264. Memorandum of the Fourth Meeting of the Special Committee To Investigate Crude Oil Imports, Washington, July 22, 19571
PARTICIPANTS
- Secretary of Commerce Weeks
- Acting Attorney General William Rogers
- Secretary-designate of Treasury Anderson
- Deputy Secretary of Defense Quarles
- Under Secretary of Labor O’Connell
- Defense Mobilizer Gray
- Gerald Morgan, Counsel to President
- Assistant Secretary of Commerce Mueller
- Mr. Wallace, Department of Labor
- Dr. Arthur Flemming, Consultant
- Mr. Loftus Becker, Legal Adviser, Department of State
- Willis C. Armstrong, Acting Assistant Secretary of State for Economic Affairs
Secretary Weeks opened the meeting by reading a letter from Acting Attorney General Rogers regarding the legal position with respect to the establishment of a system of voluntary controls.2 The letter did not deal with mandatory controls, except in the sense of suggesting that there be a hearing before the adoption of mandatory controls with a formal system of appeals for use thereafter. (Copies of the letter should be available to members of the Committee but were not so available at the time of the meeting.)
Deputy Secretary Quarles raised a question of the interpretation of Section 7 of the Trade Agreements Extension Act of 1955. He pointed out that the language of the Act calls for a finding that items are now being imported in such quantities as to threaten the national security, and he noted that the Committee’s recommendations were along the line of considering limitations necessary because planned shipments, to be made in the future, are expected to threaten national security. There was considerable discussion of this point and Secretary-designate Anderson explained the importance of dealing with oil on the basis of plans of at least 3 months and preferably of 6 months. Unless arrangements are reviewed 6 months ahead of time, it becomes impossible to control an immediate situation because tanker charters have been fixed and purchases and sale contracts made. The Committee agreed to use the language “current (as well as proposed)” to describe the situation.
[Page 712]Deputy Secretary Quarles raised a question as to the wisdom of the 10% figure for reduction in imports by established companies. He wondered what basis had been used to determine that 10% was the right figure. The response was that no figure was endowed with magic significance and that this seemed a reasonable one in terms of the situation. Mr. Quarles noted that it was rather arbitrary.
There was a long discussion of the proposed paragraph mentioning residual fuel oil and distillates. Mr. Becker and Mr. Armstrong had proposed the omission of these items as not within the terms of reference of the Committee. This was recognized as valid, but the point was made by Dr. Flemming that crude oil quotas could be evaded by the importation of distillates, which according to the Customs Court are considered for customs purposes as crude oil, although their essential value is about double that of crude oil as it comes from the well, on a barrel for barrel basis. Everyone agreed that the limitation plan should not be frustrated by imports of distillates of this kind or for that matter by residual fuel oil. Some language was eventually agreed which noted the possibility that “petroleum products” might be imported as a means of escaping from the provisions of the crude oil limitation plan and suggested that the Director of ODM keep an eye on imports of such products, including distillates and residual fuel oil.
There was considerable discussion of the difference in treatment afforded to District V as against Districts I through IV. Mr. Morgan raised the question as to whether discrimination could be effected on a mandatory basis. He implied that if this were not the case perhaps the wisdom of proceeding with the voluntary procedure should be reconsidered in view of existing doubts as to whether it would work. Acting Attorney General Rogers said that from a legal standpoint mandatory controls would have to be non-discriminatory. Secretary Seaton suggested that perhaps the system would not work, perhaps mandatory controls could not be enforced, and perhaps the President should be informed nothing could be done about it. This discussion was relatively inconclusive and also tended to move into the question of whether in fact imports had any effect on exploration. Secretary Seaton said the views available to the Interior Department would not appear to substantiate the conclusion that imports were impeding exploration.
Deputy Secretary Quarles said that the security question had been examined by the Joint Chiefs of Staff and that Admiral Radford had defined the oil resources of Venezuela and Canada as related to United States national security. This led to a general discussion of possible exemption for Canada and Venezuela and of alternative means for limiting imports. Deputy Secretary Quarles suggested that this might be done by raising the tariff considerably, [Page 713] without taking action to limit quantities by quota, either voluntary or mandatory. This evoked some comment on the foreign relations impact of tariffs and of the relationship of the question to provisions of GATT and the Venezuelan trade agreement, in which the views of Secretary Dulles, as stated at earlier meetings, were reemphasized.
The result of this discussion was that Dr. Flemming agreed to look at the formula again to see whether a single formula on a company by company basis could be arrived at under a voluntary system. It was also understood that Acting Attorney General Rogers would examine the legal problems which might stand in the way of the establishment of mandatory controls. At the same time it was recognized that the Committee had approved in principle, at its earlier meeting, the establishment of a voluntary company by company system with no effective controls on imports into District V.
There was a brief discussion of the domestic political atmosphere and of the possibility of legislation which would be more restrictive than the voluntary plan being considered. Secretary Weeks indicated he did not think that there was much chance of legislation at this session if action was not taken to limit imports, but that there would be a real problem when the Trade Agreements Act came up for renewal next year.
In the course of these discussions the Committee proceeded, somewhat slowly, with redrafting the report. It was agreed that the Committee would reconvene at 4:00 p.m. on July 23 to continue the redrafting with the idea of having a report prepared by July 24 if possible.