from the hands of the Government and perhaps go over into private enterprise, which I think is very desirable-were it not for that as a regulator, we do not know what the price would be for rubber. We have had one experience of its going clear up to the sky, almost, is that not true? Secretary MCKAY. Yes, sir. The CHAIRMAN. Then I take it that you are interested, you must be interested, of course, in tariffs where they can be applied properly to protect our industries. You have had some experience in Oregon. I remember a few years ago when there was great pressure brought to bear on this committee with reference to your shingle industry out in your country, is that not right? Secretary MCKAY. Yes, sir. The CHAIRMAN. Canada was simply driving you out of the market. Secretary MCKAY. That is right. The CHAIRMAN. To your people, the shingle industry was a pretty important thing. It provided quite a payroll for certain communities, is that not right? Secretary MCKAY. Yes, sir. The CHAIRMAN. My idea is that if you fly over this country, you look down upon hundreds of thousands of little communities, and you naturally wonder what supports each community. It is not the profits of an industry there alone that does it. It is the payroll that sustains the communities of this country, is that not right, sir? Secretary MCKAY. Yes, sir. The CHAIRMAN. Every time we export a payroll to some other country, they get the benefit of that payroll, and it rarely occurs that we get a sufficient benefit from that exportation to make up for what that payroll here means to that community and to the people who live in it. Is that not right? Secretary MCKAY. That is right. The CHAIRMAN. Is is on that basis that I have always been a protectionist. This committee has aided in the growth of this country by protecting our industries as far back as 1802, and sometimes perhaps the tariff has been made too high, and sometimes perhaps it has been very much too low. I think it is too low now on the average, down to 12 percent. Oregon is a wonderful State. I have always been very much taken with it, and I have enjoyed traveling through it. Its scenery, its woods; and the courage of the people has always been an inspiration to this Nation. I think most of them had to go into Oregon originally by water, did they not? Secretary MCKAY. They drove across the continent, which took 6 months. The CHAIRMAN. And lowered their prairie wagons down into great ravines and then hauled them up on the other side. Secretary MCKAY. That is right. The CHAIRMAN. Your people have great courage. It is that energy that has built this Nation. If our people were to be subjected to the low cost of labor abroad-I have traveled abroad and have seen what it means over there. Let us take Italy, for instance. There are some of those great valleys of rich, fertile soil over there, all owned by maybe one family. The people who work that land are practically slaves. All they would ask in the world in the way of liberty would be to have a little piece of land of their own. They are a peaceful people over there. Just because the other nations are a little bit nervous about what we are going to do over here, I do not think we should give up the very heart and soul of this Nation, which is our domestic market. Do you not agree with that? Secretary McKAY. I agree with that, sir. May I add something? The CHAIRMAN. Yes. I want you to answer. Secretary MCKAY. I agree with that in theory. I, too, have always been a protectionist; but, under the present circumstances, some of these things that are imported enable these nations to import some of our commodities. It is a very delicate balance. Nobody knows just where it should start or stop. I think we have to be flexible in our thinking on that. The oil that comes in from Venezuela, for instance, if we were to cut that out, it would cut off their buying from us a considerable amount of merchandise. We in Oregon, for instance, have always depended upon the export market. There was a time during the day of the sailing vessels when the largest port for wheat in the world was Portland, Oreg. It has lost that through changed conditions. In the wool market it was second to Boston. We have always been in the export business. We raise our things in surplus. Our lumber business is in spirited competition with Canada. It is a two-way street, in other words, more today than ever before, because we are trying to create the impression or the theory of "trade, not aid"; rather than giving foreign countries who are allies outright gifts, that we trade with them and enable them to help sustain themselves. It is a delicate balance. The CHAIRMAN. I think you would agree with me that if we have to support these other nations through taxation while they reduce their taxes and pay their debts and balance their budgets, if we still have to do that, I am not sure, but that it would be just as well for our economy here to continue to do that, maybe, as it would be to just destroy our markets and payrolls and put a lot of our people on relief. Secretary MCKAY. I do not believe, Mr. Reed, that we can continue to support the world. The CHAIRMAN. I am glad to hear you say that. For my own part, I am utterly disgusted with the idea of the amount of foreign aid which they are proposing to give at this time. Why should we be building seaways over there and building 22 dams and 46 power stations on a great canal going up from the Mediterranean to Lake Geneva, which the French are not putting a nickel into? All of that is going to lead to competition with us eventually. We do not have to build mile-long railway stations over there. The time to stop this is now, and to stop pouring all this money into foreign aid. We have to look after our own country. All I am worried about here is that we are going to ignore the complaints of the people who come from your State and all over this country which we have been hearing, as the men have told you, day after day. This forum is for our people to come before. Personally, I do not think that a study such as was proposed is going to bring us any thing new. Our duty and our sworn duty is to protect our own country. Mr. Secretary, I want to congratulate you on your remarks. You have come before a pretty hard-boiled committee, and you have not been in office so very long, and I think you have done very well, sir. I congratulate you on your statement, and we are mighty proud to have had you here. Secretary MCKAY. Mr. Reed, I have spent my life in business, a very competitive business. I am used to being kicked around. It makes nie feel at home. Thank you very much. The CHAIRMAN. One question, Mr. Secretary, by Mr. Simpson. Mr. SIMPSON. Mr. Secretary, I want to inquire about the following statement: I doubt that the right approach is to use the power of the Federal Government to control imports. You were speaking about oil in the preceding sentences. What do you have in mind? That the Federal Government power should not be used to control imports? Secretary MCKAY. There is a difference of opinion among industry, but I believe the majority of the petroleum industry would like to try to adjust the imports themselves. Mr. SIMPSON. Do you have any specific information as to how far that policy may have progressed, or if it is a policy, or if there is any effort being made along that line? Secretary MCKAY. Yes; there is an effort made along that line, but of course the industries are afraid of the Sherman Antitrust Act, too. Mr. SIMPSON. Incidentally, the Federal Government is controlling imports in the sense that the Sherman Antitrust Act comes into it. Secretary MCKAY. That is right. I believe that men in business cannot have hard-boiled rules and regulations, because then you will be in violation of the Sherman Antitrust Act. But I believe industry is sufficiently intelligently to attempt the adjustment itself. Mr. SIMPSON. I want to congratulate you, sir, for the refreshing air you have brought to the committee, and for your complete frankness with us. Secretary MCKAY. I am sorry I do not know more. The CHAIRMAN. Mr. Forand wishes to make an insertion in the record. Mr. FORAND. I ask unanimous consent, Mr. Chairman, to introduce into the record a statement by the Independent Oil Dealers of New England, including some statistics. The CHAIRMAN. Without objection, it is so ordered. (The documents referred to follow.) INDEPENDENT OIL MEN'S ASSOCIATION STATEMENT ON IMPORTANCE OF OIL IMPORTS TO THE ECONOMY OF NEW ENGLAND An extended exposition of the importance of imports of foreign oil to the New England economy, it would seem, is not necessary. The story can be briefly told. The importance of residual-oil imports is so striking and specific that recitation of a few facts and figures will suffice. The importance of crudeoil imports appears to us equally clear, but the specific effects of restrictions, because of the vast complexity of overall domestic supply and demand for crude and distilled products, are difficult to state beyond the obvious generality that short supply is bad for New England, and increased prices for products would not be welcome to New England consumers. By way of definition, it may be stated that a "barrel" in oil industry terminology, and in this statement, means 42 gallons. Crude oil is the basic petroleum from which all petroleum products are extracted by the refining processes. Residual or heavy oil is used for bunkering of ships and as fuel for industrial furnaces and powerplants. It is also blended with other oil for specialized industrial and commercial purposes. Our studies show that the use of residual in New England is 30 percent for utilities, 40 percent for manufacturing, 15 percent for heating and the balance for various military and maritime uses. In the calendar year 1951 60 million barrels of residual oil was consumed in New England according to the U. S. Bureau of Mines. Of this, 40 million barrels, or two-thirds, represented foreign imports. It is our conclusion that the 5-percent restriction provisions of the Simpson bill (H. R. 4294) would shut off at least 50 percent of the supply of residual oil to New England. The 50 percent figure assumes that New England would receive 10 million barrels of foreign residual even under the provisions of the Simpson bill, which would limit imports of foreign residual to 5 percent of the United States demand of the year previous. This assumption is a dangerous one. If it should turn out that New England would receive as foreign residual imports only 5 percent of its demand, then, using the 1951 figures, New England would receive only 3 million barrels of foreign residual and 20 million of domestic, or a total of 23 million barrels. This would be 38 percent of the 1951 New England demand and would mean that we would lose 62 percent of our residual supply. From the United States Army Corps of Engineers we have the figures for the fol lowing New England ports: Bucksport, Searsport, and Portland, Maine; Portsmouth, N. H.; Salem, Boston, and Fall River, Mass.; Providence, R. I.; and New London, New Haven and Bridgeport, Conn. A copy of these figures is attached hereto as an appendix. The figures show that New England as a whole in 1951 received 64 percent of its residual-oil supply from foreign sources and 36 percent from domestic sources. Assuming then, that New England would lose approximately 37 million barrels of its residual-oil supply, the question arises whether domestic refineries, located within the borders of the United States, would or could make up the difference. The answer appears to us to be "No." American refineries are so organized as to produce as little as possible of residual oil and as much as possible of the lighter higher priced petroleum products. Since 1945 the yield of residual oil in United States refineries has gone down from 28 percent to 19 percent per barrel of crude. The only practical conclusion is that residual oil would, by operation of supply and demand and price, be eliminated as an effective competitor of coal. The ultimate effect would be to drive the price of the shrunken supply of heavy oil skyward and then the coal industry could adjust their price upward accordingly. Thus, the simple effect of the Simpson bill provisions on residual oil is to gouge the present users of residual and the purchasers of their products and services. For example, the increased costs of electric utility companies would, under the usual rate structure, be passed on to every individual commercial and private consumer. Involved in the matter is not merely the increased cost of the fuel that is ultimately used but the cost for business enterprises of installing coal-burning equipment which they do now possess. This, we believe, would work particular hardship on smaller rather than larger business enterprises. Worst of all, there are thousands of establishments--apartment houses, laundries, greenhouses, bakeries, cleaning establishments, etc.-which could not convert to coal, and would have to pay the inflated price for what residual oil they could get. There are many others whose efficiency of operation would be greatly diminished by conversion. The provisions of the Simpson bill for restriction of imports of crude to 10 percent of previous domestic demand would have similar though less extensive effect. The position of this association is a simple one. New England, dependent for every drop of its oil on sources outside of our area, should oppose any procedure which might produce a shortening of supply and resultant arbitrary increase of price of gasoline, home-heating oils, or other petroleum products. So much for the specific restrictive provisions of the Simpson bill. It is our opinion, further, that the general provisions of the Simpson bill would permit the Tariff Commission, without the restraining influence of the President, to establish the 5 and 10 percent restrictions by administrative action, even were the specific proposed legislative quota restrictions eliminated. We consider that section 4 of the Simpson bill removes the President's discretionary power to disregard a Tariff Commission peril-point recommendation. It gives him a mandate to abide by the findings of the Commission. We are aware that Congress must consider the whole national interest. We believe that the interests of the Nation and New England, in this matter, are inseparable and identical. DONAL M. SULLIVAN, Receipts of crude and residual oil for the year 1951 in barrels |