and parcel out the exploration and exploitation of undeveloped regions. There are tendencies today on the part of some of the leaders in the industry to follow this course. You have seen some mention in the press of indications of this with respect to the Mesopotamia problem.

With reference particularly to certain economic and political aspects of the problem, let me quote once again from Dr. Veatch:

Proper development by a competent company is of greater benefit to the country developed than to the company concerned. A country grows by the development and utilization of its resources.

For a great nation to say, "Since oil is a prime necessity to us in time of war, the oil resources of our state must be developed solely by our own nationals" overlooks the economic and practical points: that very large sums are required to develop new oil regions, and that much of the money spent in prospecting is not productive; that, in case of war, only developed oil fields have practical value and that should there be a war, any developed oil field is immediately mobilized by the country concerned, irrespective of whether the development was due to domestic or foreign capital. It is

better economics to have the losses of devel

opment shared by foreign capital than to have the whole loss fall at home. The most complete national self-interest and selfadvancement says, "Throw the doors wide open."

That is the view of a private oil expert.

THE POLICY OF THE UNITED STATES

For a statement of the policy of the United States in regard not alone to petroleum but to the whole field of commercial enterprise I cannot do better than quote the Secretary of State. At Cleveland, on November 2, 1922, Mr. Hughes said, in part:

The principles of American foreign policy are simple and readily stated. We do not covet any territory anywhere on God's broad earth. We are not seeking a sphere of special economic influence and endeavoring to control others for our aggrandizement. We are not seeking special privileges anywhere at the expense of others. We wish to protect the just and equal rights of Americans everywhere in the world. We wish to maintain equality of commercial opportunity; as we call it, the open door.

There is one thing that I should like to bring to your attention, and that is the special reason why the British Government have shown this peculiar interest in the development of oil. It is not in the tradition of the British Government to get interested in commercial enterprise. In fact it is against the whole age-long practice of the British Government to have anything to do with commercial enterprise. I think there are only two examples where the British Government have become directly interested by participation in matters of this kind. The

first was a long time ago in the seventies, when we acquired an interest in the Suez Canal, and the next example is in 1920, when the British Government became indirectly interested in the Anglo-Persian Oil Company. That is an interesting fact in the development of the economic policy of the British Empire. And if you will examine well you will notice that the motive is the same in both cases: both are important to imperial security.

When you were talking about the existing supplies of oil, about 60 per cent of the existing supplies are in the

United States and only 2 per cent in the British Empire. There is absolutely none in the British Isles. In the years immediately preceding 1914 we lay under a considerable menace and oil was a question of security—a question on which our life or our death as a nation or an empire might depend. It was really, therefore, the same situation in regard to oil as it was in the case of the Suez Canal, and for the same reason I think the Government must take and continue to take a great interest in oil. In the United States you have many times as much oil as can possibly be required for the mere purposes of security. The great surplus which you enjoy is for industrial purposes or some for luxury purposes. Those are not quite so important as life and death questions of defense and security. Therefore you will understand that there is a very special pressure and our Government has a special interest in the production of oil.

Now as to the reserves, we have had interesting figures. Those figures represent, I understand, the oil reserves of various countries in groups. But they do not represent one very important fact, and that is the difference between oil actually owned by a nation in its own territory and oil resources controlled by the capital of that nation but not in its own territory. While the oil reserves of the British Empire seem very large by these tables, yet a large portion is in territory where the British companies have an interest only from the point of view of financial concessions, which is not the same thing as oil in American territory. It is something more distant; it is something that may always be affected by conditions over which you have no control. You may therefore expect that the British Government will continue to take I am speaking absolutely un[i.e., actual present production.-ED.]

officially and not, indeed, as a supporter of the present Government, and therefore entirely on general principles -but I think you may take it as a certainty that British Governments, whatever their character, whether they be Conservative, Liberal or Labor, or a bit of both, will take a great interest in this question of foreign oil resources and will do their utmost to see that where British capital has an interest that interest is not lost.

I think it was Dr. Hornbeck who in talking of the talking of the consumption of oil pointed out that 90 per cent of the motor cars in the world are owned in the United States, and he put that forward as a reason why the United States has a greater claim to oil than Europe. Other nations will find it rather difficult to accept that reasoning. I doubt if we would accept it as one of the laws of nature that every American should have a Ford car, but not every Frenchman or Englishman.

There is only one point I would like to mention and perhaps Dr. Hornbeck can enlighten us upon it. He gave us a great deal of information about English and Dutch oil companies. I waited until he got through to hear the name of a great American corporation, the Standard Oil Company, but he did not even mention it. Are we to infer that while we have been studying oil at Williamstown, the Standard Oil Company has silently and suddenly gone into liquidation? Or is it this—that the State Department has never even heard its name?

Dr. Hornbeck: With regard to the Standard Oil Company, I assumed that my American audience knew a great deal about that company, and I presumed, from what I know of the experiences of Standard Oil in trying to get into India, that the British knew all about it.

The point which Sir Edward made in

regard to oil not being actually in hand is exceedingly well made. If you want oil tomorrow you want it where you can get it, and not 5000 feet under the ground, with no drilling yet made toward it. But when it comes to the resources the statement has so frequently been made that Great Britain possesses only 2 per cent of the world's resources-I tried to get that matter understood when I worked out the percentages, and I think the figures

THE

given are fairly reliable on a comparative basis. It appears that the United States has approximately 14 per cent of the world's resources; the British Empire has approximately 8 per cent, or 8.4 per cent; and then if you want to add the Mesopotamian and Persian resources you add another 8 per cent, which would bring the British controlled total percentage up to 16.4 per cent. That is speaking strategically, Sir Edward.

HE Chilean nitrate industry is a striking example of the control of price of a raw material by the producers thereof. On account of the fact that the only large workable deposit of nitrate in the world occurs in Chile, and because of the fact that the world demand for nitrogen compounds far exceeds the supply from sources other than the Chilean nitrate, it has been possible to develop in Chile a most effective organization for controlling the price. This organization is known as the Chilean Nitrate Producers' Association, and it is this Association, its methods, and its effects on the industry which I shall discuss.

THE NEED FOR NITROGEN

by these digressions I hope to show what our interest is in the Chilean nitrate and why we are particularly interested in the price which is fixed from year to year for that nitrate.

My first digression, then, will be to American agriculture. I need not remind you that every growing plant takes from the soil certain inorganic constituents, nitrogen compounds among others. Most soils contain an abundance of these inorganic constituents save three; namely, potassium, nitrogen and phosphorus. There are certain soils in the United States which are deficient in potassium and must have an addition of that element in order to produce large crops. Many more soils are deficient in phosphorus and must have an addition of that element in order to produce crops, and practically all soils in the United States are deficient in nitrogen. Broadly speaking, nitrogen — I mean, of course, nitrogen in compounds in the soil is the limiting factor in agricultural production. In order to maintain the fertility of the soil, then, with crops year after year removing this nitrogen, it is necessary to replace it by some means or other. We can replace part

of it by growing certain plants which have the power of taking the free elementary nitrogen in the air and converting it into nitrogen compounds over and above their own use, leaving some of it in the soil. Such plants are known as legumes, and the cultivation of legumes forms an important part of agricultural practice in the United States. However, it is not possible to raise legumes over large enough areas of the United States for that to be a solution of the problem. There are also economic reasons why that cannot be done profitably. We have to come back, then, to the addition of nitrogenous materials to the soil in order to maintain its fertility.

In the United States our population has been growing rapidly and agriculture has been called upon to keep pace with food production. We have not done that by maintaining the fertility of the soil through proper application of nitrogenous fertilizer, but we have done it by extending our agriculture into the fertile fields of the Middle West and abandoning the poorer soils of the East. In that way we have kept up our food production and the fact that the soils of the United States are being depleted of their nitrogen compounds and the fertility of the soil is decreasing, has, therefore, been masked by this movement of agriculture into the fertile lands of the Middle West. The end of such a program is at hand, first, because the amount of land in the United States which can be brought under cultivation is now small compared with what is already under cultivation; and second because under present economic conditions with higher transportation costs and higher labor costs, it is not profitable to increase the acreage under production in the United States.

There is only one solution practical, and that is through the increase of

production per acre by intelligent and systematic application of fertilizers, and this calls for a supply of nitrogen cheap enough so that it can be applied to the soil in adequate amounts. At this time, unfortunately, the price of nitrogen is so high that it cannot be applied to the soil profitably except in the case of certain crops, despite the fact that the price of nitrogen today is relatively lower than it was before the war. What we do with this nitrogen problem within the next ten years will probably determine to a large extent whether the standard of living in this country can be maintained at its present level or whether it will sink to the level of European countries. We, therefore, have a common interest in this nitrogen problem and in the Chilean nitrate industry and in the prices which may be fixed in Chile for Chilean nitrate, inasmuch as the price of Chilean nitrate controls the price of other forms of nitrogen the world over.

So much for the agricultural side of it. Let me speak for a moment regarding the matter of national defense. Nitrogen is not only a life-giving element, as it is in agriculture, but it is a life-destroying element, as it is found in explosives and military propellents. Every high explosive is a nitrogen compound; every military propellent is a nitrogen compound. During the war there was great anxiety in the allied countries regarding the supply of nitrate. We had a whole fleet of vessels at the end of the war moving up nitrate from Chile, chiefly into the United States, where it was manufactured into munitions of war. Germany was cut off. But when Germany had developed methods of extracting the elementary nitrogen from the air and converting it into nitrogen compounds, it made her independent of the Chilean nitrate supply, and it was only because of this independence that

Germany was able to continue the war. From a purely scientific standpoint it is unfortunate that conditions in Germany since the war have prevented her showing the world whether or not she could compete with Chilean nitrate. The fact that one of her largest producing nitrogen plants is located in the Ruhr district and is now closed, and the fact that coal is so scarce in Germany that it has been difficult for her to keep in operation the other nitrogen plants, has prevented her from being able to prove to the world definitely whether or not she could compete with Chilean nitrate.

Immediately after the war war the the Germans declared a prohibition on the Chilean nitrate coming in. Later it was found desirable to remove this prohibition and to allow a specified amount to come in. Germany, however, was not able to buy and bring in that amount because of economic conditions in that country. Since the war every one of the allied nations have been engaged in trying to develop independence of this Chilean nitrate supply, particularly as a matter of national defense. To have the source of nitrogen several thousand miles away is a dangerous proposition. It is probable that the United States today could arrive at independence in case of emergency. During the war we built a very large nitrogen-fixing plant which was eminently successful so far as fixing nitrogen was concerned. Unfortunately, it cannot fix nitrogen at a price low enough to compete today with the Chilean product and the plant has remained closed since the war. However, that plant is a tremendous military insurance and whatever may be done toward turning it to peacetime use, the Government should maintain it for its war-time value.

Nitrogen not only plays an important part in agriculture and national

defense, but in one form or another it enters into a large number of our domestic industries. Manufacture of explosives requires a large amount of Chilean nitrate. These explosives are used for road-building, mining, quarrying, etc. There are a number of metallurgical processes in which fixed nitrogen is essential. nitrogen is essential. It is of the greatest importance in the manufacture of dyes, and of artificial leather, used so extensively in automobile upholstery. It is also used in the manufacture of artificial silk. In fact, only about 60 per cent of the enormous quantity of Chilean nitrate which is brought into this country finds its way into agriculture; the balance in peace times goes for industrial uses.

There is only one real competitor of Chilean nitrate in the world today outside of a few countries like Germany and Norway, and that is the fixed nitrogen obtained from the processing of coal. That is our chief domestic source of fixed nitrogen. When coal is burned as such, the nitrogen is lost, but if the coal is coked or carbonized before being used, the nitrogen can be recovered in the form of ammonia or ammonium sulphate and turned to useful purposes. We produced about 500,000 tons of ammonium sulphate last year and most of that went into American agriculture. We also have a supply of fixed nitrogen from organic waste materials such as fish scrap, for instance, and cotton-seed meal, leather scrap and various other organic and vegetable waste materials. These, too, find their way into agricultural fertilizers. In this country we are also producing a small amount of fixed nitrogen from the air. There are two little plants in operation, one near Syracuse, New York, making anhydrous ammonia and one at Seattle, making sodium nitrite. But these are so small as to have no effect whatever