Senator HART. Thank you. Senator Hatfield.

Senator HATFIELD. Senator, is there any reason why your bill does not require that this purchase if it is done, be of domestic copper? Senator DOMENICI. No, there was absolutely no reason that it did not. Again it was done in an emergency situation at the outset. And it appeared to me that at that point in time we were looking at a surplus that was international, and that if it were going to have a real impact on that surplus, I just wanted to say "buy copper." But if the committee finds that buying American copper would have more chances of reaching of what your and my goals appear to be, then I certainly would support such a specific insertion in the bill.

Senator HATFIELD. Thank you, Senator.

Senator DOMENICI. Thank you very much.

Senator HART. Thank you very much, Senator. We anticipate Senator Melcher appearing in the next few minutes but I would like to go forward with our other witnesses and would ask Mr. Stephen Bosworth, Deputy Assistant Secretary of State for International Resources and Food Policy to present his statement at this time.

STATEMENT OF HON. STEPHEN W. BOSWORTH, DEPUTY ASSISTANT SECRETARY OF STATE FOR INTERNATIONAL RESOURCES AND FOOD POLICY

Mr. BOSWORTH. Thank you, Mr. Chairman. It is a pleasure to be here. Mr. Chairman, I have a statement which with your approval I would propose to submit for the record and simply summarize very briefly it at this time.

Senator HART. Without objection we will receive that statement and encourage you to summarize it.

[The prepared statement follows:]

PREPARED STATEMENT OF STEPHEN W. BOSWORTH, DEPUTY ASSISTANT SECRETARY OF STATE FOR INTERNATIONAL RESOURCES AND FOOD POLICY

Mr. Chairman, I am pleased to have this opportunity to testify before your Subcommittee regarding the Administration's program for the strategic stockpile. Since Mr. Mitchell and Mr. Church will provide an overview of Administration policy concerning the stockpile, I would like to confine my remarks to S. 2181, a bill to authorize a contribution of up to 5,000 long tons of tin metal to the buffer stock operated by the International Tin Council.

The United States is the world's leading consumer of tin, consuming annually approximately 70,000 tons of tin metal valued at current prices at approximately $800 million. We acquire more than 80 percent of our tin requirements from abroad, with the remainder coming from domestic secondary production. In 1977, we imported 57,000 metric tons of tin metal valued at about $580 million. The metal is an important basic input for key industrial uses, especially in the steel and solder industries.

On a worldwide basis, approximately 210,000 tons are consumed annually, most of it in Western developed countries. In addition to the U.S., Japan, the Federal Republic of Germany, France and the United Kingdom are important consumers as is the Soviet Union. World tin trade in 1977 was valued at approximately $2.3 billion, making tin the world's seventh leading commodity export in terms of value. Tin exports are an important source of revenue to many developing countries, particularly Malaysia, Bolivia, Indonesia, and Thailand where it is a major source of domestic employment, government revenue and foreign exchange earnings.

The United States joined the Fifth International Tin Agreement (ITA) in 1976, and we have participated actively since then in the International Tin Coun

cil, the ITA's executive body. We entered the Agreement because we judged that U.S. participation would help to further our international economic and political interests. By joining the Tin Council, the U.S. put itself in a better position to influence the Council's policies affecting the long-term supply of tin, thus protecting both American industry and consumers. Our decision clearly demonstrated our commitment to the idea of joint producer-consumer cooperation on international raw materials problems, and also reaffirmed our willingness to respond forthrightly to the legitimate needs of the developing world. The intent of the ITA is to balance international supply and demand of tin, stabilizing the price within an agreed band at levels deemed to be both remunerative for producers and fair to consumers. To the extent that the ITA can be effective in achieving those objectives, it can both contribute to the economic health of the participating countries and also demonstrate the feasibility of international cooperation in dealing with major trade and developmental problems.

The purpose of the bill now before the Committee is to help rectify several major problems which have hampered the ITA historically. The most important of these is that the buffer stock operated by the Agreement has been too small to stabilize the world tin price effectively. In periods of slack demand and falling prices, the buffer stock could not absorb enough metal from the market to defend the floor price. Conversely, when shortages have appeared and prices have hit the price ceiling, the buffer stock has had insufficient metal to release into the market to dampen the price rise. This has led the Tin Council to rely excessively on export controls, the other major component of the ITA's stabilization machinery, to keep the price above the floor level.

Application of these controls has tended to inhibit production and discourage new investment in the tin industry. Over the short-term, export controls are inherently more cumbersome and slower to take effect in the market than are buffer stock purchases and sales. There are long lags between the imposition and subsequent relaxation of such controls and any actual impact on market supplies and prices. The result has been the development of chronic tin shortages and a tripling of the tin price over the past five years. This situation has been made worse, of course, by the exhaustion of the ITA's buffer stock in the face of such increases.

Another important factor which interferes with price stabilization and supply growth is the imposition of excessively high production taxes and restrictive licensing practices by some producing country governments.

The combination of export controls and production limitations, together with restrictive domestic tax and investment policies, has produced a persistent deficit between tin metal production and consumption. Production of tin concentrates has dropped from a peak of 196,000 metric tons in 1972 to 185,000 tons in 1977. In 1977, the gap between current world tin metal production and consumption was approximately 20,000 metric tons, a figure which is not expected to decline appreciably in 1978. This deficit will persist at least until 1980 and will generate continued pressure on tin prices, in the absence of infusions of metal into the market from the GSA stockpile and other sources. While the average New York price in 1972 was $1.77 per pound, the latest price is around $5.30 a pound. This is above the $4.60 ceiling price of the ITA's price band, a situation which has prevailed for the last 14 months in spite of several upward shifts in the band during that period. The obvious failure of supply to respond to these price increases clearly shows the effects of the export control policies followed by the ITA and the major producers. In sum, the world tin market is not functioning efficiently.

The contribution to the tin buffer stock which H.R. 9486 would authorize is intended to help alleviate this situation, and to make the ITA a more effective stabilization instrument. It should also support the efforts of importing countries to persuade the major producers that a modification of their tax and investment policies is essential to our joint efforts to insure stable long-run growth in the tin market.

The ITA provides for a buffer stock with a nominal level of 40,000 metric tons. Half of this is in the form of mandatory contributions from producers, with the rest made up of voluntary contributions of metal or the cash equivalent from consuming countries. Seven other consuming countries have thus far contributed or pledged the equivalent of about 7.000 metric tons. Our contribution would, we believe, encourage other consumers to contribute. It would also demonstrate, in concrete fashion, the 'seriousness of our commitment to participate in workable

international commodity arrangements. Since we consider that the ITA has economic benefits for us, both with respect to short-term stabilization and long-term assurance of reasonably-priced supplies, we should share the cost of making it work. We have stated that the same principle of mutual producer/consumer responsibility applies as well to other commodity agreements which we have recently joined or may join.

An increase in the buffer stock will also strengthen our arguments within the Tin Council against the excessive and prolonged use of export controls. A larger buffer stock should permit the ITA to moderate the price volatility which has plagued the tin industry during the 1970's. Over the longer run, such enhanced price stability, along with appropriate tax and investment policies in producing countries, should help bring about the new investment necessary to assure adequate supplies of tin in the 1980's and beyond.

The provisions of H.R. 9486 would assist us to carry out our objectives with regard to the ITA. The bill would authorize the President to direct the Administrator of General Services to transfer up to 5,000 metric tons of tin metal to the International Tin Council. The contribution would be made from metal which is surplus to our needs under the Strategic and Critical Materials Stockpiling Act. At the moment, GSA holds some 168,000 tons of surplus tin out of a total stockpile of 201,000 tons, so that the bill would have no impact on our strategic needs for the metal.

Based on the number of votes we have in the Tin Council (26 percent of total consumer votes) our pro rata share of the 20,000 tons of consumer contributions provided for in the agreement is 5,220 tons. This quantity at the current ITC floor price would have a value of $43.5 million, which is the valuation given to our contribution for purposes of liquidation and repayment to the U.S. upon termination of the Agreement. At current market prices, however, $43.5 million would equate to approximately 3,500 tons of tin metal. It is this quantity, therefore, that the U.S. would contribute in the present circumstances. Should either the market or ITC floor price change prior to the contribution, however, the amount of the contribution would be adjusted accordingly.

In formal discussions with the International Tin Council (ITC) senior staff, we have been assured that the tin will be sold in the United States. This in fact would be commercially sensible because, while title to the tin would pass to the buffer stock manager, the tin would remain in U.S. warehouses putting U.S. bidders at an advantage over foreign buyers because of lower transportation costs. This contribution will not disrupt the tin market. As I noted earlier, the market price is substantially above the ITA's present price band. The release of additional tin metal through our contribution will help to dampen these high market prices. Some producer countries themselves, realizing that a continuation of excessively high prices would cause a long-term shift in consumption away from tin, welcome our proposed addition to the tin buffer stock.

In conclusion, I would add that while we have used the term "contribution", we are in effect making an investment in the tin buffer stock. This investment will be returned to us at the termination of the Agreement in 1981, along with our pro rata share of any profits resulting from buffer stock operations. While a profit is not guaranteed, contributions have earned an average return of 8 percent per annum in past agreements.

Thank you, Mr. Chairman.

Mr. BOSWORTH. My name is Stephen W. Bosworth. I am Deputy Assistant Secretary of State for International Resources and Food Policy.

It is a pleasure to be before this subcommittee regarding the administration's program for the strategic stockpile. Since Mr. Mitchell and Mr. Church will provide an overview of the administration policy concerning the stockpile, I would like to confine my remarks, Mr. Chairman, to S. 2181, a bill to authorize a contribution of up to 5,000 long tons of tin metal to the buffer stock operated by the International Tin Council.

The United States joined the Fifth International Tin Agreement in 1976, and we have participated actively since then in the Tin Council. We entered the Agreement because we judged that U.S. participation

would help to further our international economic and political interests. By joining the Tin Council, the United States put itself in a better position to influence the Council's policies affecting the long-term supply of tin, thus protecting both American industry and consumers. The intent of the ITA is to balance international supply and demand of tin, stabilizing the price within an agreed band at levels deemed to be both remunerative for producers and fair to consumers. To the extent that the ITA can be effective in achieving those objections, it can both contribute to the economic health of the participating countries and also demonstrate the feasibility of international cooperation in dealing with major trade and developmental problems.

The purpose of the bill now before the subcommittee is to help rectify several major problems which have hampered the ITA historically. The most important of these in our view is that the buffer stock operated by the agreement has been too small to stabilize the world tin price effectively. In periods of slack demand and falling prices, the buffer stock could not absorb enough metal from the market to defend the floor price.

Conversely, when shortages have appeared and prices have hit the price ceiling, the buffer stock has had insufficient metal to release into the market to dampen the price rise.

The contribution to the tin buffer stock which would be authorized by this bill is intended to help alleviate this situation, and to make the ITA a more effective stabilization instrument. It should also support the efforts of importing countries to persuade the major producers that a modification of their tax and investment policies is essential to our joint efforts to insure stable longrun growth in the tin market.

The International Tin Agreement provides for a buffer stock with a nominal level of 40,000 metric tons. Half of this is in the form of mandatory contributions from producers, with the rest made up of voluntary contributions of metal or the cash equivalent from consuming countries. Seven other consuming countries have thus far contributed or pledged the equivalent of about 7,000 metric tons. Our contribution would. we believe, encourage other consumers to contribute. It would also demonstrate, in concrete fashion, the seriousness of our commitment to participate in workable international commodity arrangements. Since we consider that the ITA has economic benefits for us, both with respect to short-term stabilization and longterm assurance of reasonably priced supplies, we believe the United States should share the cost of making it work. We have stated that the same principle of mutual producer/consumer responsibility applies as well to other commodity agreements which we have recently joined or may join.

Mr. Chairman, this contribution will not disrupt the tin market. As I noted earlier, the market price is substantially above the ITA's present price band. The release of additional tin metal through our contribution will help to dampen these high market prices. Some producer countries themselves, realizing that a continuation of excessively high prices would cause a long-term shift in consumption away from tin, have indicated that they would welcome our proposed addition to the tin buffer stock.

In conclusion, I would add that while we have used the term "contribution," we are in effect making an investment in the tin buffer

stock. This investment will be returned to us at the termination of the Agreement in 1981, along with our pro rata share of any profits resulting from buffer stock operations. Thank you, Mr. Chairman.

Senator HART. Thank you. If you would indulge us, I would like to ask you to remain for a few minutes for some questions but in the meantime hear from Senator Melcher, who has asked to appear before the subcommittee and make a statement on his own, and then we will come back to questions if that is agreeable.

Mr. BoswORTH. Yes.

Senator HART. Senator Melcher.

STATEMENT OF HON. JOHN MELCHER, A U.S. SENATOR
FROM THE STATE OF MONTANA

Senator MELCHER. Thank you, Mr. Chairman. I appreciate the opportunity to testify in support of the legislation proposed in S. 2167 by Senator Domenici. Five months ago I asked on October 20 of last year for these hearings. At that time we asked for authorization to sell 30,000 tons of tin from the strategic stockpile and to acquire approximately 250,000 tons of copper for the stockpile: in effect, a simple swap, virtually a barter exchange. This was tabled by a 47 to

44 vote.

Since last Fall my own State has lost about 250 jobs in the cities. of Anaconda and Butte with the closure of a smelter and leaching precipitation operation, plus the underground mining operation at Butte.

Whether the 250,000 tons stockpile copper acquisition would have helped to save these jobs we will never know. But what we do know is that without the assistance from the Federal Government and with the continued procrastination, we will keep alive the bleak outlook that has led to copper's cry for help since last summer.

The salient facts are:

One, that copper is selling for 60 to 6112 cents per pound;

Two, the estimated per pound cost of producing copper-and these are 1975 operating costs-is $0.754 per pound;

Three, there is little or no copper in the stockpile now;

Four, domestic copper mines are operating at 77 percent of capacity; Five, the mines in the rest of the non-Communist world are operating at 92 percent of capacity;

Six, imports of refined copper have climbed to 20 percent of domestic production of refined copper in 1976 and 19 percent in the first 10 months of 1977, compared to about 9 percent during the 1970-75 period.

Seven, that at year's end almost 5,000 copper workers remain out of work;

Eight, over 5,000 copper workers who have been totally or partially separated or threatened with separation from employment have already been certified as eligible for trade adjustment assistance under the 1974 Trade Act, based on findings by the Department of Labor that increased imports of refined copper have contributed importantly to the actual or threatened separation;

Nine, two companies have shut down their entire primary copper operations; five other domestic mines and a refinery closed during the