2500 automobile. Those are nonferrous metals.

Mr. McCULLOCH. Well, might the committee properly conclude, then, that it is your opinion that in the long run this sliding-scale tariff would cost the American consumer less than it could cost him to be at the mercy of those foreign producers who charge and get all the traffic will bear?

Mr. WILLISTON. Far less. We have a beautiful example in copper in 1952 and 1953. Domestic copper was obtained for 242 cents. The world price on copper was 55. We have become dependent on world copper and we paid through the nose for it.

We paid many times over the cost of a tariff in a good many years in the brief period of 1951 and 1952, when we were trying to buy 35

and 40-cent copper from abroad. It would be much cheaper to buy it at home where we had some control over it. If we enter into a contract with a foreign producer, he uses it as a floor. If he can sell for a better price, he doesn't deliver to use. And if the market goes below, he sells to the United States. We have a beautiful example in tungsten where we have 2 years to go on a current tungsten program. Tungsten from King Island in the South Pacific still has 5 years to on their contract with the Government. They didn't deliver when the price of tungsten was above 63, but now that the price is below 63, they will religiously fill out the contract.

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We have a 10-year contract for tungsten in Korea. If we got into a hot war, we wouldn't have any Korean tungsten. But as long as we don't need that tungsten it will come into the market. They have 7 years to go, while our domestic producer under the Government guaranteed tungsten plan has only a little over 22 years to go.

Mr. McCULLOCH. I would judge from what you have said, that you do not believe international relations have reached the point where we can safely embrace free trade as a national policy?

Mr. WILLISTON. I think that the foreigner will take advantage of us every time he gets the chance, and usually he gets the chance and usually he does it.

Mr. RIEHLMAN. Mr. Hosmer?

Mr. HOSMER. Do I understand that you mean that the existence of a domestic metals supply, even though it might cost something to the consumer by way of tariffs, is actually a protection against the international cartels that could do what they wanted with prices of imported metals if we did not have an industry of our own?

Mr. WILLISTON. I think that is exactly the case. I can give you a ery excellent example: Mercury in World War II. We were selfsufficient in that. The European mercury cartel broke the price of mercury to its prewar level, the lowest purchasing power of mercury in history, down to $40 a bottle. They did it and advertised in the London paper and said they were doing it to destroy the domestic industry in the United States, and when they had the industry destroyed they would raise the price again. They eliminated 90 percent of it and raised the price 90 percent.

We have practically been warned that if we increase production in this country, they will again bring down the price, and shut down the mines, and then bring the price up again. The State Department brought over representatives of the Spanish producers, representatives of the cartel, asked the domestic producer to show them our equipment, our metallurgical plants, so they could take them back and copy them and compete. The United States Government has purchased every ounce of mercury for the stockpile from foreigners, and have refused to even permit domestic producers to bid. It is an example of what happens when you follow that type of policy. We now are dependent for 85 percent of our requirements of mercury on Italy and Spain. The Joint Chiefs of Staff say in the event of a hot war to count for no metals whatsoever from Europe.

I think I have taken too much time.

Mr. RIEHLMAN. I would like to ask just this one question:

Your organizations in the mining industry, of course, have no objection to a certain portion of materials coming from foreign countries, but your main interest is to preserve the mining industry in this