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Furthermore, sugar and fluorspar are quite different commodities. The production of sugar can be regulated by planting or failing to plant as is the case with most agricultural products. Fluorspar, on the other hand, requires that a certain amount of reserves be present before it can be economically produced. One cannot regulate natural reserves by legislation.
S. 1285 is violently opposed by all of the foreign producers while the Sugar Act was endorsed by most foreign sugar producers. So, I think it well to clear up once and for all the misnomer of this bill as a Sugar Act type of treatment for fluorspar and call it what it is: an out and out bald quota. Reduced, therefore, to its simplest terms, S. 1285 would do no more and no less than establish import quotas on fluorspar, whether in its present form or under Mr. Flynn's proposed amendments.
Congress must determine in its consideration of this legislation whether it here and now desires to reserve the free trade philosophy which has been the foreign policy of this country for many years or whether it will reaffirm and reiterate an approach to international commerce that has been the cornerstone of our foreign policy. It is no answer to say that fluorspar is a material connected with national security, and, therefore, import quotas should be levied.
The Trade Agreements Extension Act of 1958 gives the President of the United States, through the appropriate administrative agencies, the right to make determinations that excessive imports threaten national security and to take appropriate action to alleviate that condition including the imposition, where necessary, of import restrictions. This legislation presently pending before you is, therefore, in my humble judgment, redundant. Congress, by this legislation, would be usurping the prerogative of the President that has been delegated by Congress to him to make determinations concerning national security. It is well known that this bill is being closely watched throughout the country and that its enactment will set a precedent for other industries and products and there is indeed no valid reason why the same treatment that is afforded to fluorspar should not, likewise, be afforded to all of the multitude of raw materials that find their way through the ports of New York, New Orleans and San Francisco, because the argument about low labor costs applies with equal force to every product that is produced abroad. I think it would be well to examine the composition of the American acid-grade fluorspar industry which divides itself into two distinct categories: the independent production which is available for sale in the open competitive market and the captive production which is used only by the company mining and milling the ore. Up until 1955 there was the one independent domestic producer of acid-grade fluorspar for all practical purposes. The records of the U. S. Tariff Commission who have conducted both hearings and investigations on this matter and who have made extensive examinations of the books and records of the various producing companies will bear witness to the fact that over 90 percent of the acid grade fluorspar that was produced for open market consumption was produced and sold by Ozark-Mahoning Co. of Tulsa, Okla.
Today the United States Bureau of Mines lists among the principal producers of acid-grade fluorspar only Ozark-Mahoning Co. and
Minerva Oil Co. in the ranks of independent producers. This information may be found in the report of Robert F. McDougall to which Mr. Flynn referred yesterday.
If it be the policy of the Congress of the United States to aid a single dominant producer to create a market free from all competition then I urge you to report out favorably S. 1285. Another point that must be considered is that over one half of the productive capacity of acid grade fluorspar in America is operated and controlled by the so-called captive producers.
While Mr. Flynn has testified that the captive production constitutes only 25 percent of the American production, the U.S. Tariff Commission stated in 1955 on page 12 and 13 of its June report that the captive production was in the neighborhood of 60 percent.
On each and every occasion when legislation was pending to impose restrictions on acid-grade fluorspar or administrative action to accomplish the same end was under consideration, these captive producers have opposed such legislation or regulation.
We are, therefore, faced with a ludicrous situation of having over one-half an industry opposed to congressional action designed to aid that industry. Why this opposition? In statements filed before the Tariff Commission, the House Ways and Means Committee, the Senate Finance Committee on prior occasions, and recently before the Office of Civil and Defense Mobilization, these captive producers have indicated their genuine fear that the reserves of acid-grade fluorspar in the United States are not sufficient to enable them to have adequate protection for a long and uninterrupted supply of this mineral which is essential to their business.
These captive producers are some of the largest corporate entities in the United States. They have hired the best geological talent that this country can supply and they are unanimous in their statement that the long-term reserves of fluorspar in the United States are not adequate to meet this country's ever-growing demand.
We are faced today, as we have been faced for the last 5 years, with the statement that the national security is being imperiled by excessive imports. The claim that the national security was being imperiled by excessive imports was made before the U.S. Tariff Commission in 1955 in connection with the application of the domestic industry for relief under the escape clause provisions of the Reciprcoal Trade Acts. In an editorial entitled "Escape for Fluorspar" on October 11, 1955, the Journal of Commerce stated, and I quote:
Yet the biggest tariff question of the hour remains unsettled. How many industries will the national defense shield be stretched to cover and what will be the ultimate effect on the vigorous and competitive domestic industries which face the loss of export markets if imports are seriously curtailed in the interests of what might be called defense autarchy. If the shield can be stretched to protect companies which do not produce the item in question at all and will only produce it if guaranteed a considerable higher price than that currently prevailing, it is unpleasant to think how far the trend that started with the watch case may ultimately go.
Mr. SINSHEIMER. There is no question that acid grade fluorspar is a vital national defense material. It is used in the fabrication of aluminum, in the atomic energy program and in the manufacture of liquid fluorene for missile fuel. We all readily admit that in time of war or other national emergency, we must have a supply of fluorspar for these vital defense applications.
What is the best way to assure that this country has this type of a continuing supply of acid grade fluorspar? Certainly it is not to encourage the domestic industry to use his limited reserves in relatively tranquil times when there is unlimited supply available from abroad. The consumption of acid grade fluorspar is rising fantastically. There is every indication that it will continue to do so. If the geological experts of the Aluminum Co. of America and the Du Pont Co. are correct, it will not be many years before we have exhausted our limited national reserves of fluorspar in the event that the Congress should deem it expedient to impose import quotas on foreign fluorspar. Is it not a wiser policy to conserve the limited reserves so that in the event of need they will be available?
It seems to me significant that the major captive producers of acid grade fluorspar and also the major consumers of acid grade fluorspar have found it desirable to purchase property containing fluorspar reserves in Mexico to guarantee a continuity of supply of this material. I think it might be well to ask Ozark-Mahoning Co. why they have recently purchased fluorspar deposits in Mexico if they believe their reserves in this country are adequate. We are also informed that Minverva Oil Co. either has recently purchased Mexican deposits or is actively seeking them.
We have all heard the argument that if some aid is not given to the domestic industry, the fluorspar mines will close and in time of national emergency the mines will be filled with water and there will be no fluorspar available from domestic sources and we will have to rely upon imported fluorspar which may come from areas not readily accessible by the United States.
This argument overlooks several vital factors.
First, there is a stockpile of fluorspar in this country which is adequate for any projected military action. Fluorspar has been stockpiled since 1952 under a variety of programs. We are informed that the stockpile requirements are fully committed so that we may draw the conclusion that the above ground mined material is sufficient for any foreseeable emergency.
Second, the largest reserves of fluorspar known in the world today are located in neighboring Mexico, which is, in fact, closer to most consuming centers than a great deal of the domestic production in this country.
Third, the captive procedures during time of war, when all nonessential uses of fluorspar such as the use of propellants in shaving creams, toothpaste, and hair sets could be eliminated, could produce much of the country's requirements by themselves.
Fourth, we are advised that even if all of the independent mines in the country were to close, they could be opened within 6 months at an estimated cost not to exceed $5 million. However, the domestic industry will not close all its mines.
I do not claim nor has anyone else claimed that mines can be opened and shut like turning on and off a water faucet. The fact is that in time of emergency closed American mines can be reopened in a reasonable period of time while the national need is amply met by withdrawals from the stockpiles.
The operation of the Ozark-Mahoning plants at Rosiclare, Ill., are still profitable. It is a fact, however, that Ozark-Mahoning does have
mines and facilities in Colorado which never can be commercially operated since the cost of freight from these mines to any consuming area is absolutely prohibitive.
The Ozark-Mahoning Co. knew when these facilities in Colorado were opened that they were not commercially feasible and they were opened under a Government contract whereby the Government agreed to buy for the stockpile 100,000 tons of acid grade fluorspar at high prices to enable the complete investment to be amortized. The other companies who claim to be in the acid grade fluorspar business have never sold a pound of acid grade fluorspar commercially. We have yet to find a consumer of acid grade fluorspar who has ever bought from mines such as Rosiclare Lead & Fluorspar, Pacific Fluorite, or Kentucky Fluorspar Co., and we submit that legislation should not be passed to enable people who have not been part of an industry to become part of it by virtue of congressional interference.
S. 1285 is entitled "A bill to provide for the preservation and development of the domestic fluorspar industry." It is quite curious that most of the testimony that has been presented to this committee to justify this legislation insofar as it affects the acid grade fluorspar industry has been directed to the production of Ozark-Mahoning Co., at Northgate, Colo.
There has been very little mention of Ozark's facilities in the Illinois-Kentucky area. And this seems to us to be logical, for the facilities in the Kentucky-Illinois area have been highly competitive with imported fluorspar primarily because of their proximity to the consuming industries located in the midwestern section of the country. Traditionally this area has been considered the fluorspar area of the United States. With the opening of Ozark's facilities at Northgate, Colo., an entirely new problem faced Ozark-Mahoning, a problem not at all related to competition from abroad, but a problem having solely to do with the extremely high cost of rail transportation from these facilities to any consuming center in America.
Much of the fluorspar in the United States is consumed on the eastern seaboard, in the Southeast, and in the Midwest. The freight rates to any of these consuming centers from Northgate range from $14 or $15 a ton to $22 a ton. So it may be seen that in some instances the freight to a customer's plant can be as high as 50 percent of the f.o.b. mine price. I submit to you that the Northgate properties not only cannot compete with imported fluorspar but likewise cannot compete with domestic fluorspar which is mined in the Illinois-Kentucky
Under this legislation, some consumers in this country would be placed at a tremendous price disadvantage if they were forced by the U.S. Government to make purchases from Northgate at a freight rate three or four times as high as that from Rosiclare, Ill.
There is no justification for these facilities at Northgate, Colo., except in time of national emergency when no other fluorspar is commercially available. These facilities have now been amortized, as I have said before. And Ozark-Mahoning will not suffer any economic loss by their ceasing to operate since they still have their profitable fluorspar operation in Rosiclare.
If we were to eliminate from our consideration these properties in Northgate, Colo., there certainly would be no reason for S. 1285 inso
far as it affects the acid-grade fluorspar industry. It is no answer to say that some of the traditionally metallurgical-grade operators such as Cummings and Roberts in Darby, Mont., would like to get in the acid-grade fluorspar business. They are not in the acid-grade fluorspar business. They have never been in the acid-grade fluorspar business, and to pass legislation for the purpose of allowing them to enter into the acid-grade fluorspar business would be the same as passing legislation establishing import quotas on industrial diamonds, because I, who have never been in the industrial diamond business, desire to start a commercial venture.
The fluorspar industry already has been the recipient of much favored treatment by the Government which industries outside of the oil and mineral industries have been unable to obtain.
The depletion allowance for fluorspar granted by the Internal Revenue Code has put millions of dollars into the hands of fluorspar operators. They have been the beneficiaries of fast tax amortizations. I see no further reason why the Government should subsidize this industry, whether the subsidization is under the guise of national security or any other label. If we take the attitude that this industry cannot engage in normal commercial competition without the advantage of artificial stimuli by the Government, we are admitting that this country's industry is in need of a planned management because I can assure you that this preferential treatment will be demanded by every producing industry in the United States that is feeling the pinch of foreign competition.
The quotas which the President has imposed upon lead and zinc and petroleum have already caused some people in this country to say if for lead and zinc and petroleum, why not for fluorspar?
It seems only natural that if Congress were to grant this type of aid for fluorspar, it must, in the long run, grant it for many other materials and industries, and I submit to you that the opponents to free trade would have indeed made out a strong case for the imposition of across-the-board quotas on all products; and if that comes to pass, we would find ourselves in the position of being isolated from the rest of the world commercially, and that, I submit to you, cannot and should not happen.
There have been some people who have made statements before this committee that they cannot understand why either importers or foreign producers are against the imposition of these quotas.
It seems to me that a simple reading of the bill would explain this. Domestic consumption last year was in the order of 258,000 tons. Under this type of legislation, the foreign share of that market would only be approximately 58,000 tons, which would mean a decrease for most importers of over 50 percent of the 1958 sales. I cannot see how the statements can be made that this legislation would not work a hardship on the foreign producers.
On the contrary, it would work a great hardship on not only the foreign producers and the importers, but on the consumers of acidgrade fluorspar.
This bill is intended to raise the prices of acid-grade fluorspar and in some consuming points, this price would be raised almost 50 percent from current market prices. The consuming industry has appeared in this proceeding and it has with greater clarity and percep