Mr. Mann, you or your Department supported the proposal last year by Secretary of Interior Seaton, to stabilize the lead, zinc, copper, fluorspar, and tungsten industry, is that correct?

Mr. MANN. That is correct, Senator.

Senator Moss. That program provided for the support at the rate of 180,000 tons a year for acid-grade fluorspar, is that correct? Mr. MANN. I don't remember the exact figure but I am sure you are correct, Senator.

Senator Moss. The Secretary accepted for acid-grade fluorspar a price of $53 a ton .f.o.b. barge or cars, and a stabilization payment of $13 a ton. Do you recall that?

Mr. MANN. I don't remember the details.

Senator Moss. At that time the industry was operating presently under Public Law 733, the interim stockpiling program?

Mr. MANN. That is correct, Senator.

Senator Moss. Did the Seaton program pray any relief for foreign producers who would be injured by the effects of the program?

Mr. MANN. Senator, it has been some time since I have looked at the Seaton bill, and as you know it went through many changes. My recollection is that the Seaton bill was based on a subsidy to the domestic industry rather than on the approach which is in the bill now under consideration.

There is a difference in foreign trade between subsidizing a domestic industry openly at the expense of the taxpayer, and subsidizing it indirectly through tariffs and quotas at the expense of the consumer and the foreign producer.

Senator Moss. And of course in S. 1285 we are attempting to provide relief for the foreign producers by directing absorption of the surplus through barter, which I might add would be at no greater rate, in fact less, than the rate of barter that stockpiling contracts have been in the past 2 years; is that right?

Mr. MANN. Yes, sir. I believe, if I understand the bill correctly, it contemplates that there will be a barter program for fluorspar. Senator Moss. One final thing: Could this bill S. 1285 be amended so as to meet your approval? I have in mind only to support domestic fluorspar production at the reasonable level without creating injury abroad while at the same time providing protection for the domestic consumer of fluorspar at a reasonable price.

Within that framework, could this bill by amendment be made to met your approval or the approval of your Department?

Mr. MANN. Well, Senator, that is a tough question. It is one that I haven't thought about and would hesitate to give you an answer on at this time.

In general, from a strictly foreign relations point of view, the Department of State would not normally take a strong position against direct subsidies paid to producers. But we normally take a position of opposition to anything which directly impedes the free Low of trade.

Those are guiding principles. And whether within those principles amendments could be made which would be consistent with them, I would hesitate to say at this time, Senator.

Senator Moss. Well, do you agree that there is some area between completely free trade and one of quotas and subsidy where the Department should lend its approval?

Mr. MANN. Yes, sir. I don't think people these days in any country believe in absolutely free trade.

For example, on fluorspar we have a 40 percent ad valorem duty on certain types of it. That is pretty far from free trade. And we have a smaller duty bound on other grades of fluorspar.

Senator Moss. Well I appreciate that Mr. Mann. You go ahead and give your testimony if you will, please.

Mr. MANN. Senator, the Department of State has sent a letter to this committee, and I have a written statement which follows it almost verbatim. I would be happy if it is your pleasure to file this with the committee.

I believe the staff already has copies. Or if you wish me to read it in its entirety, I will be happy to do that.

Mr. REDWINE. The reporter has already put in the record the written report of the Department. I think it would be well for the Secretary to read his prepared statement.

Senator Moss. Yes. You summarize or make whatever comment you want.

STATEMENT OF HON. THOMAS C. MANN, ASSISTANT SECRETARY OF STATE

Mr. MANN. Thank you, Senator.

The Department of State is strongly opposed to the enactment of S. 1285, a bill to provide for the preservation and development of the domestic fluorspar industry.

This bill would institute quotas for domestic production and imports. The basic formula would provide an annual quota for the domestic industry of 200,000 tons of fluorspar containing more than 97 percent calcium fluoride, and 125,000 tons for lower grade fluor

spar.

The import quotas would be equivalent to the difference between the domestic quotas and the estimates of annual domestic consumption.

The effect of the bill would be to restrict imports in the interest of national security.

The Congress established a standard procedure under section 8 of the Trade Agreements Act of 1958 for the investigation of the effects on the national security of imports and for the imposition of import restrictions if it is determined that they are necessary to prevent a threat of impairment to the national security.

At the present time the Office of Civil and Defense Mobilization is conducting such an investigation regarding the imports of fluorspar under this procedure. We consider that this is the best method presently available for a thorough objective evaluation of the complicated issues involved in this type of problem.

While we fully appreciate the concern of those who feel that imports of fluorspar may seriously impair the domestic industry there is also a procedure established by law which provides safeguards to domestic industries against injury from increased imports resulting in whole or in part from trade agreement concessions.

Under the escape clause provisions of the Trade Agreements Legislation, the domestic industry producing fluorspar containing more than 97 percent calcium fluoride may apply to the Tariff Commission to institute an investigation. If the Commission determines on the basis of such an investigation that increased imports are causing or threatening serious injury to a domestic industry, it recommends to the President increased duties or other import restrictions.

He has the authority to decide what action should be taken in the national interest. The restriction of imports that would result from the enactment of the proposed bill in the absence of clear evidence that it is necessary in the interest of national security, or to prevent serious injury to the domestic industry would be directly contrary to the administration's policy of expanding international trade of the United States so as to increase our economic strength and that of our allies.

The extent of the potential trade restriction is illustrated by the fact that if the legislation had been in effect during 1956-57, our average annual imports of fluorspar for commercial uses would have been approximately 308,000 tons, as against the actual figures of 441,000

tons.

This would have adversely effected exports from Mexico, Italy, West Germany and other countries and substantially reduced their ability to buy from the United States.

There are a number of other points about the proposed legislation which concerns us. We are informed by the Department of Interior that it would be necessary to allocate the domestic production quotas to various producers so as to provide equitable treatment of the companies concerned.

Thus, the production of individual companies would be controlled by Government fiat rather than by the free play of market influence. This artificial restriction of competition between domestic companies as well as the curtailment of imports resulting from the legislation would tend to increase prices. Consequently the competitive position of American industries which use fluorspar products as important raw materials would be impaired.

The price increases would also have a general inflationary influence. In summary, the basic features of the bill appear to be directly contrary to the principals of our free enterprise system upon the strength and vitality of which we are relying to meet the Soviet economic challenge.

It might be mentioned also that the provisions of the bill relating to the barter of surplus agricultural products under Public Law 480 in exchange for fluorspar abroad would serve no useful purpose. Statutory authority already exists for the acquisition of fluorspar under the barter program and significant quantities of fluorspar have actually been so acquired.

Furthermore, although such acquisitions could be increased under existing legislation, it is the judgment of the Department of State that an enlargement of the barter program would have the effect of displacing ordinary commercial exports of farin products by the United States and by certain foreign countries whose economic strength is important to us.

Finally acquisition of additional supplies of fluorspar by the Government under the barter program would tend to aggravate the future problem of diposing of the Government's surplus holdings without causing injury to domestic and foreign producers. That is the end of my statement, Senator.

Senator Moss. Well, your statement of an objection to having any sort of a quota system for fluorspar does not mesh with the policy of the administration on a limitation on lead and zinc under quotas, then, does it?

Mr. MANN. Yes. In the case of lead and zinc there was an investigation by the Tariff Commission which developed fully the facts and rendered a judgment. That judgment was substantially accepted by the President.

The question then arose as to whether from a foreign relations and domestic viewpoint tariffs or quotas would have been more appropriate.

In view of the peculiar situation involved in the lead and zinc industry, it was decided to follow the quota route. It was hoped that at the international meetings on lead and zinc which took place last year, first in London and then Geneva, or at the international meeting which will take place in New York in about 2 weeks, the other lead and zinc exporting nations might agree to restrict their exports. We have not yet given up hope that that will be possible.

Senator Moss. But it is the same principle. It is just a matter of degree as to whether the industry is suffering?

Mr. MANN. Well, there is, in our judgment, one basic difference, Senator. And that is that in the case of lead and zinc, there was a full and complete investigation.

In this case, the investigation has not yet been completed.

Senator Moss. Haven't we really, recently, had import quotas placed in oil, in the field of oil?

Mr. MANN. That is correct, sir.

Senator Moss. Was there any Tariff Commission investigation there and finding of injury?

Mr. MANN. Not a Tariff Commission investigation. But there were several OCDM investigations, detailed investigations; a series of them, extending back over a period of years, Senator.

Senator Moss. Does this boil down, then, to the fact that we haven't had Tariff Commission or other investigations of sufficient magnitude to allow us to make a judgment here?

Mr. MANN. I think that is a factor which influences the Department of State greatly, Senator, yes.

Senator Moss. Are you aware that last November the Tariff Commission refused to entertain a petition from the fluorspar producers? Mr. MANN. Yes, sir, I am aware of that.

Senator Moss. You are aware of that?

Mr. MANN. I believe without prejudice, however, to refiling a petition for relief after the termination of the stockpile program when it would be easier to determine the actual situation of the industry. Senator Moss. The stockpile program terminated as of the end of the calendar year, last year.

Mr. MANN. That is my understanding, yes, sir.

Senator Moss. Mr. Broadgate, do you have anything for us on this particular problem.

Mr. BROADGATE. Mr. Chairman, I would like to ask two or three questions to clarify the report of the Department.

Mr. Secretary, on page 2 of the departmental report to this committee, it says, in effect, that there is no clear evidence that the fluorspar industry has been injured.

You say

in the absence of clear evidence, that it is necessary in the interest of national security or to prevent serious injury to the domestic industry, would be directly contrary to the administration's policy of expanding the international trade of the United States so as to increase our economic strength and that of our allies.

Isn't it well known to the State Department and almost anyone else in the domestic mining business that the entire fluorspar industry of the United States has been shut down as of last December, with the exception of one or two captive mines?

And I am just wondering what clearer evidence one could have that the industry has been injured?

Mr. MANN. Well, under the laws of Congress, procedures are set up whereby the Tariff Commission determines whether injury or threatened injury has resulted from increased imports due wholly or in part to a trade agreement concession.

The OCDM would be expected to pass on, as I understand it, two basic issues; one, whether the industry was essential to national security; and, secondly, what steps should be taken if it is determined that imports threaten to impair the national security.

Mr. BROADGATE. Well, of course, we know that technique and procedure of OCDM.

They seem to be pretty slow about coming to any determination. And you mention OCDM in this report.

But in this particular paragraph you say "in the absence of clear evidence."

Now, it is necessary for OCDM to declare to your Department and other Departments that the industry is shut down before you know whether it is shut down or not?

What is clear evidence, in other words, that the industry has been injured?

Mr. MANN. The law does not provide, insofar as I know, for automatic relief to any business or industry in the United States which finds itself in trouble.

The law provides for relief when that trouble is due to certain specific causes. That is one of the things which an investigation either by the Tariff Commission or by the OCDM would reveal.

If the issue is national security, which is for the OCDM to investigate, there ought to be a complete investigation and finding as to whether distress in the industry is related to the national security.

Mr. BROADGATE. I understand that. But in this part of the report you are speaking about economic injury.

Doesn't the State Department know that the industry is shut down? Mr. MANN. I think it is fair to state that we are aware of the fact that there is a general distress condition, not only in the fluorspar industry, but in the mining industry in general, yes, sir, due in large part to very painful readjustments which have had to be made as a result of the termination of the Korean war, the stockpile purchase program and other things.