3. From the industry experience since mid-1964, operating under the quota proclamation, we recognize that quotas can become too restrictive if consumption increases faster than the supply. Accordingly, S. 289 provides that if during the three-year term of a lead or a zinc import quota, enacted as indicated above, there should occur a shortage of the metal in the United States, again determined by the relative level of producers' metal stocks, the import quota would be canceled. The percentage or "trigger figure" for quota cancellation for lead is 100 percent of average metal shipments during a 3-month period, and for zinc 75 percent. Here again, past experience, and this during the last 2 years, has indicated that this ratio of metal stocks to metal shipments will maintain adequate supplies for the consumer. If these "one-shot" quotas are canceled, new legislation will be required to authorize further import controls. And I would underline further import controls.

4. The quotas set by the Secretary of the Interior would be 80 percent of average quarterly imports during a base period of 10 quarters, immediately preceding the quota calculation. This would provide current import information that would fairly serve to establish a quota for a 3-year period. Specific import quotas would be assigned to countries with an import record in excess of 10 percent of imports during a current base period determined at the time a quota became effective. Countries with a lower level of imports would participate in an "all other country" quota.

5. Specified lead or zinc manufactured products should be placed under an import quota during the period that a quota is in effect on lead ores and metal or zinc ores and metal, respectively, if imports of the manufactured item increase substantially after the quotas are in effect. Once again, we know from experience during the quota proclamation period, that imports of certain lead-zinc manufactured items were stepped up as an "end-run" around the quota on unmanufactured material. The Secretary of the Interior should be allowed to place limitations on excessive imports of any manufactured lead or manufactured zinc item during a lead or zinc quota period, respectively. Clarifying amendments for title III of S. 289 are attached as an annex to this statement. And I will speak about that when my statement is finished.

6. The provisions of S. 289 recognize the need for imports of lead and zinc, but, it must be remembered that the U.S. industry has, and is in the process of investing hundreds of millions of dollars in expanding domestic lead-zinc mine and smelter production.

Accordingly, minimum quotas are included to provide the importers a reasonable share of the U.S. market, but the ratio of ore to metal has been changed from the old quota proclamation to conform to U.S. potential production. of these items.

We have new mine production coming on stream in the United States by 1969-particularly so for lead. New smelters are being constructed to treat this material. Some custom smelters, particularly in Western States, will require imported material to augment domestic mine production. Accordingly, S. 289 specifies a minimum quota for lead ore of 30,000 short tons per quarter. If the Secretary of the Interior is called upon to determine a quota for lead, he must guarantee 30,000 short tons for lead ore. What we are saying is, that for 60,000 tons, it is 50-50 between ore and metal. If the quota as calculated, exceeds

60,000 short tons, it will be divided equally between ore and metal. A sample calculation, using 1966 as a base since this represents actual import experience not affected by the quota proclamation, indicates the quota would have been at the proclamation level with a greater allocation to ore and lesser to metal than in the old proclamation.

The zinc minimum quota is left at the quota proclamation level of 130,000 short tons per quarter, as domestic zinc production expansion is less than that for lead. As in lead, the ration of ore to metal has been increased but to a lesser extent. The sample calculations here, similar to that for lead, indicates a 23-percent increase over the proclamation level, again with ore increased, and metal slightly decreased from proclamation amounts.

At this point, Mr. Chairman, I would like to mention that there has been some comment that in the case of zinc, while our overall capacity might be sufficient to take care of our consumers, that in the case of special high-grade zinc we might possibly have a tight spot. Some of our people have furnished information that the special high-grade zinc capacity at the present time is 761,000 short tons per year. A part of this is used for high grade, but this is a pretty good figure regarding the special high grade. In 1966, we produced 569,000 short tons of special high grade and we use somewhere between 600,000 and 625,000 tons. It looks as if we are in good shape there, as the imports will include special high grade, so that we don't think there is any particular problem.

In the assignment of quotas to importers, S. 289 recognizes the changes in trade patterns in recent years in the various countries. In the assignment of minimum quotas S. 289, despite the potential of our own domestic industry, recognizes that our domestic production may be limited by economics if supply and demand are to be equalized during a quota period.

7. One last provision of note. Manufacturers of lead-zinc products for export using foreign metal during the proclamation period, were required to enter this metal under the quota from the country of origin, and, in so doing became less competitive in export markets against foreign manufacturers who bought metal at the foreign prices. Unlike the quota proclamation provisions, S. 289 will permit such manufacturers to use imported material, obtain a refund of duties on this metal, and this metal will not be charged to the quota. This means a U.S. manufacturer selling in the foreign market may obtain his lead and zinc at the foreign price, consistent with the market in which he is selling and accordingly his business practice will not be disturbed by enactment of S. 289.

Mr. Chairman, this plan is much simpler to implement than previous legislative proposals. It is fair to the producer, consumer, and importer alike and would only be in effect when necessary to stabilize the supply-consumption ratio at proper levels. We urge that you and your committee approve S. 289 and adopt the amendments we propose and explain in annex II.

Now, turning to annex II, Senator Anderson, we have indicated that in sections 103 and 203 the comment there is "If, for any period of three consecutive months***" And this continues referring to the levels of metal stocks in relation to shipments.

As I have indicated, here we propose that the word "any" be replaced by "a". It has been suggested that the word "any" permits

multiple qouta calculations. The intent of this legislation is to permit the Secretary of the Interior to calculate a quota once only. The use of "a" clarifies the intent.

2. Title III-Pages 8 and 9.

I have added a new title III in this annex.

S. 564, introduced January 19, 1965, listed certain lead and zinc manufactured items to be placed under a quota whenever imports exceeded a specified quantity as compared to a base period.

S. 564 amended, July 28, 1966, and S. 289 provide "blanket coverage" for application of quotas on all lead-zinc manufactured items exceeding specific limits, without listing specified items.

The purpose was to simplify the terms of this title in line with the changes for unmanufactured lead or zinc.

The provision of S. 289 appears to be too broad in that the Secretary is directed to establish quotas on all products that meet specifications for a 50-percent lead-zinc content and a statistical import record.

The attached revision proposes reinstatement of the list of specified lead or zinc manufactured items, providing that quotas be imposed according to a defined import record considered excessive and also includes permissive provisions for the Secretary to establish quotas on other articles if he determines that imports are excessive. 3. The third proposed amendment has to do with section 405, the last section of the bill.

The intent of S. 289 is to provide authority for a 5-year period during which a lead or zinc import quota may be established for a maximum of one 3-year term, if producers' stocks of metal in comparison to metal shipments, become excessive as defined in the bill. The present language of section 405 may permit a second quota with a 3-year term to be applied, if the 5-year period of the authorizing legislation had not expired. This is not the intent and the attached revision specifies that a quota can be established, "once only" during the 5-year period.

We propose that these three amendments to S. 298 be adopted. Thank you, Mr. Chairman.

Senator ANDERSON. Thank you, Mr. Wilson. We are glad to have these amendments, and generally we are glad to have any amendments that people in the industry desire to submit. We try our best to do a good job, but sometimes we have to have amendments. You have done a fine job throughout the years, and we compliment you. Senator Jordan.

Senator JORDAN. Thank you, Mr. Chairman.

I just want to compliment you, Mr. Wilson, on this statement. I think you have done a good job. You have indicated that the need is now and not when we get into distress at a later time. Wouldn't you regard the signals that are evident to even the Secretary of the Department of the Interior as being especially significant at this time? The price is dropping in these metals as the general commodity prices in other things are going up.

Mr. WILSON. As I have indicated, Senator Jordan, I hate to be a pessimist, but I have been through this cycle a few times and when you begin to see a soft spot you like to have something on the books that will take effect.

The advantage of this particular bill is that action will be available, but it doesn't have to take effect as long as conditions go along as we would like and hope that they would.

Senator JORDAN. It only puts a floor under you, a base under you contingent upon arrival of certain circumstances where you would need it, and then it would be too late to start anew and enact legislation to cover the situation.

Mr. WILSON. That is right, sir. We have been through this sine curve experience several times. We would sort of like to soften the dips, and in doing that the peaks will be softened, which is good for our business in the long run and certainly good for the consumer and the importer.

Senator JORDAN. You would like to stabilize the industry.

Mr. WILSON. Yes, sir. We would like to look forward and see that the investment of a millions of dollars will be repaid by a decent return over the years.

x

Senator ANDERSON. Senator Jordan, the emphasis that you put on the fact that these things can change is very interesting. We tried once to present some things to the Department of the Interior, and the answer was given. "Why do you wait this long." I submit that some of these actions now would make us much better off than to wait.

Mr. WILSON. That is right, Senator. I might say that I enjoyed Mr. Moore's statement. He and I talk about the same things to a great extent. The only trouble is we differ in the end result. We say we need it, and he says we don't. I am biased in my favor.

Senator ANDERSON. I think the State Department biased in its favor, because we seem unable to get anything by the State Department. When we passed this small mines bill several years ago, many of us thought the State Department was going to be agreeable to the project we had, but as soon as it took care of some very small operators and small amounts according to who they were, the State Department was all through. They said "You got relief."

Mr. WILSON. I might say, Senator, that we supported the small mines bill and actually visited some of these departments in support of it, recognizing that this was a segment that certainly needed some immediate help. They in turn have recognized, in a statement to your committee, that, while they have this, they recognize that S. 289 is a long-term solution is what we are after.

Senator ANDERSON. Senator Allott.

Senator ALLOTT. I congratulate you also, Mr. Wilson, on your statement and also it seems that for many, many years we have been meeting on these things.

Mr. WILSON. That is right, Senator.

Senator ALLOTT. I want to inquire, and perhaps we will get some testimony on this later, How do you envision, because the point will be raised, that this is going to (1) discourage and be a vital blow to our GATT negotiations and to the Kennedy round; (2) that this is going to vitally and adversely affect our foreign policy with the developing nations? And there may be a few other arguments that will be used in addition to this. You have been in this area a long time. How do you feel in a practical way that this would affect our foreign relations with other countries, particularly those which supply us raw minerals?

Mr. WILSON. Senator, the statement has been made by a responsible member of the group I represent that in his opinion, if this legislation

were to be enacted for a 5-year term but effective immediately he would rather doubt that the 3-year quota would ever have to be applied, the reason being that the 3-year quota regulations as spelled out in the bill are ground rules for everybody who participates in the U.S. market. We need imports to supplement our domestic production. If the foreign producers will be satisfied with a reasonable share of our consumption, and if they will observe the ground rules the quota would never have to come into effect..

So that, to answer your question in regard to trade policy, unless someone takes advantage of our markets we won't need import quotas and on that basis I don't see that S. 289 will affect trade policy.

Senator ALLOTT. Basically, this is a utilization of the same policy that I know I have discussed with you in past years but not recently, that you establish the ground rules and then if foreign countries lead themselves into the trap they have only themselves to blame, which is the reason for the introduction of S. 522, to establish a national minerals policy.

Is that your point of view?

Mr. WILSON. That is absolutely right.

Senator ALLOTT. Having done this, we do not stimulate, then, the development of new probably cheaper or more profitable mines, nor overproduction, because they will be aware of what is happening here and what the probable market will be.

Mr. WILSON. Your point-and we agree with it is that no one in the executive department has ever said what incentive should our domestic mineral industry have, what should it be? We get the negative side that we are trying to do things that give a so-called residual market to the foreign producer. But it must be remembered that the portion of the market that the importer gets is at the U.S. price, and generally this is above the level of the world price. The importer likes the U.S. price and this helps offset their reductions in sales by increasing the value of material that they bring into us.

Senator ALLOTT. Thank you very much.

Senator ANDERSON. Thank you very much for coming here. We are very happy to have your testimony. Your full statement will be included at this point.

Mr. WILSON. Thank you, Senator.

(The statement referred to follows:)

STATEMENT OF CLARK L. WILSON, CHAIRMAN, LEAD-ZINC PRODUCERS COMMITTEE

Mr. Chairman and Members of the Committee, I am Clark L. Wilson, Chairman of the Lead-Zinc Producers Committee. I appear on behalf of the domestic lead-zinc industry.

Mr. Chairman, it was my privilege to appear and present a statement for our industry before your Committee on August 14, 1963 in support of S. 1534, a bill to establish “flexible" import quotas for lead and zinc. Today, I appear to support enactment of S. 289, also a lead-zinc import quota bill but with import provisions greatly liberalized from those proposed in 1963.

The differences in the two legislative proposals reflect the improvement in domestic and foreign consumption, production and market price of both metals that has occurred since the Committee hearing in 1963. The continuing need for import quota legislation emphasizes once again the lack of an overall minerals policy to encourage maintenance of a necessary segment of our lead-zinc mining and smelting industry and reemphasizes the absence of any constructive proposal for such a minerals policy from the Executive Department.

Before discussing the provisions of S. 289, I would like to (1) review the several factors leading up to the issuance of the Presidential Lead-Zine Import