foreign interests, in competition with foreign business. I have always believed that industry should stand on its own feet with regard to competition.

Senator JORDAN. You have answered with respect to coal. Is your answer the same in regard to lead and zinc?

Mr. KOENIG. If I were connected with a company that produced anything in the United States, lead or zinc or whatever, I would be ready and willing to stand on my own feet and invest my own money and the invested money of my shareholders in competition with anybody. That is what we are paid to do.

Senator JORDAN. Thank you.
Senator ANDERSON. Senator Allott.

Senator ALLOTT. With respect to your remark about Peru you say, "Yet the full Peruvian quotas on zinc and lead metal and almost all of the quotas on lead and zinc contained in concentrates was met." Was this because of long-term existing contracts?

Mr. KOENIG. No, sir. There are no such long-term existing contracts. You can enter into contracts for maybe a period of time, a year or year and a half, but generally speaking the contracts are not in excess of 1 year in length, so that there were no outstanding long-term contracts. This was a purely voluntary act on the part of the Peruvians.

Senator ALLOTT. I don't see that this puts any particular feathers in their bonnet. They have had a good customer. They have had a reasonably good price, and so the fact that they met these quotas and thought it was better to continue this than to jump around in the world market does not particularly put any stars in their crown as far as I am concerned.

Mr. KOENIG. Well, Senator, the point I was trying to make was that they were not opportunists and not taking advantage.

Senator ANDERSON. That is a bad word.

Mr. KOENIG. A dirty word; yes. That they were not playing it on an opportunistic basis, taking advantage of higher markets that existed because they did want to protect their good customer standing and maintain the customer relationship. That is good management. It shows they wanted to carry on the business in accordance with watching their manners, in other words.

Senator ALLOTT. Let me ask you a question. Since the establishment of the Alliance for Progress, has Peru carried on any land reforms that you know of?

Mr. KOENIG. Yes; I do know of that. The company which I happen to be engaged in has probably one of the largest sheep farms in the world. We have about 8,000 acres and 240,000 head of sheep and we are being reformed right, left, and center, and over the years we have lost already 25 percent of the area of these farms and this land has been divided up among the Indian communities. At the present time we are in most active discussion with Peruvian ministries and also with the President himself in respect to selling half of our total farm area for the agrarian reform business.

Senator ALLOTT. How much of the large landholdings have been broken up; what percentage in the last 5 years?

Mr. KOENIG. I could not say what percentage there has been but there has been considerable dividing up of the large landholdings, mostly up in the Sierra. The second largest holding in Peru, a farm that ran about 160,000 head of sheep, has been completely broken up. It was purchased by the Peruvian Government and divided up.

Parenthetically I might say that this is not good for the economy because those lands that are so divided up are taken off the productive line of producing anything that can be exported. The farms are not as well run after they are divided up as they were before but we recognize the fact that this is a trend throughout Latin America and quite contrary to the trend in the United States, where farmers are tending to coalesce rather than being divided up.

We are going along with the move, and I should also like to state that we didn't buy these farms because we wanted to but because people made us buy them because of alleged smoke damage from our smelter. The fact that it is a heck of a good farm now would seem to indicate that perhaps this was a move that wasn't entirely warranted but anyway here we are the owner of the farm and so we are acutely conscious of this.

Senator ALLOTT. What tax reforms have been made in Peru during the past 5 years?

Mr. KOENIG. The tax reforms have been in the method of increasing taxes. I don't know whether that is reform or not.

The Peruvian income tax on industry now is somewhat higher than it is in the United States. It is now 48.65 percent, which is almost a percentage point higher than in the United States. The collection of taxes, of all taxes, has improved. The one area in which tax collection is noticeably bad in Peru and one which we squawk about is the collection of the income tax. Now, mind you, they collect the income tax from the big companies and from the employees of the big companies that have payrolls and IBM machines and all of those contraptions but the collection of income tax throughout the country is very deficient and we recognize it and some people in the Government recognize it but they haven't been sufficiently firm to really do something about it yet.

Senator ALLOTT. Who owns these mines?

Mr. KOENIG. These mines of ours or the other mines?
Senator ALLOTT. Are they owned by you?

Mr. KOENIG. As I have said, we have 20,500 shareholders, 98 percent of whom live in the United States.

Senator ALLOTT. Do you own the mines in Peru?

Mr. KOENIG. No; the mines, as in most countries of the world, are owned by the state and you get a perpetual concession from the state by staking the claim and then paying a nominal fee per unit of land per year to hold them, so that the possession of these mines is tantamount to ownership. It is on a concession basis as it is in many countries of the world.

Senator ALLOTT. I think that is all I have.

Senator ANDERSON. If stocks get overlarge in the United States, are domestic prices of lead and zinc likely to decline?

Mr. KOENIG. Yes; I should think so. Now, if the stocks are large, it is not the customer who picks up the telephone and says. "Give me 500 tons of lead and zinc." It is the producer or the smelter who picks up the telephone and says, "Won't you take 200 tons of lead and zinc from me?" The supply and demand picture changes.

Senator ANDERSON. If prices do decline, what will be the effect of such a price decline on Peruvian producers who sell to the United States?

Mr. KOENIG. I suppose there will be a reduction in production. Some of the marginal mines will go out of business just as they do in other parts of world. I see nothing wrong with that.

Senator ANDERSON. You are absolutely opposed to this legislation? Mr. KOENIG. Yes, sir.

Senator ANDERSON. Are you absolutely opposed to the farm program subsidies?

Mr. KOENIG. I know absolutely nothing about farming, Senator Anderson. I will take No. 5 on that one if I can.

Senator ANDERSON. I congratulate you. Thank you very much. Mr. KOENIG. Thank you.

Senator ANDERSON. Mr. Steinberg? Will you identify yourself.

STATEMENT OF DAVID J. STEINBERG, COMMITTEE FOR A
NATIONAL TRADE POLICY, INC.

Mr. STEINBERG. Mr. Chairman, Senator Jordan, I am David J. Steinberg, secretary and chief economist of the Committee for a National Trade Policy, Inc.

Senator ANDERSON. Proceed.

Mr. STEINBERG. We appear here today, Mr. Chairman, in opposition to Senate bill 289. We do not appear on behalf of any business interest in any way connected with the lead-zinc industry or any other business enterprise. Our views are never intended, and are not intended in this testimony, to reflect the special interests of any of our supporters. Our committee is a business-directed and primarily business-supported organization, its backing entirely American in origin, established to promote U.S. foreign-trade policies and practices that, in our view, serve the total national interest.

We believe that, with respect to this country's trade relations with the rest of the world, the enlightened self-interest of the United States is best served by a sustained lowering of trade barriers on a multilateral basis.

The proposed establishing of quota controls in the event of certain conditions in the market for lead and zinc is intended as protection against the kind of imbalance of supply and demand that caused the industry considerable difficulty a decade ago, leading to the escapeclause import quotas established in 1958. Proponents of the proposal say it is "simple, fair to producer, consumer, and importer alike and would only be in effect when necessary to stabilize the supply-consumption ratio at proper levels."

Our objections may be summarized as follows:

1. The proposal would invoke import restrictions as a kind of faucet to be turned down or up, depending on the level of lead-zinc inventories in the domestic market. In other words, import restrictions would be triggered by imperatives of arithmetic, not by imperatives of the national interest. Nor would the proposed government attention to difficulties in the industry be geared to an objective finding of injury in the industry in general or to the special problems of individual producers or groups of workers.

2. Stability in the relation between supply and consumption would be sought at the expense of stability and consistency in trade policy. Deviations from a sustained and consistent policy of freer international trade are justifiable only as indispensable, emergency measures of last resort to buy time for well-designed adjustment efforts to take effect, and if otherwise consistent with the overall national interest. No such standard is evident in the proposal before your committee.

3. The proposal may be "fair to producer," as its proponents say, though only in short-run terms in view of its harmful effects on overall trade policy and hence on the overall economy, which is affected favorably by sound trade policies promoting the national interest and unfavorably by trade policies seriously compromised by measures geared to the parochial interests of individual sectors of the national economy. And if it is fair to the lead-zinc producer, it seems to us unfair to producers in other American industries who, themselves, might like comparable treatment but not be able to get it because of inadequate political support and because of the shambles such measures would make of national trade policy. In this connection, Mr. Chairman, another "Orderly Marketing Act" has been introduced in this Congress, a proposal whose concept of "orderly" is just as deficient as are the concepts of "fairness" and "stability" in the lead-zinc bill.

4. In view of the uncertainties which any quota system creates for those who import the particular product (there tends to be a scramble to avoid being shut out unexpectedly by completion of the quota), such a proposal cannot properly be regarded as "fair" to importer and consumer. It also interferes with the flexibility that is so essential to a soundly operated free enterprise system-in this case, flexibility in obtaining supplies from whatever sources adequately meet the user's

needs.

5. Reflecting in important measure a substantial downturn in domestic demand, imposing the proposed quotas would be tantamount to a deliberate attempt by the U.S. Government to export recession. These restrictions would have harmful effects on the international purchasing power of other producing countries and consequently on exports of American goods to those markets, including goods in which lead and zinc are used. The special export factor provided for in the bill (permitting ex-quota imports of lead and zinc commensurate with the quantities of these metals contained in exported goods and on which duties are refunded) does not, in our view, substantially offset this, because the additional lead-zinc imports allowed would probably not produce dependable improvement in the foreign-exchange prospects of these countries. The prospects for U.S. exports would also be reduced by the directly retaliatory import restrictions to which these countries would be entitled to resort-under the rules of the General Agreement on Tariffs and Trade for those who belong and otherwise for those who do not.

6. The bill would also tend to affect adversely the climate for international cooperation on lead and zinc matters, provided by the international lead-zinc study group.

Recent investment and other decisions in the lead-zinc industry have, we trust, been closely conditioned by the experience of the late 1950's and reflect realistic reactions to the changing patterns of world supply and demand of more recent years. Producers whose decisions have been soundly based on realistic criteria, and who have not overreacted to the strong market conditions of recent years, have strengthened their competitive positions and may be expected to endure effectively such market declines as may reasonably be expected to occur.

More serious problems incurred by other producers should be dealt with by domestic economic measures if the national interest warrants such Government assistance. But these problems should not be allowed to back up onto the Nation's foreign-trade policy, impairing our progress toward freer world trade.

In any event, the situation of the late 1960's is not like that of the late 1950's, when the large excess of lead and zinc supplies over requirements reflected not only substantially reduced industrial consumption but also the Government's abrupt termination of its stockpile programs (the strategic stockpile, and acquisitions for the supplemental stockpile in exchange for surplus agricultural commodities) following a period when the Government was stimulating production in this country and abroad.

No such contingency confronts us now, and we hope that adequate adjustment measures will accompany the termination of any future programs to stimulate minerals production.

In discontinuing the escape-clause quota controls on lead and zinc imports in late 1965, the President instructed the Tariff Commission to keep the effect of this action under review and to be prepared to certify quickly for adjustment assistance those firms or workers who qualify.

Since the Tariff Commission's role is analytical, not program oriented, we believe the Interior Department should also follow developments in the lead-zinc industry and also developments in the market for these metals and be prepared with remedial proposals it may from time to time consider necessary in the national interest. We assume the Department is alert to such a responsibility on its own initiative.

In conclusion, Mr. Chairman, we believe that the lead-zinc industry should consult very closely with the Interior Department, both the industry and the Department making every effort to insure a sound, a healthy, a strong lead-zinc industry consistent with the highest principles of the free enterprise system and of freer international trade. That completes my formal statement, Mr. Chairman.

Senator ANDERSON. On page 3 you say :

And if it is fair to the lead-zinc producer, it is unfair to producers in other American industries who might like comparable treatment but not be able to get it.

Can't you visualize the possibility that one policy might be restricted to a single industry and not completely upset the whole balance? We had the Tariff Department talking one day about bicycles. I couldn't care less because I have passed the age where I ride a bicycle. We didn't hurt anything, I don't believe. Isn't it possible to pass legislation without destroying somebody else?

Mr. STEINBERG. I am not talking about destroying somebody else, sir, if I understood your words.

Senator ANDERSON. You say it is unfair?

Mr. STEINBERG. Yes.

Senator ANDERSON. We passed the Small Producers Lead-Zinc Act some time ago. Were we unfair to the large producer?