operations over a period of 5 years, we will say, would work out on the assured basis or on the guaranteed price.

Therefore, our objective has not been to write a program which continues a high price for a limited period of time. We want a program which guarantees a fair price over a long enough period of time to give stability to the mining market.

In our opinion it does not make very much difference whether that is done by a selective contracting system or by a premium-price program, so long as the standards are set up in the law. We think that the standards should be established in some reasonable way.

For instance, in our legislation we provide that anyone who can produce any of the items named by the Munitions Board to be critical and strategic, and so published on their list, anyone who can produce those items and who can produce them within a certain price range and can meet the specifications set by the Munitions Board is entitled to receive a contract.

Now, we cannot see anything very wrong with that. If copper, for instance, is in short supply and if we decide that we will go 25 percent above the market, or stay at the level of 232 cents, with such an assured price for 5 years, with escalator clauses in the contract, and abide by the specifications of the Munitions Board, we cannot see why another fellow out here cannot come under it. One fellow's copper is just as good as another's.

If you get more copper than you need all the Munitions Board has to do is to take the copper item off the list of the incentive program, and the incentive program for that particular item ceases. The specifications are set up by the Government. When anyone meets those specifications within the price set by the law, and as long as the article remains on the critical list, why should not his material be received? I cannot for the like of me see anything very wrong with that kind of a program.

I do not care how it is done. If selective contracting would be more agreeable to you, I say it would be personally all right, provided we had some kind of standard in it. Can you see anything wrong with that?

Secretary KRUG. No, sir; I cannot, but for the very reasons you pointed out, when you start writing standards into the law and then make the contracting authority mandatory with respect to anyone who falls in those standards, there is a point where in effect you accomplish the premium-price plan, although presuming to give flexibility in the contracting procedure. That is the difficulty in the drafting. It is that angle that I would like to have the committee study, in our effort to meet your request to incorporate the standards, with anyone meeting the standards getting a contract.

You have been over this so many times that I hesitate to take up your time further, but I know many of you have had experience with the premium-price plan during the war. I did, too, personally.

The difficulty came, not in the simple terms of the problem as you set it forth, but in the mineral producers who were able to adjust their operations to inferior ores and submarginal ores, to get the benefit of the subsidy, rather than to mine other ores they had on hand which could have been mined at less cost, particularly in manpower and materials, at a time when manpower and material were very dear. It

is that feature of the premium-price plan that gives me great concern. The other feature that gives me equally great concern is to protect the people and to protect the Government against practices of that kind. It requires intense regimentation of those units in the industry that want to participate in the plan. In other words, you can take their words for it, and you are sure that in many cases the United States Government is going to get trimmed; or you can go in there and make a real accounting and cost study that would be necessary, in which event you have to decide matters that can best be decided by management. There is no happy meeting of those two problems. You either have to do it one way or the other.

In other words, a fellow says, "My costs are such-and-such, and I am entitled to a premium of such-and-such." To find out whether he is right or not, you have to go in there and study his books, study his costs, and study his operating methods.

If he feels that each officer of the company is entitled to a Cadillac automobile, you have to agree or disagree with him in calculating his costs. When you get down to the practical end of administering the plan, you have complete regimentation, or you have a loose system-and we had it during the war-where a considerable injustice results from producers who want to take advantage of the looseness. Mr. WELCH. May I ask the Secretary a question?

Mr. ENGLE. Just a minute, Mr. Welch, and I will yield to you for a question.

I just want to comment on the Secretary's statement. I agree that that is true, but I think that it is inevitable under any incentive system. In other words, unless you are going to abandon the idea of incentives altogether, whether by contract or by mandatory premiumprice programs, you have the same problem.

For instance, let us assume that the Spence bill went through with its broad powers, which gave the Government the right to contract on any basis without any limitation as to how far above the market it would go; and your agency, administering mining contracts, enters into a contract for a period of 5 years with a man to produce copper at a price of 2312 cents, let us say. That is the current price. If the price happened to drop and you had guaranteed that price for 5 years, the Government would get chiseled, would it not? Or, if you wrote into that law or that contract the right to pay the producer 25 percent over the market price and not in excess of that, in the event that his costs required it, then you would have to go right back to the same proposition you are talking about and determine whether or not the assistant manager ought to have a Cadillac automobile, whether his costs were padded or not, and whether he could do it without more manpower, with less manpower, and whether the new machinery he wanted to buy was really needed.

Secretary KRUG. It is true that in either form you will have certain degrees of Government interest in finding out various factors concerned in the operation of the producer.

As I say, to make a contract you need to know some of the things you need to know to apply the premium-price plan. It is my very strong feeling, based on my experience with the premium-price plan, that we could avoid many of those difficulties if there were some selectivity in deciding whom you were going to contract with.

Mr. ENGLE. Let me give you another illustration. The price of lead declined 25 percent in the last month, from 212 cents to 16 cents per pound.

Let us assume that under the selective-contracting system you agree and enter into a contract with a man to produce lead over a period of 3 or 5 years at 212 cents, and the price, for instance, instead of dropping to 16 cents a pound, went down to 13 cents a pound in the open market.

Then the Government contract, at that point, would become a subsidy between the actual market price and the price written into the contract. It may be that you could put an escalator clause in there to protect the Government, but it seems to me you would have the same kind of problem every time you put an industry in a subsidy position. You have to check it one way or the other.

It occurs to me that the Government should never do that except under one circumstance, and that is where the national security is involved and the necessities of our care are of such urgency that we are justified.

We should take those chances in order to protect this Government against an emergency in which we might be unprepared.

Now, my distinguished colleague from California, Mr. Welch, wanted to ask a question, I believe.

Mr. WELCH. Mr. Secretary, strategic minerals and metals, including petroleum, unlike grain or cotton, cannot be reproduced.

May I ask this question: What percentage of our strategic minerals and metals, when made into machinery, are shipped out of this country for peacetime use in foreign countries?

Secretary KRUG. I do not have that figure at the moment. Maybe Dr. Boyd can give you an estimate.

Do you have any idea of what percentage of our minerals are shipped out for peacetime uses?

Dr. BOYD. We are talking now about the strategic materials. I cannot give you the exact percentages. It is quite small, except in the fabricated form. Machinery is shipped out and sold to foreign nations, but very little of our own production is shipped overseas today. A very small percentage.

(The information is included in the appendix as exhibit 23, p. 340.) Mr. WELCH. What I had in mind, Mr. Secretary, is the fact that there is a limited amount of strategic materials under the earth in this country.

Secretary KRUG. That is right, sir.

Mr. WELCH. Every time you take a ton or a pound out, it is gone forever.

Secretary KRUG. It is pretty hard to get it back, even as scrap. Mr. WELCH. Some materials and metals should be lift for centuries to come, for the security of this country and our peacetime economy. Mr. ENGLE. Mr. Lemke, do you have some questions?

Mr. LEMKE. Yes; I have one or two of them.

Mr. Secretary, I realize, and I am afraid you do not realize that when you get into this selective contracting business that not only you would be swamped with letters and so forth, but also complaints. I think about one-fifth of the time of my office is taken up with two or three people who complain that they did not get justice. One now

claims he did not justice in connection with a discovery regarding airplanes.

I generally shift that responsibility to the different departments of Government, but I cannot stop the flow of letters.

Secretary KRUG. If you find a way, I wish you would let me know. Mr. LEMKE. I do not know. I am not in a position to pass upon the merits or the demerits of this. It seems to me that when you get to your selective contracting system you are opening the door wide for that kind of criticism. It may not be justified, you may say, but you will get it.

However, if a uniform rule of some kind were followed, where you can shift the responsibilty and say, "This is the law; I cannot do it," it would be much more preferable to leaving it to discretion.

Secretary KRUG. I certainly cannot disagree with you, Congressman Lemke, that a mandatory instruction on me to do something without any discretion on my part would create fewer headaches for me than one that gives me discretion. There is absolutely no disagreement on that.

My feeling is that those headaches, whether they fall on my shoulders or someone else's shoulders, are worth it, if they contribute to the objectives that we all have in mind.

If you will recall; during the war we had a premium price plan for a few things we needed. We did not have for hundreds of other things that we needed. We got them, and we got them by making contracts with thousands of people. We felt, in those cases, that it was more effective than the premium price plan.

You have a complete parallel in the efforts of the Government to get the hundreds of commodities that were needed during the war in the way they were obtained, as against the few that were obtained with the premium price plan.

I would say that the efficiency and economy of the other approach was so obvious that no one who had anything important to do with it would disagree with me on it.

Mr. LEMKE. Let me make another observation as to where, perhaps, too much discretion has been given.

We will go a little afield, to another department, the Department of State, under the so-called Marshall plan. We know about the aluminum scandal. Somebody blundered. I am not saying it was dishonest, but just human nature.

I run up against these things more directly in connection with well casing in my own State. A young couple getting married out there cannot get well casing to dig a well for their livestock or for domestic use. Then we find that somebody blundered in the discretion as to all this steel pipe being sent to other nations, and we come into some further blunders in discretion where Holland received so much of this pipe that she agreed to enter into a contract with a distributor, furnishing pipe made in the United States, to sell it back f. o. b. Holland at $290 per ton, and they received it for $110 under the Marshall plan. That is equivalent, in my mind, of having received it for nothing because they will never pay back the credit we gave.

Those mistakes are made, and they are made by departments of Government which we have confidence in, but it is, nevertheless, a mistake. That is a mistake in discretion. If we leave it all to dis

cretion that happens. However, if we had some general rule or provision I believe those things would not happen.

Am I right or wrong?

Secretary KRUG. Well, I do not think that all the rules that you gentlemen could write for the next 1,000 years would eliminate many of the mistakes that come because men are not as wise as they should be, or, perhaps, did not have all the facts that they should have had at the time they made the decision.

I certainly would agree that where standards can be written in which will control administration in the right direction they are desirable. I would not oppose them in any way.

It is my feeling that in this case we might be able to find some way of writing in standards that would be helpful as a guide to the administration. That was our hope, in following out the chairman's suggestion-I think you suggested it, also of working some standards into the bill; and that we have done.

After you have studied it, it may be that is the solution. On the other hand, I am very fearful that an outright instruction, "You pay a premium up to such-and-such an amount to anyone who can produce any of these metals," is going to lead to a waste and a very substantial waste of the taxpayers' money, without accomplishing a result.

Mr. LEMKE. May I make this other suggestion, and see whether we agree on this: If you fix a price of what you are going to pay for 5 years, I would not consider that as a subsidy. I would consider that Uncle Sam needs this material, and the quicker he can get it under the present world conditions, the better.

Secretary KRUG. I feel that way, also. My only disagreement is that I think we ought to have flexibility in making these arrangements, and that it should not be a mandatory instruction to anyone to make a payment to everyone who can produce any of these metals.

Mr. LEMKE. I realize, also, what my colleague, Mr. Welch, says, that this material cannot be reproduced. It does not reproduce itself, and it must be taken care of in an orderly fashion and not all mined. However, we must be in a condition, in case of national crisis, to be able to use it when we need it. It would not do us any good if this Nation were destroyed, to have a lot left, by conservation, unless we can use it when the hour calls for it.

Mr. ENGLE. Will the gentleman yield to me 1 minute?

Mr. LEMKE. Yes.

Mr. ENGLE. I would like to have the record show the interest and the presence of our colleague, Congressman Bennett, from Michigan, who is in the audience, and whom I had join us here on the rostrum. He is intensely interested in this legislation and came down to participate in these hearings.

Mr. LEMKE. Mr. Chairman, I do not care to take up any more time. at the present, because you westerners who are further west than I have these metals and minerals in your States. I have lignite coal, and when we get around to that I may have something to say. Mr. ENGLE. Mr. Barrett, do you have any questions?

Mr. BARRETT. Mr. Chairman, I have one question.

I have been a little concerned with your statement, Mr. Secretary, that the present high prices for these strategic minerals have not stimulated the production that you had hoped for.