Senator MCCLELLAN. The record should show.

Senator KEFAUVER. Yes, I think the record will show that the subcommittee, on its meeting of August 31, voted 5 to 2 to find the companies and the individuals who defaulted in appearance in contempt of the subcommittee, and recommended to the full committee that it cite them for contempt before the Senate.

The CHAIRMAN. I am informed by the staff that the matter has never been submitted to the committee. It never received a report from the subcommittee, the staff informs me.

Senator MCCLELLAN. Pardon me, I am trying to get this parliamentary situation correct.

Do I understand no report has yet been submitted by the subcommittee?

The CHAIRMAN. That is what the staff informs me.

Senator KEFAUVER. No, the report was fully submitted, together with the proceedings before the subcommittee.

The CHAIRMAN. Mr. Collins is checking and he is a staff member. Senator KEFAUVER. I saw the report that was submitted.

Senator MCCLELLAN. One more question, Mr. Chairman.

I am here today at this meeting of the committee under the impression that the subcommittee had acted.

The CHAIRMAN. They have acted.

Senator MCCLELLAN. And had voted to cite these people and the companies for contempt and had made such a report to the full committee with a request for the full committee's approval.

Am I correct?

Senator KEFAUVER. That is correct, to my understanding.

Senator MCCLELLAN. Well, I am proceeding on that assumption. The CHAIRMAN. My information is that the subcommittee voted to cite these companies. The staff informs me-is that correct, Mr. Davis?

Mr. DAVIS. Mr. Chairman, there was a printed report, a printed hearing on this matter. There was a letter that was referred to the committee stating the vote was 5 to 2. It is not a report under the circumstances.

Senator MCCLELLAN. What is that?

Mr. DAVIS. A letter merely stating that the subcommittee had voted 5 to 2.

Senator MCCLELLAN. What I am trying to find out, is there anything pending before the full committee in the nature of a report and recommendation from the subcommittee?

Senator KEFAUVER. If I may answer, the letter referring the matter to the full committee from the subcommittee enclosed the resolution passed by the subcommittee.

Mr. DAVIS. No, sir.

Senator KEFAUVER. Yes, it did. And asking the full committee to act, together with a printed copy of the hearings and proceedings

before the subcommittee.

The CHAIRMAN. What about that, Mr. Davis?

Mr. DAVIS. The letter was received, but not the resolution.

Senator KEFAUVER. It was attached to the resolution, Mr. Davis. Senator MCCLELLAN. Mr. Chairman, all I want to do is to get this thing in its proper perspective so we will know actually what is at issue.

I thought that was the situation, and I think the full committee has the right and the duty to make such inquiry as it may desire in order to determine the respective merits involved in the action of its subcommittee and its recommendations, and, thus, to inform itself as to what its duty is, whether to approve and follow the recommendations of the subcommittee or to reject them.

I thought we were here to hear these people.

Let them state their reasons for not complying with the subcommittee's request.

That is what I thought we were to hear.

Senator KEFAUVER. Will the Senator yield?

Senator MCCLELLAN. Yes, I yield.

Senator KEFAUVER. In addition to the letter to the full committee, it was accompanied with a formal report, proceedings against Bethlehem Steel, and others.

Mr. Kefauver from the Subcommittee on Antitrust and Monopoly submitted the following report. Then it goes on to cite the creation of the committee, the jurisdiction, the issuance of the subpena, what happened, and then in the body of the report was the language contempt proceeding voted on by the committee.

Senator HRUSKA. Would the Senator yield?
Senator KEFAUVER. I yield.

of the

Senator HRUSKA. The fact is, if my recollection is correct--and I will ask Mr. Flurry, the counsel, to corroborate it, because I think he will-that that report was brought by him to the committee room a few days ago or last week. It was not distributed. It was taken

back from whence it came.

Mr. Flurry can speak to the point if he wishes.

It was not distributed to members of the committee, nor was it transmitted to the clerk of the committee, Mr. Davis.

Senator KEFAUVER. Well, I do not know what Mr. Flurry wants to

say.

Senator DIRKSEN. Let us hear from Mr. Flurry.

The CHAIRMAN. Let us hear from him.

Mr. FLURRY. Senator Hruska stated the matter correctly, but it was my understanding that the matter had been referred to the committee before the meeting on that day.

Senator HRUSKA. But not the report.

I would suggest, Mr. Chairman, there is no use getting all excited about this; there was a letter of transmittal. There was no document attached, according to the clerk. The Senator from Tennessee says there was a copy of the resolution.

I suggest he hand it to the chairman forthwith and let it be considered filed with the committee, and we can go on with the business. The CHAIRMAN. That is exactly what I am suggesting.

Senator KEFAUVER. Very well.

The letter, the report, which includes a copy of the resolution, together with the proceedings before the subcommittee dated August 21. The CHAIRMAN. Do you have the resolution?

Senator KEFAUVER. And before the subcommittee on August 31. The CHAIRMAN. Do you have a resolution citing them?

Senator KEFAUVER. Yes, I have the resolution citing them for contempt.

The CHAIRMAN. All right.

You can file that.

Senator KEFAUVER. That will be filed.

The CHAIRMAN. Proceed.

Is there anything else?

Senator MCCLELLAN. Mr. Chairman, I request that copies be provided to members of the committee.

The CHAIRMAN. Yes.

Mr. PATTON. Mr. Chairman, I take it that copies of my statement which have been filed with your clerk have been distributed to the members of the committee and are available to you as I proceed.

Mr. Chairman and other distinguished members of the Senate Judiciary Committee, as I said, my name is Thomas F. Patton and I am president of Republic Steel Corp. I am here today, as you know, at my own request and at the request of the committee, and I, at the outset, would like to say that I am most grateful to the committee for its willingness to take time to hear me, especially when I know you are all extremely busy with highly important legislative matters.

It is my understanding that the committee has expressed a desire that a presentation of the matters here involved be made by one individual rather than by representatives of each of the four companies. Accordingly, as a result of discussions with the executives of the other three companies present here today I will be making my presentation on behalf of Republic in such a manner as to incorporate the considerations and factors deemed relevant by the other three companies.

I suggest that it may expedite the orderly presentation and analysis of this matter if I am permitted to read my statement in full, and after this has been done I can answer any questions which members of the committee may want to ask.

The eight other executives of the four companies named in subpenas are here in person and will be available for any questions which you may want to address to them.

May I emphasize that my purpose is not to deal with the legal questions involved, important as they are, but to discuss the business considerations which have made this matter a problem of paramount importance and concern to us, the companies involved.

Counsel tells me that the subpenas issued by the subcommittee may well be invalid, first, because they are so burdensome as to constitute an unreasonable search and seizure in violation of the fourth amendment to the Constitution and, second, because they do not serve any proper legislative purpose of the subcommittee. But I am not here to ask you to give us an opportunity to litigate these issues in the courts. I am here seeking to persuade you that the subpenas, irrespective of their validity, should not be enforced because enforcement would seriously damage the steel industry of this country.

I want you to understand that we have the deepest respect for the Senate of the United States and the authority of its committees. We are sincerely convinced, however, that the furnishing of the material which has been subpenaed would seriously harm not only us but our country. We, therefore, are pleased that we have the opportunity to present this matter before this full committee in order that the wisdom and experience of all its members may be brought to bear on a question which we deem to be of vital concern to our whole economy.

In order that you may understand the origin of our concern and the nature of the dangers which we feel would be encountered by the steel industry if the disclosures were to be made may I sketch briefly for you the present status of the steel industry in the United States. Unfortunately the picture is not a bright one. Competition from competing materials and from steel produced in foreign countries is becoming increasingly severe. The industry is operating at about 50 percent of its estimated capacity, steel workers are laid off in substantial numbers, the profits of the steel companies have been declining seriously and we have no assurances that the end of this decline is in sight. Several steel companies, including my own, have already been forced to reduce dividends in order to conserve cash for the modernization and improvement of their plants, so necessary to their survival. May I submit, Mr. Chairman, that this industry and my company are in enough trouble competitively without having the situation aggravated through the disclosure of production costs.

The charts contained in my statement dramatically show what has been happening to the steel industry profits during the decade of 1950-60. If you will look at this chart you will see that it reveals that during this period net profit as a return on invested capital has declined by almost 50 percent. So for the American steel industry, gentlemen, there is a serious earnings squeeze.

In 1961 the average rate of return on stockholders' investment in the American steel industry was less than two-thirds of that of all manufacturing industries, and currently it is about one-half. This is true despite the fact that since World War II the industry has spent $15 billion for capital improvements and every effort has been made to enforce tight cost controls.

Clearly, this is a time when the steel industry should not be exposed to the threat of public disclosure of confidential cost data. Such disclosure we submit would give an unfair advantage to foreign competitors, and might I say that combining the figures on the basis suggested by the subcommittee, or on any other basis, would not mitigate in the slightest the harmful effect of the disclosure.

A product-by-product breakdown of the American steel industry's costs, whether published by groups of three companies or even 12 companies, would be invaluable to foreign competitors engaged in penetrating our markets.

I would like to emphasize in this connection that the information required from us is cost-not price-information. While prices may change, a foreign competitor who is aware of the average cost of American mills of producing a particular steel product has a specific target for planning his sales campaign, and taking our markets away from us.

Our ability to compete with foreign-made steel, sold both abroad and in our own domestic markets, has already been gravely impaired, mainly because of the building of modern steelmaking facilities abroad and because of the wide disparity in employment costs as between American steel companies and foreign steel companies. Foreign steel companies have employment costs of about one-third or one-fourth of ours here in the States.

Let me give you an example of what happens when foreign producers invade our markets. I am informed by Mr. Logan T. Johnston, president of Armco Steel Corp., that Armco's Houston, Tex., plant is the largest integrated steel plant in the gulf coast area, normally

employing about 4,000 persons. Its production includes wire products: basic wire, field fence, barbed wire, nails, staples, galvanized wire, and bailing wire.

In 1955 this plant produced 64,000 tons of these products. Imports through the Houston port that year were only 17,000 tons. But last year, 1961, imports had quadrupled to 76,000 tons while Armco's Houston production had dwindled to 20,000 tons.

Because of this, Armco's employees at Houston are losing 800,000 man-hours of work a year, the equivalent of 400 jobs.

Imports have also made serious inroads in Armco's production of reinforcing bars, rods, and mesh at this same plant. These have resulted in the loss of an additional 400,000 man-hours of work a year, or 200 more jobs.

These 600 jobs represent 15 percent of the plant's normal work force and represent a loss of approximately $4 million annually in payrolls in that one community.

This example is presented to illustrate the basic problem which confronts one company at one plant, but the same problem exists at other plants of Armco as well as plants of almost every other member of the steel industry.

As an indication of the importance the foreign steel producers attach to the confidential character of product cost data, the kind that we are requested to present here, I call your attention to the fact that the High Authority of the European Coal and Steel Community is not permitted to obtain manufacturing cost data from the participating companies without the explicit permission of such companies; and even in the United Kingdom, where the Government is directly involved in the making of steel prices, it is a criminal offense to make such cost data public.

Our deteriorating position in world steel markets is shown by the fact that the American steel production has dropped from 46 to 26 percent of world steel production since 1950. Although American steel production has not shown any material increase, world production during that period has doubled, increasing from about 200 million to almost 400 million tons a year, and it is slated to rise to 500 million tons by 1965. This, of course, includes the tremendous expansion in the Iron Curtain countries, where steel production rose from 39 million tons in 1950 to almost 120 millions tons in 1961. Who knows when these same Iron Curtain countries will move into world steel markets as they already have moved into oil and aluminum, and how pleased they would be to have our costs.

The growing impact of the export-import picture on the American steel industry is shown by the chart contained in my statement on page 7, which demonstrates that since 1958 our country, previously a net exporter of substantial quantities of steel, has been a net importer of steel, and there are attached to the statement other charts dealing with specific products.

For instance, one chart shows that in the case of merchant wire products, imports have increased from about 4.8 percent of total industry shipments in 1950 to 73 percent in 1961. In the case of concrete reinforcing bars, imports have gone from 3.6 percent of industry shipments in 1950 to approximately 24 percent in 1961. Imports of wire rods have risen sharply since 1957, when they were 5.7 percent of industry shipments, to 48 percent in 1961.