enactment of S. 1285, it would be akin to moving a pebble with a stick of dynamite. The benefit would be tiny; the harm would be tremendous.

The cost of giving the needless protection to this industry in its present size as contemplated by S. 1285 is out of all proportion to the desirability of doing so. And in speaking of cost we refer not only to the dollar cost, which is ultimately borne by the taxpayer as a consumer of the many, many articles into the production of which fluorspar is a necessity, articles which probably each one of us has contact with at least once a day, but the cost in terms of the national interest as a whole.

If the Congress is convinced of the desirability and the necessity of maintaining this industry in its present size, there are many things which can be done to effect that result, with much lower overall cost. If Congress wishes to assure the United States of reserves of fluorspar over and above those mountains of this commodity which are presently above ground in the form of stockpile, it would continue the stockpile program. Or it would preserve the known fluorspar reserves of the United States in their present condition in the ground by a program akin to the agricultural soil bank program.

To sum up: Enactment of the bill before us would result in much harm; little, if any good. We are opposed to it.

(Mr. Karasik presented the following additional statement for the record:)

STATEMENT OF FLUORSPAR IMPORTERS & PRODUCERS INSTITUTE IN OPPOSITION TO THE APPLICATION OF AMERICAN FLUORSPAR PRODUCERS ASSOCIATION FOR THE IMPOSITION OF AN IMPORT LIMITATION WITH RESPECT TO FLUORSPAR

THE LAW

The law on which this application is based is section 8(a) of the Trade Agreements Extension Act of 1958 (Public Law 85-686; 72 Stat. 673; 19 U.S.C., section 1352A, subparagraphs B and C).

Under this statute the Director of the Office of Defense and Civilian Mobilization is required, upon request, to make an appropriate investigation to determine the effects on the national security of imports of the article which is the subject of such request.

In the event the Director determines that the "said article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security * * *," he is so to advise the President. Then, unless the President determines that the article is not so being imported, the Director shall take such action as he deems necessary to adjust the imports of that article and its derivatives so that the imports will not so threaten to impair the national security.

Both the Director and the President are required, in the light of the requirements of national security, and without excluding other relevant factors, to give consideration to the following factors in making their decisions:

"Domestic production needed for projected national defense requirements; "The capacity of domestic industries to meet such requirements; "Existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense;

"The requirements of growth of such industries and such supplies and services, including the investment, exploration, and development necessary to assure such growth;

"The importation of goods in terms of their quantities, availabilities, character, and use as those affect such industries;

"And the capacity of the United States to meet national security requirements."

In the administration of this section of the law, both the Director and the President are further required to “recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration— "The impact of foreign competition on the economic welfare of individual domestic industries;

"And any substantial unemployment;

"Decrease in revenues of Government;

"Loss of skills or investment;

"Or other serious effects resulting from the displacement of any domestic products by excessive imports;

"Without excluding other factors."

AREA OF AGREEMENT

In pursuing this investigation, the Director will necessarily have to find answers to the questions suggested by the criteria set forth in the statute. We, ourselves will give our views on these questions further in this statement.

However, we are sure that the Director will find that on one basic matter, there is complete agreement among all parties—the applicants, the Importers Institute, Government agencies, and other experts in the field. This is, that domestic demands for, and consumption of, fluorspar will, within a relatively short time, require maximum production from all domestic and foreign sources.

Citing some examples of this widespread agreement, one must begin with the President's Materials Policy Commission (the Paley Commission, 1950), which said:

"The growing demand for aluminum, plastics, ceramics, steel, and other fluorspar-using products in the United States can, by 1975, be expected to increase the demand for fluorspar, possibly, to nearly three times the 1950 consumption." The Tariff Commission in 1952 said:

"The supply of acid fluorspar, on the other hand, has not been adequate to meet the greatly increased demand in recent years even with increased production from domestic sources, larger imports will also be required to meet future United States acid fluorspar requirements."

Joseph L. Gillson, chief geologist with E. I. du Pont de Nemours & Co., and once vice president of the American Institute of Mining Engineers, in delivering the 1957 Jackling lecture to the society, said:

"*** the present consumption of about 550,000 tons of fluorspar of all grades in this country is expected to grow to 1 million tons by 1965, and probably sooner * * *. In my opinion it is not the producers who should be worrying about whether they are going to sell their fluorspar, but rather the consumer as to where he will obtain his supplies."

Walter E. Siebert, president of St. Lawrence Fluorspar Co., a member of the Importers Institute during the 1958 hearings of the Mining and Minerals Subcommittee of the Senate Committee on Interior and Insular Affairs, testified: "*** I believe if your curve of increase in consumpttion of fluorspar keeps up at the rate it has been going over the last 5 years, that there may be a world shortage of fluorspar."

Clyde L. Flynn, Jr., vice president of Hicks Creek Fluorspar Mining Co., representing the Independent and Domestic Fluorspar Producers Association, at the same hearing of the Senate Interior and Insular Affairs Subcommittee, stated : "We believe now, as we have for the past few years, that some time during the 1962-66 period, with new uses and expansion of present uses of fluorspar, domestic consumption will have reached a level sufficient to require the maximum production from domestic and foreign sources at price levels sufficient to maintain a healthy domestic industry."

At another point in the same hearing, Mr. Flynn said: "The best information that we have is that there will be about a 300 percent increase in consumption over the next 5 years."

A Department of Interior report by Robert B. McDougal, dated February 1958, quoted in full in the report of hearings before the Senate Subcommittee on Minerals, Materials, and Fuels of the Committee of Interior and Insular Affairs, states that "fluorine consumption in the next 10 years is expected to increase substantially." (After reading the rationale supporting this view, one might conclude that the projections of Mr. Flynn and of Mr. Siebert would seem most conservative.)

GENERAL VIEWS OF THE INSTITUTE

Before we discuss the various questions raised by the statutory criteria, certain other observations must be made. What we propose here to explore are the "other relevant factors," which the statute includes for consideration in addition to those criteria specifically spelled out.

One of these is the factor of the moral responsibility of the United States. This has two aspects.

The first of these is that the alleged "excessive imports of fluorspar" which, it is alleged "threaten to impair the national security," are, in large part, imports required by the national security. It is quite obvious that a large part of the imports in recent years were occasioned by Government acquisition for stockpile purposes. While the actual figures are, of course, classified, these imports for stockpile are of considerable magnitude.

Mr. Flynn, for instance, estimated that over 100,000 tons of acid grade fluorspar alone or between a third or fourth of all actual imports of that commodity during 1957-went to Government stockpile. It is also known in the trade that considerable quantities of fluorspar entered the stockpile in the previous years, and in 1958 have either entered the stockpile or will enter it.

The question then is, would it be morally justifiable for the United States to denominate as "excessive" imports the quantity of which was in large measure demanded to fulfill U.S. Government needs-presumably in the interest of national security?

Related to this is another question of moral responsibility. In addition to the indirect encouragement of the expansion of foreign fluorspar production, the United States has directly encouraged expansion of such production. Thus, in the case of Spain, a major fluorspar mining establishment in that country, Fluoruros, S.A., was enabled to increase its production by reason of a 25-year loan from the Export-Import Bank in 1953 at a low rate of interest.

The question here is: Is it morally justifiable for the United States to call "excessive" imports directly encouraged by it, particularly when the dollars earned by such imports are necessary to service and repay a loan made by the United States for the express purpose of increasing that production?

Another relevant factor, if one is to take seriously the reasoning and conclusions of the application of the American Producers Association, is: What may be the effect on U.S. foreign policy of unilateral discrimination in favor of a single foreign nation?

The application concludes and requests (at p. 3, under par. (e) of the "conclusion and request"): "Domestic production of fluorspar should be maintained at a rate that when added to Mexican production will equal the current rate of consumption."

The Congress in considering the Trade Agreements Extension Act of 1958 emphasized the need of this country to prevent new trade barriers and increased restrictions against U.E. exports (S. Rept. No. 1838, Committee on Finance, 85th Cong.).

That committee said: "The United States is in a unique position to help discourage many new trade restrictions from being imposed * * It is to be hoped that administrative agencies will be able to effect a more coordinated economic policy regarding international trade and to make some progress toward the mitigating of trade restrictions abroad."

In its adherence to the General Agreements on Tariff and Trade, the United States is pledged toward reducing trade restrictions and to working toward a nondiscriminatory policy.

In the light of these indicia of national policy, one might well ask whether special discrimination in favor of Mexico, while import quotas are placed upon the fluorspar production of other nations, would tend to discourage foreign restrictions on the export of U.S. products or the reverse. And on its face, such a suggestion is clearly contrary to our expressed national policy of antidiscrimination.

Although the following remarks might, in a sense, be responsive to one or more of the specific statutory criteria, we think that they also are of quite broad application. The question we raise here is: In a time of rising taxes, rising costs, and the strict necessity for Government economies, where we may indeed have a problem of taking present action to supply the future needs in this country in a time of future emergency, should we adopt the most costly possible solution to the fulfillment of such a need?

Certainly the solution proposed by the applicant is the most costly one possible. It may well be, as the applicant argues, based on its interpretation of the Pettibone report, that our future needs require greater stockpiling of fluorspar. The solution proposed by the applicant is both to continue stockpiling domestic fluorspar and to impose import limitations.

The Importers Institute is not opposed, nor has it ever been opposed, to a continuation of stockpiling domestic fluorspar for defense requirements. In fact, we are on record as being in favor of it. We think that so long as there is a national need to stockpile fluorspar for future emergency purposes that it may be useful to purchase all defense requirements from domestic producers.

We realize that the prices which might have to be paid to the domestic producers might have to be greater than normal market prices, since it is clear that domestic production is more costly than foreign production. As American citizens ourselves, we are willing to share our part of the burden, as taxpayers, if these higher prices must be paid by the Government for stockpile purposes. We share the view of the Department of the Interior-in the McDougal report cited above as to the problem of the adjustment of the domestic industry to current market requirements, namely, that:

"Technological solution of this problem will require time and a great deal of research, but pursuit of his course is most desirable because it will place the industry in a firm competitive position."

The avenues of attack leading toward this technological solution, as outlined in that report by the Department of Interior, all should be followed. Through them, in time, the domestic industry might well achieve a position of fair competition with imported fluorspar.

But limitation of imports is not only an unfair competitive device against more efficient producers, who can deliver fluorspar to this country at lower prices, but until the cost problems of the domestic industry are solved, will cost the immediate consumer, the general public, and the Government, a great deal more than it should.

The quota proposed by the applicant would give domestic producers of acid-grade fluorspar five-sevenths of U.S. consumption, and domestic producers of metallurgical fluorspar one-half of United States consumption, in perpetuity. The obvious effects of thus limiting imports, would be to cause a general price rise toward the high level needed to sustain the American producer because of his high production costs. The technological problems subsuming these high costs may not be expected to be capable of quick solution, so that higher domestic production in response to increased defense stockpile demands is, in itself, unlikely to bring about any material lowering of cost.

These technological problems are set forth in the McDougal report, previously cited, as follows:

"*** the domestic deposits commonly have fewer advantageous characteristics than do many of the high grade surface deposits in foreign areas which contribute major tonnages to the present market. Consequently, the domestic output of fluorspar is hampered by high costs of exploration, development, mining, and processing.

"Complexity of some of the domestic ores, stringent product specifications, and difficulties encountered in the utilization of low-grade ores are all major fluorspar problems. Production at some domestic mines is seriously handicapped by water control problems. The recovery of large tonnages of fluorinebearing materials, now being wasted at plants that process phosphate rock and complex metallic ores, is hampered by lack of sufficiently efficient and low cost methods."

Thus, it is not likely that prices based on the high cost of domestic fluorspar can be much reduced in the near future. Consequently, prices on a quotacontrolled market will tend to level off at or near the prices required and set by the high cost domestic producers who will, under the formula suggested by the applicant, completely dominate that market.

These higher costs will be reflected in the private sector in the prices paid by the consumers of the vast variety of articles and commodities in the production of which fluorspar is a necessity.

In the public sector, they will in the first instance be borne by the Government in paying higher prices for the vast multitude of national defense products into which fluorspar enters, and ultimately, of course, by the taxpayer whose taxes must show some rise as a result of cost to the Government thus increased.

On the other hand, where increasing general consumption is satisfied by unlimited imports and lower prices, the overall cost to the consumer as a consumer and to the general public as taxpayers will be lessened; the only price factor that would remain high would be that attributable to a minor fraction of all fluorspar shipments-that tonnage of domestic production which would go into defense stockpiling.

While on this subject of cost and price and burden to the Treasury of the United States and ultimately to the taxpayer, one further observation seems to be in order.

The domestic industry has benefited from specially favorable treatment by the U.S. Government, not enjoyed by the generality of taxpayers and to a degree at the expense of the generality of the taxpayers.

For instance, the domestic industry has enjoyed a depletion allowance of 23 percent on its production ever since the passage of the Internal Revenue Act of 1954. As of December 31, 1955, under the accelerated tax amortization program of the Defense Production Act, the industry was the beneficiary of accelerated tax amortization grants in the amount of $4,282,000. Under the Defense Minerals Exploration Act, the United States contributes 50 percent of approved costs on exploration programs for domestic flourspar.

In addition, the domestic industry enjoys an advantage over the producers of imported fluorspar-an advantage reflected by a direct benefit to the U.S. Treasury, and ultimately, to the taxpayer-of a tariff of $2.10 a long ton on acid grade fluorspar and of $8.40 a long ton on metallurgical grade fluorspar. Despite these advantages, as the pending application alleges, and requests, the domestic industry needs high prices to remain in business, and needs additional Government support and protection, at the taxpayers' expense, to maintain those high prices in the face of the competition of imported fluorspar.

While one cannot ascribe blame or fault to the domestic producers for their high costs resulting from the technological problems described and quoted above from the McDougal report, one might well ask to what limits is the American taxpayer expected to support inefficient high-cost production?

The help given by the U.S. Government to foreign producers to increase their production has resulted in increased production at lower cost, and there fore, lower prices to the American consumer and a lowering of the burden on the American taxpayer.

THE STATUTORY CRITERIA

(1) "Domestic production needed for projected national defense requirements Certainly, even with an adequate stockpile of fluorspar, a viable domestic fluorspar, industry is useful in the interest of national defense. The major areas of national defense in which fluorspar is vital are uranium hexafluoride for the production of atomic energy, hydrofluoric acid for the production of aluminum and certain additives for high octane gas, and for certain fuels as missile propellants.

Another important national defense use is in the manufacture of refrigerants. While metallurgical grade fluorspar is presently necessary in the production of steel, other materials of lesser effectiveness can be used as fluxes in steel manufacture, in the absolute absence of metallurgical fluorspar.

However, it should be clear that, with abundant quantities of fluorspar available in Mexico, by overland routes, and from Newfoundland by protected waterway, all operational needs could be satisfied in time of emergency from these sources, even in the complete absence of a domestic industry.

Notwithstanding this, the cessation of domestic production, in our opinion, cannot be envisaged, both because of the necessity of continuing defense stockpile needs, and because there is little likelihood that the so-called captive domestic producers (see point 6, below) would cease operations so long as their own ore reserves are capable of being processed.

(2) "The capacity of domestic industries to meet such requirements * * *." Nobody has ever claimed that the domestic industry has, or at any time in the reasonably near future, will have the capacity to meet national defense requirements.

Indeed, Mr. Flynn, at one point in his testimony before the Senate Interior Committee estimated that at some time in the 1962–66 period, consumption of acid-grade fluorspar alone would probably reach 1 million tons a year.

Under its own most optimistic estimate of what constitutes capacity, the American Fluorspar Producers Institute, page 2 of the application, estimates acid-grade fluorspar capacity as in excess of 450,000 tons annually.