(The matter referred to is as follows:)

Strategic and critical materials, Bureau of Federal Supply, act of June 7, 1939, as

Statement showing obligations for personal services and other items under regular appropriations and other available funds

Status of $70,000,000 appropriated under Public Law 117 for strategic and critical materials, as of May 13, 1948

ADMINISTRATIVE EXPENSES

Mr. WIGGLESWORTH. I notice, incidentally, that your administrative expenses show an increase of something like $700,000, and that the number of personnel has gone up from 189 to 379, or about double.

Mr. MACK. Yes, sir, that is right. We are beginning to feel the impact of this increased work load. You see, in addition to the purchasing that we spoke about we have been getting surplus stocks from RFC in very substantial quantities. We have a lot of work to do in connection with those surplus stocks. We have to inspect the material, and we have to do all of the work that is incidental to the final storage and transportation of it and all of that sort of thing, and it will tremendously increase our work load.

Now, in fiscal year 1949 we will be operating on a greatly increased basis for purchasing involving $660,000,000.

Mr. WIGGLESWORTH. Either on or off the record, in how many places are the materials that you now have stored?

Mr. MACK. Well, my best estimate would be probably about 300 different locations. Eventually, of course, they will all be moved into locations approved by the Munitions Board.

Admiral PAINE. We select those locations strategically. We attempt to divide them up and spread them over the country so that one particular place will not have all it; and, as a secondary consideration, we try to place it close to a point of technological usage.

Mr. WIGGLESWORTH, I have no further question, Mr. Chairman.
The CHAIRMAN. I believe that is all I have today.

EXHIBIT 72

MILITARY FUNCTIONS, NATIONAL MILITARY ESTABLISHMENT APPROPRIATION BILL FOR 1949

HEARINGS CONDUCTED BY THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, IN CHARGE OF THE MILITARY FUNCTIONS OF THE NATIONAL MILITARY ESTABLISHMENT APPROPRIATION BILL FOR THE FISCAL YEAR 1949, ON THE DAYS FOLLOWING, NAMELY

WEDNESDAY, MARCH 17, 1948.

MUNITIONS BOARD

STATEMENT OF THOMAS J. HARGRAVE, CHAIRMAN, MUNITIONS BOARD; ACCOMPANIED BY LT. GEN. LEROY LUTES AND MAJ. GEN. SIDNEY P. SPALding, of the EXECUTIVE COMMITTEE, MUNITIONS BOARD; AND CAPT. C. G. DEKAY, UNITED STATES NAVY MUNITIONS BOARD

MATERIALS DIVISION

Mr. HARGRAVE. Now, we will drop down to the Materials Division. The Materials Division has several important duties.

As you may know, the Joint Chiefs of Staff lay down what you have heard a lot about in the last few weeks, called the strategic concept or strategic plan. That plan is more or less essential for final planning by our Board. This con

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cept is given to the three armed services, who translate it into the munitions required to carry it out; that is, the ships, planes, guns, tanks, ammunition, and $ countless other munitions items. Then the armed services prepare bills of materials showing the amounts of raw material, steel, aluminum, copper, lead, zinc, and so forth, and all the other basic manufacturing materials required to produce the end items which would be necessary to carry out the concept of the Joint Chiefs of Staff.

Then the Materials Division, among its other duties, balances the military material requirements and conducts surveys to establish the present and potential capacity of the country to meet such requirements. If the industrial capacity of the Nation is inadequate to meet those requirements then there are only about two things which can be done. They must be sent back to the services either for revision of the requirements made by the services, or back to the Joint Chiefs of Staff for a revision of their concept, assuming that the country is potentially unable to carry it out so far as both raw materials and end products are concerned.

Stock-piling functions

This Materials Division is also charged with the administration of the National Stock Piling Act, about which you probably read in the papers recently. That act provides for a national stock pile of critical materials under Public Law 520. These materials are critical for two reasons, or two principal reasons.

First, they are absolutely essential for military and civilian use in time of war. Second, in most cases they must be transported from 3,000 to 10,000 milesa great part of them from the Eastern Hemisphere, notably China, India, Russia, Africa, Madagascar, and so forth.

One of our basic assumptions in connection with the stock pile is that if another war should prove inevitable we shall not have a 2-year period, as we did in the last two wars, within which to bring such materials within our borders.

There are about 55-I believe actually 52-such critical materials on our list at the present time. I mention tungsten, manganese, rubber, tin, lead, zinc, graphite, chromite, antimony, industrial diamonds, as samples.

PURCHASE OF CRITICAL MATERIALS UNDER EUROPEAN RECOVERY PROGRAM

Mr. ENGEL. May I interrupt you on that?

I have within my files a recent statement of the critical items of that type, with the production as of today, and the productive capacity of England, Belgium, and France.

I got that list with several purposes in mind, one of which was to buy those materials in those countries, to expand their production to the maximum capacity, provided we can absorb that, and to furnish them, by those materials, the dollars to support themselves with, which they lack so badly, and so as to get something in return.

We are now giving them dollars, and will give them under the Marshall plan dollars which we will not get back.

For instance, this committee was down in New Caledonia. New Caledonia is perhaps as rich in critical materials which we are short of as is any place in the world. They are rich in nickel, particularly.

France owns New Caledonia. They have a great nickel capacity, which we use industrially as well as for a monetary system.

My purpose was to buy those materials from them in the channels of trade, keep them, giving them the dollars and getting something in return therefor, instead of just giving them the dollars outright.

Mr. HARGRAVE. I might say, sir, that that program was inaugurated some time ago by Secretary Forrestal's office. We have had surveyed all of the critical materials such as tin and antimony, and so forth, that would be available in any of the countries under the European recovery program, and we have expressed through the Secretary of Defense to the Secretary of State the desirability of getting as many of these materials as possible under the European recovery program.

We have not placed it on a basis, as you indicate, of a quid pro quo, as a part of the European recovery program, but simply as a means of developing those resources so that we can buy those materials with additional money, if necessary, because what we want to do is to create a stock pile.

That has been forcibly brought to the attention of General Marshall and the entire Department of State.

Mr. ENGEL. Mr. Hargrave, the purpose of the entire recovery program is to get them dollars; is that not true?

Mr. HARGRAVE. That is right.

Mr. ENGEL. They require a certain number of dollars. Every dollar which we can get material for is a dollar we do not have to furnish them under the relief program.

Mr. HARGRAVE. That is right. The only point I wanted to mention there-this is outside of my province-is that if we were to take materials which they would be glad to sell us, we would pay them dollars, and that might possibly increase the amount of the European recovery program. In other words, if they have the industrial diamonds, or tin.

Mr. ENGEL. Industrial diamonds are in England?

Mr. HARGRAVE. Yes. Holland has tin, and so forth, but if we take that-and I say again, that is without my province-if we take it, it might increase the amount which would have to be granted under the European recovery program. The Munitions Board simply takes the position that however it is worked out diplomatically, and however Congress decides to draft the European recovery pro-gram, what we want to do is to get these materials, if possible.

Mr. ENGEL, How could it increase the amount? How could the fact that they are selling us things increase the amount? They are actually manufacturing these things, and we are giving them dollars. Should that not decrease the amount they require, rather than increase it?

Mr. HARGRAVE. Except that if they had the tin to sell us, we would be glad to buy it right now, which would give them dollars. We cannot buy.

Mr. ENGEL. Is this not the trouble over there: They sell that tin, or will sell that tin to some place else, to some other nation, and get their currency, and why should they sell it to us to get their dollars, when we are giving them the dollars without anything in return.

In other words, if I can go to one meat market and get my meat without paying for it, and I can go to another where I have to pay for the meat, I am going to the one where I do not have to pay for it

Is that not the situation?

Mr. HARGRAVE. It might be, but if they had those materials, I think they would rather have dollars than anything else at the moment.

Mr. ENGEL. However, if they can get the dollars without giving us the materials, what object is there in giving us the materials?

Mr HARGRAVE. I am not going to argue the point, Mr. Engel. I see your point, and I am thoroughly enthusiastic about getting the basic and critical materials out of the foreign countries which have them. I see no reason why, in some way or another, we cannot get them in connection with the European recovery program, but the details of that and how it would be worked out I do not know. I would say that we have surveyed those critical materials and brought to the attention of the Department of State the countries which have them, indicating very strongly that we would like to get the materials. As I go on, you will see that the stock pile is not in as good a shape as it should be.

STOCK-PILING PROGRAM

Determination of requirements

Now, in the first place, there has been some discussion in the papers as to how the amount of these materials was determined. I want to explain that to you. Under Public Law 520, the amount of the materials was determined originally by the Department of War, the Department of the Navy, and the Department of the Interior, but in determining that, under the law, they also had to bring in the Departments of State, Treasury, Agriculture, and Commerce.

Most of the major departments of the Government participated in the determination which was originally made in 1944. It was reviewed by the Joint Chiefs of Staff in 1946, and has been reviewed constantly by our Critical and Strategic Materials Committee, and by our Board.

Mr. KERR. Let me ask you a question there.

Functions of various Departments in stock-piling program

Is it not contemplated that those departments should be in an advisory capacity Only?

Mr. HARGRAVE. I did not understand you, sir

Mr. KERR. Was it not contemplated that these other departments of the Government would sit with you only in an advisory capacity? The Department of Agriculture does not know about how much munitions you need.

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Mr. HARGRAVE. On the question of critical materials, for instance, the Depart ment of the Interior was delegated to join with the Army and the Navy in the determination. All of the other departments that I have mentioned were also under the statute required to sit in on the determination.

I would like to tell you the basis of the determinaiton. At that time, without a definite strategic concept, the determination was based on the peak year's use of these critical materials by both the military and civilian during the last war In determining that, to put it simply from an arithmetical point of view, all of the materials available in the United States or in the Western Hemisphere, based on the best reasoning we could use, were deducted from the total. The remainder then became our goal, under a list of strategic materials of about 52 materials which we are trying to acquire.

We originally set out to acquire those over a period of 5 years. That 5-year period, which was mentioned in the press, was not a strategic period at all. It was taken as a practical period of acquisition. It was practical to the extent that it would probably be impossible to have the materials available and be able to buy them in less than that time. As a matter of fact, we are behind in our stock-piling program on that 5-year schedule right now. Over all we only have about 20 to 30 percent of the total of the materials we would like to have, and also, we have some very bad situations as far as the unbalanced nature of our r stock pile is concerned. In some instances we have practically all that our goal was set for, and in a great many instances we have practically none.

Mr. KERR. You understand, I am not criticizing your program. I just wanted to know what these other departments of government had to do with the Munitions Board, when it determined how much munitions we needed to formulate and have in order to protect ourselves.

Mr. HARGRAVE. They-the Joint Army-Navy Munitions Board-made that determination. As a matter of fact, the present Board that will review the over-all picture.

However, prior to that I am just trying to give you the information of how we determined what materials were to be obtained, under the Stock Pile Act. Appropriations for stock piling

Mr. ENGEL. The request for an appropriation for this division would come to the Deficiency Committee and not to this committee; is that right, Mr. McNeil? Mr. MCNEIL. I think it is in the Treasury bill.

Mr. ENGEL. The Treasury-Post Office bill?

Mr. MCNEIL. Yes.

Mr. ENGEL. All right. Please go ahead, and take the next step in your subject. Reasons for inadequacy of stock pile

Mr. HARGRAVE. I want to explain right here the question of why the stock pile is not adequate at the present moment, or give the reasons. There are three

reasons.

A second has been the

One reason has been the appropriations, of course. availability of the materials. The third has been the price.

During the past 2 or 3 years it has often been a question of whether the Board should permit paying a higher price for these things. We do not actually do the buying. It is done by the Bureau of Federal Supply of the Treasury Department; we tell them what to buy and when to buy it. Whether or not we should pay 2 or 3 cents a pound more than industry is willing to pay in order to create our stock pile is a problem confronting us all the time. Also, the question of the amount of appropriations has been a problem confronting us.

Mr. HARGRAVE. I can give all the figures for this year. I did want to explain that originally, in the year 1947, we estimated $270,000,000 for stock-piling re quirements. The Bureau of the Budget approved $250,003,000, and the Congress appropriated $100,000,000. In the fiscal year 1948 we estimated $330,000,000, The Bureau of the Budget approved $200,000,000, and the Congress appropriated $175,000,000, of which $75,000,000 was contract authorization and not an appropriation. Now, for fiscal year 1949, we estimated $660,000,000 and the Bureau of the Budget approved $380,000,000, of which $75,000,000 kas simply liquidating the $75,000,000 contract authorization of the preceding year, so that we would end up with $285,000,000 net, so far as dollars are concerned, in 1949 appro priation estimates.

Mr. CASE. That is the net of the budget estimate?

Mr. HARGRAVE. That is right.

Mr. ENGEL. Again, that is a determination as to how much money you will get for that purpose, and that does not come within the scope of this committee.