to trigger a quota occurred at the end of Feb. 1958. Two months later it would have been reported, and the quota placed in effect July 1, 1958. The table below shows the actual quota that was proclaimed Oct. 1, 1958; the record of imports (A) for 10 quarters prior to our hypothetical case; (B) the actual average share for the base period; and (C) the share that would have been obtained from S. 289.

The second hypothetical quota case would involve more recent calculations of actual import experience. Of course, this would assume that our general economy had collapsed in the 4th quarter of 1966; that the quota had been triggered in December; the information collected and reported early in March; and the quota would have become effective April 1, 1967. A table similar to the preceding one would then read like this :

The unfairness of the bill now begins to unfold. The share (50%) to the custom smelter gives them just what they want (150,600 t/yr.), which is slightly more than they actually bought over the last three years. (See exhibit A-1). The remainder, subject to further dilution by any scrap imports, lowers the allocation to importers and consumers by 111,000 tons below the average for the last ten years, or 70,000 tons below the 1958-65 quota. More important-the 1958-65 quota and half of the above 10-quarter base period have an 80% factor "built in," so that B in the table is 80% of 80%.

This is only the beginning. In any of each succeeding quarter, the ratio may be retested and a lower quota applied until the guaranteed minimum (30,000 tons) is reached for custom smelters. Thereafter, the drop in metal imports accelerates. This is compound retrogression.

SECONDARY SMELTERS

Nowhere in the bill is mention made of the secondary smelters, yet they play a most important role, in fact their production in 1966 exceeded primary producer production by 18%. See Exhibit A-1 again and note that their average production for the past ten years exceeded that of primary producers. Last year

they could not obtain all the scrap they needed, else their production would have been higher. They are not asking for help and protection.

Years ago secondary smelters concentrated mainly on antimonial lead alloys and other alloys. Softening lead was relatively expensive, but as years passed, more economical methods were found, and the ideal balance of production became 50-50 as between alloys and softened lead. This softened lead competes with the refined soft lead sold by the primary producers, and in 1966 was greater than the foreign ore receipts by U.S. smelters.

MARGINAL MINES

When the price of lead fell below 11¢, the small marginal mines had to close and the hue and cry arose because of unemployment. Again "no minerals policy" and no relief bill in sight, the Congress passed legislation to subsidize the small high-cost miner with a cut-off point at 144. The general economic situation improved, the price of lead began to rise, and in 18 months exceeded 14¢. During the tenure of the subsidy bill, few miners availed themselves of the subsidy and, I believe, a large amount of the appropriated relief was unexpended.

The reference to 14¢ lead would seem to indicate that this price is high enough to support the high-cost mines. If the industry fears further price deterioration, then the extent of damage must be measured against modern low-cost mines which will probably include 90% of the production. Then Congress should decide what needs to be done for the 10% minority segment.

A FAIR PRICE FOR LEAD

Certainly, the members of AABM do not wish to see harm befall the lead industry. No one can say x cents per pound is a fair price because we do not have public knowledge of the costs that are involved. Companies must report to shareholders and should be able to make a fair return on their investment.

There is some revelation, however, from the files of S.E.C. that concerns two ventures in Southeast Missouri. Two mining companies have agreed to develop and exploit the Magmont Mine with an annual capacity of 50,000 tons of lead. Another group of two mining companies will exploit the Buick Mine project with the same capacity (50,000 t). Both mining groups have contracted to sell their concentrates to the Missouri Lead Company, whose smelting capacity will be 100,000 tons of lead.

If the price of lead at New York drops below 8.5 cents, both mining groups are relieved of their obligation to ship concentrates. The obligation is renewed, however, if the smelter agrees to pay the 8.5 cents per pound "making adjustments for freight which would be incurred in making delivery pursuant to sale in New York City, and less a sales commission of $3.00 per short ton."

One might reason from the above statement that present day costs are less than 8.50¢ per pound, from which you may reason whether 16¢ or 14¢ is too high a price.

THE END RESULT

Mining capacity will be increased 2.5 times. The custom smelters will have a minimum guarantee of 120,000 tons of concentrate imports. Primary producers will be able to produce without restriction, and if their management of stocks in the past is any criterion, one might expect a prompt implementation of the quota and a continuous operation of it.

It can only end in shutting the door to free international trade, which is contrary to a policy this Administration is trying to pursue. It might imperil some sections of the GATT agreement. Even worse, it could provoke retaliation against us in other commodities, or it could set up similar protective features between other Countries that would drive the International lead and zinc situation to its lowest ebb.

For the consumer, it holds out one promise-higher prices.

CONCLUSION

Speaking in behalf of the Association of American Battery Manufacturers, the writer states their objection to "The Lead and Zinc Act of 1967" to be:

1. It is iniquitous-devoid of all signs of justice and fairness.

2. The "triggering" mechanism is a ratio of stocks of lead and antimonial lead to shipments of only lead. This increase in the numerator tends to trigger quotas sooner and rescind them later.

3. It is capable of further manipulation by increasing the portion of antimonial lead stocks as "dead" stocks held for tax purposes or otherwise.

4. No machinery is provided for gathering the statistics required to measure the test of ratios specified.

5. It places a terrific burden on the Secretary of the Interior in interpreting the implementing action of the quota formula.

6. The only guaranteed minimum quota is allocated to the custom smelters. The remainder of the allocation as metal for the consumer is "flexible" and retrogresses everytime the ratio is tested.

7. Stocks measured for the ratio include those held "elsewhere." The Bureau of Mines does not report this classification. If they followed the definition of A.B.M.S., they could include those stocks on consignment or in warehouses anywhere in the World.

8. With the new developments in Southeast Missouri, plus modernization in other areas, there should be little fear of future prices because costs for 90% of the production will be quite low. Congress may still choose to protect the "little fellow" with the high-cost mine representing only a minority interest of about 10%.

9. The bill would stifle free International trade, contrary to the policy of the present Administration.

10. The bill might provoke retaliation against us in other commodities. Other Countries would also be encouraged to provide similar barriers which could effectively block the export trade of major lead producing Countries.

11. The bill would counteract all efforts by 24 Nations to promote the stabilization of lead and zinc commerce.

12. The effect of the bill, if passed, is to hit the CONSUMER where it hurts most-the pocketbook. Stifled competition can only end in higher prices.

(The charts supplied are in the files of the committee.) Senator JORDAN. Are there any other witnesses here who wish to be heard, or who request permission to file statements at a later date? We will keep this record open, if anyone wants it kept open, so that they may file later.

The hearings are closed. Thank you all.

(Whereupon, at 3:40 p.m., the committee adjourned.)