I said there was no

Mr. SULLIVAN. No, Senator. Excuse me. shortage of domestic tungsten, or that is what I meant. Most of the foreign mines are closed today. There is only one mine operating in Europe, and that is Biralt tin and tungsten, and it only operates because it has tin, and tungsten is a byproduct.

Senator BIBLE. Where is that located?

Mr. SULLIVAN. Portugal.

Senator MALONE. There are no tungsten mines in South America, South Africa, or Korea?

Mr. SULLIVAN. Yes. We have 2 countries, or maybe 3, where the normal course of economics does not seem to hold. You mentioned Korea earlier. That is one. We are supporting their economy with other means, so they can almost produce and sell tungsten for any price.

Senator MALONE. We bought the machinery for them?

Mr. SULLIVAN. Yes. And we also supply with surplus food, which they turn around and use for paying wages.

Senator MALONE. Did we supply them with old-fashioned machinery or was it up-to-date machinery?

Mr. SULLIVAN. We gave them the latest type of machinery and mills.

Senator MALONE. It seems like professors and so forth misunderstand that. They think they have old-fashioned machinery.

Mr. SULLIVAN. That is not the case today.

Senator MALONE. Of course it is not the case today. We reviewed that a while ago, and we still see it in our knowledge, that we with our knowledge and up-to-date machinery can compete with anyone. That was true 40 years ago, but not now.

Today they have the same machinery as we have and the same know-how, and 3 to 7 percent of our people will teach them how, if it is American capital.

Mr. SULLIVAN. That is right.

Senator MALONE. It might be up to your Tungsten Institute to do a little education. Maybe they could pay for advertisements in these newspapers. Maybe that is what they are waiting for.

Mr. SULLIVAN. Senator, as you know, our western newspapers have well presented our side of the story in the past.

Senator MALONE. Yes.

I read an editorial in the Hearst New York paper that this free trade must be extended. That is great support you are getting. Mr. SULLIVAN. The most interesting thing to me is to hear the Copper and Brass Institute talk in favor of tariffs.

Senator MALONE. He was careful to say that he was not sure yet that his people were for it.

Mr. SULLIVAN. But he gave an indication that he was for it.

Senator MALONE. He gave an indication that he was for it, and now he is going to find out if his people would stand for staying in business under the Constitution of the United States.

Mr. SULLIVAN. You will recall, Senator, I believe we discussed that if we had enough joiners to the raw materials producers, we might have the right type of legislation enacted, or at least tariff protection in this country.

Senator MALONE. I think the workingmen of America could bring it about tomorrow. But in Florida, you will recall, the AFL-CIO passed a resolution asking for the extension of the free trade.

Mr. Walter Reuther is for it and so is Mr. Meany. Of course, neither one of them has ever said anything to the contrary, and Mr. Reuther is very outspoken.

I remember one time about 4 or 5 years ago I was making a talk in Milwaukee and that is a pretty good crowd to talk to, or seemed to be, anyway. I seemed to be getting along pretty well and I said. "You have a very peculiar neighbor down here in Detroit, and if he is successful in carrying forward his free-trade policies to a successful conclusion, he will see the day in the not too distant future when he will be riding a foreign car down the streets of Detroit waving to his unemployed workers."

They said they were arguing that in the bars for 2 or 3 weeks. He has just about reached that point now. I do not know whether they are arguing, but there are unemployed on the sidewalks.

There are even people today that cannot make monkey wrenches in this country today because of foreign competition. Now we have $4 billion more that we passed last week to build more plants abroad. None of that will go to you, I venture to say.

Mr. SULLIVAN. I don't think it will.

Senator MALONE. It is crazy, but there it is.

Senator BIBLE. I would like to ask one question, Mr. Chairman, by way of information and possible clarification.

I understood you to say that the industrial consumption of tungsten last year was about 5,000 units?

Mr. SULLIVAN. No, 534,000 units. I believe the figure has been raised, or has been corrected up to about 541.

Senator MALONE. Maybe there is some disparity with this table, but this Bureau of Mines release indicates that the industrial consumption. 1957 estimated, was 8,600,000 pounds, 1956 was 9,061,000 pounds, and 1955 was 8,967,000 pounds.

Without taking your time presently, I suggest that you do get with Mr. Redwine of the staff and square this.

Mr. SULLIVAN. The figures I was quoting were copied from reports. They are incorporated in another report.

The CHAIRMAN. Does that conclude your statement, Mr. Sullivan? Mr. SULLIVAN. Yes; it does.

The CHAIRMAN. Thank you very much.

The committee will take a recess until 2 o'clock, this afternoon. (Whereupon, at 12 o'clock noon, the committee recessed, to reconvene at 2 o'clock the same day.)

AFTERNOON SESSION

The hearing was resumed at 2:05 p. m., pursuant to the recess. The CHAIRMAN. The hearing will come to order, please.

The first witness this afternoon will be Matt Triggs, assistant legislative director, American Farm Bureau Federation.

STATEMENT OF MATT TRIGGS, ASSISTANT LEGISLATIVE DIRECTOR, AMERICAN FARM BUREAU FEDERATION

Mr. TRIGGS. Thank you, Mr. Chairman.

We appreciate the opportunity of presenting the views of the American Farm Bureau Federation with respect to the proposal set forth in S. 3892, to support the incomes of domestic producers of copper, lead, zinc, fluorspar, and tungsten by stabilization payments. Our purpose in testifying is to express our grave concern that the proposal establishes a precedent that could be broadly extended to other industries; and that its application to any industry would serve as a vehicle whereby private competitive enterprises would be converted into enterprises controlled and directed by Government and dependent upon Government.

The CHAIRMAN. Do you offer a substitute program for it?
Mr. TRIGGS. No, we do not, Senator.

The CHAIRMAN. That would mean that if nothing were done these industries would fold up and the mines would go to water and there would be unemployment in every section of the country where there was mining?

Mr. TRIGGS. I am not here, Senator, to testify on the whole problem of the minerals industry but only this particular proposal because of our concern with respect to the proposal as a precedent.

The CHAIRMAN. I understand.

Mr. TRIGGS. If we were to adopt the precedent that certain mineral industries, because they face import competition, should receive direct subsidy payments, this policy could be applied with equal logic to a great many other industries. Nor is there any reason to suppose that this approach would be limited to commodities subject to import competition.

If the use of direct payments to bring total returns up to specified levels is warranted in the case of minerals specified in the bill, there is no reason why the same approach should not at some future time be adopted for other minerals-iron ore, coal, oil, sulfur, potash, phosphates, and other mineral products.

Nor is there any reason why this approach should not be used for other natural resource industries such as forest products, fisheries, or for agriculture.

And if this is a desirable policy there is no reason why it should not be extended to many manufactured products-to textiles, ceramics, automobiles, or farm machinery.

The railroads are currently involved in a serious income situation. With comparable logic, direct payments might be made to railroads to bring average earnings to a specified level.

It is submitted as axiomatic that:

1. That which the Government subsidizes it will come to control, eventually, if not immediately. In the long run, "He who pays the piper calls the tune."

2. That the support of price or income creates the need for control of production.

Both of these axioms are carried into effect in S. 3892. The bill provides that the Secretary "may fix quarterly limitations on the total amounts of each" product for which payments are to be made.

The Secretary is further authorized to "distribute the benefits of the program equitably among the producers."

This is an effective control of production at any time the margin between the stabilization price and the market price is significant. Thus, the Secretary of the Interior would have the authority to allocate the right to produce among the producers of each metal; and the quota for each producer would tend to be frozen, thus preventing normal shifts in the pattern of production in response to economic and market factors.

Any industry for which direct payments are used as an incomesupporting device is likely to become a net consumer rather than a net producer of Federal tax revenue, thus adding significantly to the tax burden on all other taxpayers.

For example, a study by the Department of Agriculture of the cost of a direct payment program for agriculture at 90 percent of parity reached the conclusion that the program would cost between 7.5 billion and $10 billion a year.

It is a basic feature of our private competitive enterprise system that price serves as the balance wheel-to balance supply and demand, to guide production and consumption, to direct the flow of investment. The economists would say that the function of price is to allocate resources.

But when Government steps into the picture to prevent price from performing any or all of these functions, we are in effect substituting political management, and centralized control, and planning for the impersonal operation of the market system.

It is our conviction that the archstone of the economic system that has made America the arsenal and support of the free world is that its functioning is guided primarily by the impersonal operation of the market system, rather than upon centrally controlled and directed authority.

We were fortunate in that circumstances freed us from the controls, the cartels, the guild system, the political management that was the Old World economic system.

Many observers of the European scene have suggested that the postwar recovery of Europe has been roughly proportionate to the extent to which they have thrown off the shackles of centralized control, whether by cartel or government, and moved toward the market system. The extraordinary resurgence of the German economy since World War II is attributed to the wartime destruction of the many institutional arrangements to restrict competition and control price and production, and the steadfast opposition of the political leadership of the German Government to the reinstatement of such institutional arrangements.

In countries where this has not been so, however, the economy has tended toward stagnation. Thus, the Swiss historian and political analyst, Herbert Luethy, in his recent book, France Against Herself, says with respect to the French economy:

Half a century of deliberate and systematic action by Parliament and the trade associations have served to eliminate all these normal connections and mechanisms, though the full extent and implications of what was being done was never examined. The apparent chaos is the result of the organization of the most complete conceivable defence against any risk, disturbance, or necessity for adaptation.

From top to bottom this national economy has got into such a state of congealment, and has grown so used to it, that, though everyone complains about it in general, in every concrete instance the phalanx of those involved immediately closes its ranks to protect its "situations acquises" from the slightest disturbing innovation. It has indeed so nearly approached a situation in which all existing situations have been transformed into permanent rights, privileges, and sources of revenue that all risks have been practically eliminated and bankruptcies practically never occur.

But all progress has also been eliminated.

It is our view, therefore, that the issues involved in S. 3892 are far broader than the specific mineral-industry problems covered by the bill. The basic issue involved is the choice between (1) a free competitive enterprise system operating in response to market factors or (2) central planning and direction of the economy by government. The pragmatic test of experience, in our view, evidences the overwhelming superiority of the first choice. We believe it is important to the long-run welfare of the people of the United States and to the strength of our economic system that we avoid on every possible occasion any excursions or precedents going in the direction of the second choice.

The implications of this proposal in terms of foreign trade and foreign relations will also be obvious. The net effect of a payment program is to reduce imports below what they would otherwise be by subsidizing higher cost production here at home. We believe that the long-run welfare of the whole American economy will be most furthered by policies that result in a high level rather than a low level of trade between nations. We must import if we are to export. The present imbalance between exports and imports is not desirable, either to the United States or to other countries. Barriers to increased imports stand in the way of obtaining a better balance.

National defense is commonly given as the reason for measures to protect a domestic industry. Present legislation provides means whereby such factor may be given careful consideration. But this national-defense aspect can be overdone. If mineral imports come from nearby countries such as Canada, Mexico, et cetera, this provides essentially the same national-defense features as production in the United States.

Thank you very much, Mr. Chairman, for this opportunity.
The CHAIRMAN. Thank you.

We have a few questions here for you. What comment does your organization offer in respect to the wool program and the Sugar Act? Mr. TRIGGS. We are very conscious of the fact, Mr. Chairman, that these acts provide some precedents for the kind of thing that is contemplated here. This explains in part our real concern with respect to the wool program and, as you know, we do not exactly endorse it wholeheartedly. But even though we have one precedent in this direction, we are hopeful that this precedent will not be extended and deepened by further wholesale precedents in this field.

The CHAIRMAN. You are opposed to the program but you have no substitute, no other way of meeting the problems involved which make it necessary for us to attempt a program of this kind?

Mr. TRIGGS. I appreciate that the problem before us, the American Farm Bureau Federation, is a little different than the problem before the committee. We would probably be out of order if we thought

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