MEMO TO KEN GLOZER OMB FROM JOHN MORGAN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-01156R000300370010-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 21, 2016
• Document Release Date: October 24, 2008
• Sequence Number: 10
• Publication Date: March 9, 1984
• Content Type: MEMO

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Approved For Release 2008/10/24: CIA-RDP85-01156R000300370010-4
DULY
U11111 ed States I)c
l;lrtnlcnt Of* the Ulterior
f
"'-- ,.
MINES
UR U OF
2401 E S'IREE7. NW.
WASHINGTON, U.C. 20241
Ken Glozer, 0MB AnW*- TOLE FIT}GERAW Richard Levine, NSC
Room 8234 New EOB Room 37-3 3 0 c Old EOB
Maurice Ernst, CIA arren Farb, DOC
Room . E487 Hq. Langley Room 4836 Main Commerce
Richard Donnelly, DOD Al1N : JAUC EGK Edward Zabrowski, FEMA
Room 3C257 Pentagon Room 617 FEMA
From: John Morgan, Room 1038, BuMines (phone [phone]) FRED SMwP TOR s?ATf
Roo v*
At the February 1 and 24 meetings of the Stockpile Review Group
it was indicated that some additional detail covering assumptions
should be included in our covering memorandum "Scenario 3 World
Mineral Production Capacities." The attached is submitted in compliance
with that request. Because the original wording was so carefully weighed
and edited, it is left intact and the new material is clearly marked by
underlining.
Please let me know by Friday, March 16, if you have any further
suggestions.
OFFICIAL USE
ONLY
 These tables summarize engineering estimates of world mineral production
capacity, based on known mineral deposits, present capacities, and
additions to capacities under way or feasible under Scenario 3
conditions (without reductions for zones of military hostilities,
political alignments, or shipping losses). They are not mere
statistical projections but are based largely on specific deposits,
mines, smelters, and refineries. It is assumed that at the start of the
period of warning the U.S. government would establish Industry Advisory
Committees, cleared for access to security information, in order to
assess the adequacy of existing productive capacity and to recommend
measures that would be necessary to sustain and to enlarge such
capacity. Such Industry Advisory Committees were widely utilized in
World War II and in the Korean War period and are currently authorized
by the Defense Production Act and the Stock Piling Act. In World War II
and in the Korean War the government endeavored to control the economy
by a broad spectrum of price, wage, credit, and investment control
along with priorities and allocations covering materials, fuel, power,
transportation, and other factors of production. In World War II, a
major international control was the control of shipping by the U.S. and
Allied powers because the availability of shipping space for export of
essential machinery and supplies and imports of ores and mineral
materials governed much of the free world economy. These projectios
assume a reinstatement of world shipping controls similar to the World
_War II type It must be noted that control of the free world economy in
the 1980's will be much more difficult than was the situation in World
War II and the Korean War. In those days virtually all of Africa was
under the control of allied European nations and virtually all of the
critical industries in Canada and Latin America were under the control
of U.S. commercial interests. Today there are several dozen independent
countries on the African continent, many riven internally by tribal
hostilities. Even in Canada the Provinces often are unresponsive to the
wishes of the central government.
Also inherent in the U.S. supply projections is the assumption that
there will be stringent domestic measures to protect key industrial
facilities - including mines, smelters, refineries, power generation and
distribution, and transportation - against sabotage. This would require
control not only of the millions of undocumented alliens presently in
the U.S. but also control of U.S. citizens in ways that could well
exceed measures taken in World War II. After Germany attacked the
Soviet Union in June 1941 left-wing elements in the U.S. aided the war
efforts, but what would happen today in an US/USSR war ??? The security
of the U.S. transportation system is of the utmost importance to the
mineral sector of the economy because minerals and processed materials
 Approved For Release 2008/10/24: CIA-RDP85-01156R000300370010-4
of mineral origin including fuels account for 90 percent of U.S.
waterborne imports, 60 percent of U.S. waterborne exports, 85 percent of
domestic waterborne commerce, 60 percent of domestic rail shipments, and
100 percent of domestic pipeline movements. To produce at these
capacities could require selective use of Defense Production Act Title I
authorities for priorities and allocations and/or Title VII authorities
for voluntary agreements (which facilitate industrial cooperative
activities) covering needed factors of production in short supply such
as: fuel and electric power, construction supplies (steel, aluminum,
cement, wire, etc.), machinery, MRO (maintenance, repair, and operating
supplies), scientific and technical personnel, and sea, land, and air
transportation. Relaxation of many current environmental regulations
may also be required. The assumption is also made that prices for
mineral materials will be largely free of government controls. The
easiest bureaucratic response in the event of an emergency is to impose
an across-the-board price freeze. However, prices cannot be frozen
worldwide and most mineral commodities are traded worldwide;
consequently, a domestic price freeze has four negative impacts: it
discourages supply expansions; it encourages marginal and frivolous
uses; it encourages exports - open or concealed - from the U.S.; and it
discourages movement of foreign materials into the U.S. In order to
induce increased supplies from existing capacity by unleashing the
ingenuity of the private sector through the stimulation of market
forces, it probably would be sufficient for prices of common mineral
materials such as steel, aluminum, copper, lead, and zinc to rise about
50 percent above recent levels, but the exotic materials such as cobalt,
columbium, and tantalum would require prices as much as 4 or 5 times
recent levels. However, transitory market price rises by themselves are
generally inadequate to stimulate long-run capacity additions.
Producers may require long-term market guarantees of the Defense
Production Act Title III type for U.S. production, and possibly for
foreign production. Such guarantees should assure the recovery of
capital invested in expansions of capacity. Reactivation of the
U.S.-Canada Joint Industrial Mobilization Planning Agreement of 1949
(attached) is essential because Canada is a major source of many U.S.
mineral imports as shown by Figure 1. Also creation of an allied raw
materials coordinating body, such as the International Materials
Conference of the Korean War (which involved 27 nations and The OAS and
OEEC and covered 12 major commodities) would be required to assist in
maintaining orderly free-world markets.
Stable and convertible currencies would assist significantly, and use
would also have to be made of The Export Administration and
International Emergency Economic Powers Acts and in some cases,
stockpile releases under Sec. 7 of The Strategic and Critical Materials
Stock Piling Act.
To bring into production presently known but undeveloped major mineral
deposits can take 5 to 7 years for some minerals even under favorable
conditions, although small mining operations which ship to existing
smelters or processors can usually expand in a few years. Consequently,
the start of a national security emergency, or even a war, may not be
sufficient to induce the private sector to make the multi-billion dollar
investments required for major additional productive capacity, which
 could later be excess capacity. Further, because mineral deposits are
wasting assets often with areas of differing grades (percent mineral
content), temporary high prices sometimes result in lowered production,
because the mine management seeks advantageous long-term development of
the geometry of the ore body. Consequently, by maintaining hoisting
capacity and mill through-put tonnages, management often treats
lower-grade ores in periods of higher prices because such ores become
economic to treat, and the high-grade ores are conserved for future
periods of depressed prices. Therefore, to secure expansion in times of
emergency, it could be necessary for the government to guarantee the
recovery of additional invested capital through accelerated tax
amortization (rapid write-off), as was done in World War II and the
Korean War under Sec. 124A (later Sec. 168) of the Internal Revenue
Code, plus market guarantees with buy-out provisions covering the
undepreciated facility costs, as was done in the Korean War under Title
III of the Defense Production Act.
Additional U.S. domestic supply expansion increments are provided at the
bottom of each sheet based on the use of what might be called "Concerted
Programs," meaning coordinated national programs similar to the World
War II aluminum, synthetic rubber, and aviation gasoline programs. None
of these expansions requires breakthroughs in science or technology, but
each would entail a concentrated marshalling of engineering resources,
physical capital, and other productive inputs. While some could be
initiated during the warning period, all concerted programs probably
could not all be accomplished simultaneously, requiring some
prioritization thereof based on meeting definitive military requirements
first and less important civilian needs subsequently.
Dr. J. D. Morgan
March 9, 1984
634-1330
 JOINT INDUSTRIAL MOBILIZATION
COMMITTEE Agreement between the UN1TSn Stifle
air AssstcA and CANADA
The American Ambassador to the Canadian Secretary of Seat. for
External Affairs
AMSSICAN EMBAar
No.? Ottawa, Canada, April 12, 1949.
Excsuaxcv:
I have the honor to inform Your Excellency that the common
interests of Canada and the United States in Defence, their proximity
and the complementary characteristics of their resources clearly
indicate the advantages of coordinating their plans for industrial
mobilization, in order that the most effective use may be made of
the productive facilities of the two countries.
The functions of the Department of Trade and Commerce and the
Industrial Defence Board in Canada and those of the National Se-
curity Resources Board and the Munitions Board in the United
States suggest that, for the present, it would be appropriate to use
these Agencies to assist the two Governments in coordinating their
Industrial Mobilization Plans.
Therefore, my Government wishes to propose that the two Gov-
ernments agree:
(a) That a Joint Industrial Mobilization Committee be now con-
stituted consisting, on the United States side, of the Chairman
of the National Security Resources Board and the Chairman of
the Munitions Board and, on the Canadian side, of the Chain
man of the Industrial Defence Board and a Senior Official of
the Department of Trade and Commerce:
(b) That the Joint Committee:
(i) Exchange information with a view to the coordination of
the plans of the United States and Canada for Industrial
Mobilization;
(ii) Consider what recommendations in the field of Industrial
Mobilization planning, in areas of common Concern, should
be made to each Government;
(iii) Be empowered to organize Joint Sub-Committees from
time to time to facilitate the discharge of its functions;
(iv) Be responsible for cooperation with the Permanent Joint
Board on Defence on matters of Industrial Mobilization.
If your Government is agreeable to the above Proposals, it is
understood that this Note, together with your Note in reply agreeing
thereto, shall constitute an agreement between our two Governments
which shall enter in force on the date of your reply and shall remain
in force indefinitely subject to termination by either Government at
any time on giving six months' notice.
Please accept, Excellency, the renewed assurances of my highest
consideration.
His Excellency the Honorable
The SSCSarAST OF STATS
roe ExrasNAL AFFAIRS,
.
? Effected by Exclsngs of Notes
63 Stat 2331;
Signed at Ottawa April 12, 1949
TIAS 1889 - 6 Bevans 486;
206 t/NTS 241
The Canadian Secretary of Slate for External .airs to the American
Ambassador
nanRTMZNT OF
srTSSNAL AFFAIRS
CANADA
No. I's Omaws, April IS, 1949.
ExcnLtaxcr,
I have the honour to acknowledge the receipt of Your Excellency's
note No. 93 of April 12, 1949, in which you inform me that the Govern-
ment of the United States of America wishes to propose that our two
Governments agres:
(a) that a Joint Industrial Mobilization Committee be now
constituted consisting, on the United States side, of the
Chairman of the National Security Resources Board and the
Chairman of the Munitions Board and, on the Canadian side,
of the Chairman of the Industrial Defence Board and a senior
official of the Department of Trade and Commerce;
(i) exchange information with a view to the coordination of the
plans of the United States and Canada for industrial
mobilization;
(ii) consider what recommendations in the field of industrial
mobilization planning in area of common concern should
be made to each Government;
(iii) be empowered to organize joint subcommittees from time
to time to facilitate the discharge of its functions;
(iv) be responsible for cooperation with the Permanent Joint
Board of Defence on matters of industrial mobilization.
2. I have the honour to inform Your Excellency that the Government
of Canada concurs in the foregoing proposals and agrees that Your
Excellency's note and this reply shall constitute as agreement between
our two Governments which shall enter into force on this day and
shall remain in force indefinitely, subject to termination by either
Government at any time on giving six months' notice.
Accept, Excellency, the renewed assurances of my highest Consider-
L B PsAesoN
Secretary of stab for
External Affairs.
His Excellency, The Hon. I.AUSUNCS A. STanrn ncr,
Ambassador of as United State. of America,
Embassy of As United States of America,
100 Wellinptoa Street,
onatoa.
 NET IMPORT RELIANCE: 1983
SELECTED NONFUEL MINERAL MATERIALS
U.S.A.
COLUMBIUM
MICA (SHEET)
STRONTIUM
MANGANESE
BAUXITE & ALUMINA
COBALT
TANTALUM
PLATINUM-GROUP
CHROMIUM
NICKEL
POTASH
TIN
CADMIUM
ZINC
ASBESTOS
BARITE
SILVER
ANTIMONY
VANADIUM
GYPSUM
TUNGSTEN
IRON ORE
SELENIUM
SILICON
MERCURY
GOLD
ALUMINUM
COPPER
SULFUR
IRON & STEEL
LEAD
NITROGEN
100
99
88
81
81
77
77
73
n
7
89
66
86
84
61
52
39
37
3737
MAJOR SOURCES
Brazil, Canada, Thailand
India, Brazil, Belgium
Mexico
So. Africa, France, Australia, Gabon
Australia, Jamaica, Guinea, Surinam
Zaire, Zambia, Canada Beig.-Lux., Japan
Thailand, Canada. Brazil
So. Africa, UK
So. Africa, USSR, Phil., Zimb., Yugo.
Canada, Australia, Norway, Botswana
Casa Israel
Malaa, Thailand, Bolivia, Indonesia
Canada. So. Africa
China, Peru, Chile, Morocco
Canada. Mexico, Peru, UK
So. Africa, Bolivia, China, France
So. Africa, Canada, Finland
Canada. Mexico, Spain
Canada. Bolivia, China
Canada Venezuela, Brazil, Liberia
a Japan, UK, BeIg.-Lux.
Canada, Brazil, Norway, Venezuela
Japan, Spain, Canada Italy
Canada. Switzerlan , USSR
Canada. Ghana, Venezuela, Japan
Chile, Canada. Peru, Zambia
~Cana~da Mexico
uE rope, Japan, Canada
Canada. Mexico, Australia, Peru
Canada. Trinidad & Tobago, USSR, Mexico