developing world situation in which we cannot content ourselves with gradual and natural economic growth to provide the industrial base which national security requires. Economic growth is not only essential, but must not be permitted to slacken. Our industrial base cannot achieve the size, the strength, the flexibility it must have unless we press steadily forward to make the best use we know of the resources available to us.

The question of time has become especially critical with respect to the St. Lawrence seaway and power project. It is needed as soon as possible simply because only by means of the seaway could we, if war should come, safeguard an adequate supply of iron ore. Without enough iron ore, our steel industry, our economy, and our military posture would decline disastrously.

At this point, Mr. Chairman, I ask to place in the record at the close of my remarks a report of the National Security Resources Board, of which I am a member. This is a supplement which brings up to date the report, identified as NSRB Document 123, issued last April and placed in the record of the hearings at that time. I commend this report, as I did its predecessor, to your most careful and earnest consideration.

Primary emphasis in this supplementary report, as in the earlier one, is laid upon the hard fact that our steel industry is facing a rapidly growing dependence upon foreign iron ore. This is due primarily to the fact that the Lake Superior reserves, although still substantial in total quantity, can be mined only at a dwindling annual rate. Furthermore, whereas last spring the outlook was that by 1960 this dependence would make it necessary to import 25,000,000 tons a year, it now appears, in light of the requirements of mobilization and of a sustained build-up of our industrial capacity, that by 1960 we must be prepared to import upward of 40,000,000 tons. It must be expected, indeed, that imports of at least half this volume will become necessary within 2 years.

What lies behind this revision is simple enough. It had earlier been expected that the American steel industry would grow gradually to a capacity in 1960 of about 110,000,000 ingot tons. We know now that

this capacity will be attained before the end of the present year. At the Department of Commerce we have already issued certificates of necessity for construction of sufficient additional capacity to bring the total above 118,000,000 tons in 1952. By 1960 we shall have steel-making capacity substantially greater than even this.

Other witnesses will further develop the urgency of construction of the seaway in light of our ore requirements. They will also cover other factors affecting the national security, including particularly the important contribution that the associated power project can make in the development and mobilization of our economic strength. This testimony and the potential advantages set forth in the reports before you should carry such weight, I believe, as to resolve any doubts that may remain, even in the minds of the most skeptical, concerning the importance of prompt action to construct this dual-purpose project.

Among these security considerations is the important fact that construction of the project will use very little of our critical materials-in no case as much in any year as one-half of 1 percent of the annual supply.

STRENGTHENING OUR INDUSTRIAL ECONOMY

The basic case for the project, however, is the one that has steadily gathered strength over the years as the size and requirements of our industrial economy have grown and as it has become more widely understood and accepted that this dynamic growth must continue.

The basic purpose of the St. Lawrence seaway and power project is to complete the job which nature began ages ago when the St. Lawrence became the stream draining the Great Lakes into the Atlantic Ocean. It is only a few dozen miles in a reach of over 1,000 that remain to be broken through so that ocean vessels may enter the Great Lakes and the Midwestern industrial heart of the country may, in terms of much of its transportation, be effectively brought to the Atlantic seaboard. The same topography that makes it necessary to provide canals and locks for this purpose creates a powerful flow of water which requires only damming to become a magnificent source of cheap hydroelectric power.

There was a time when men argued that so much electricity could not be absorbed within economic transmission distance of the International Rapids section. Today, however, we know that power from the St. Lawrence, like the power that will be gained from redevelopment of the Niagara and the power that we are straining to secure from dozens of other sources, both hydro and steam, is spoken for well in advance of its actual availability.

The reason is not difficult to understand. Cheap and plentiful electric power encourages new industries and new processes that could not thrive without it. The very act of supplying such power thus evokes the demand for it.

The principle that underlies this experience in the power field holds true for transportation as well, and has direct application to the proposed seaway. Both parts of this dual-purpose project will yield plentiful low-cost services. The cheap electric power will be matched by cheap water transportation. The availability of this transportation will help promote new traffic-both for the seaway and for other carriers in the area as well as provide greater flexibility in the transportation of our expanding volume of production.

Quite apart from the advantages gained in time of emergency from having a choice of alternate routes in the event one becomes closed, there are manifest advantages for the normal economy in a transportation system that is well balanced and flexible. At the same time we are concerned that the railroads shall have enough freight cars to carry the increasing traffic that mobilization means, we need to assure ourselves that transportation by water is similarly strengthened. Replacement of the existing 14-foot channel on the St. Lawrence by one of 27-foot depth would powerfully strengthen our transportation system.

CONCRETE BENEFITS FROM THE PROJECT

Not all the benefits to be derived from the St. Lawrence project can be given a dollar value. This is particularly true of its strategic value to our national security. The demonstration of its commercial value, however, can be put in dollar terms.

So far as the power phase of the project is concerned, no one, to my knowledge, questions the salability of all the power that can be

generated, at rates which will cover current costs and amortize the investment over the usual period of years.

As for traffic through the seaway, the evidence points plainly to the conclusion that here, too, the demand for transportation will be ample, under a reasonable schedule of tolls, to pay off the investment. The staff of my Department has had the question of seaway traffic under study for a number of years. Preliminary studies were submitted to the Senate Foreign Relations Committee in June 1947 and these, together with later and more complete studies, were placed in the record of this committee last spring.

These studies indicate that the potential traffic through the St. Lawrence seaway lies somewhere between 57 and 84 million tons a year. Under fair and equitable toll charges, the resulting revenue is estimated as totaling between 361⁄2 and 49 million dollars a year. These traffic and revenue estimates are summarized in a table I have here, the body of which is the same as appears in my testimony of last spring.

Summary of estimated traffic and revenue

1 Grain traffic is more likely to be in the neighborhood of the minimum rather than the maximum tonnage indicated.

The estimate of 20,000,000 tons of petroleum products is to be regarded as a very long-range estimate based upon eventual needs for the importation of a fairly substantial portion of United States and Canadian requirements. Most of the long-range traffic is likely to move inward up the seaway, whereas for the first few years after the seaway is completed there is considerable likelihood that some Alberta oil will move down the seaway. The 6,000,000 tons of short-range traffic takes into account this latter possibility as well as the probability of some cross hauling.

Includes all general cargo but wheat flour and manganese, chrome, and ferro-alloy ores and metals, on which tolls of 50 cents per short ton are suggested.

At your request, Mr. Chairman, I shall omit detailed explanation of these traffic and revenue estimates. This is already in the record of last year's hearings. I have not, of course, personally reviewed all the calculations that have been made in reaching these estimates of traffic. I can assure you, however, that the studies were made by competent people on a wholly objective basis.

On an over-all basis, these estimates represent a realistic and reasonable forecast of the amount of traffic that we may expect to see developed on the seaway. They indicate that the seaway will be selfliquidating by a very large margin.

In fact, it will take only a little more than half of the anticipated traffic to pay off the investment. At present cost levels, revenue of about $20,000,000 a year will be sufficient to cover maintenance expenses, interest at 2% percent, and amortization of the investment in 50 years. Our minimum estimate of toll revenue of some $36,000,000 a year is more than two-thirds again as large as the expected annual charge for maintenance, interest, and amortization, and our maximum estimate is nearly two and one-half times the annual charges that must be met in liquidating the investment.

DOUBLE JUSTIFICATION FOR THE PROJECT

Mr. Chairman, the St. Lawrence seaway and power project is of urgent importance to our national security, as I am sure you will be convinced when all the evidence is before you. As such, its construction could be well justified even if its commercial value were negligible and its total cost had to be charged to the taxpayers.

But the commercial value of the project is far from negligible, as my testimony and that to follow should make amply clear. The net cost to the Federal Treasury, over the span of a generation or so, will be zero. Its construction solely as a business proposition would be fully warranted and its strategic benefits could be obtained at no additional cost whatever.

The solid commercial basis of the project is but the reflection of its immense economic advantages. These are so great and the investment is so modest in comparison that not only can we afford to build the project we literally cannot afford not to build it.

BASIC ISSUE: SHALL WE USE OR WASTE OUR KEY RESOURCES? What underlies both these facts is one simple proposition our strength lies in wise use of our resources rather than in mere possession. Unless we build the dual-purpose project we shall neglect both our economic strength, which is our only long-run guaranty of security, and our national security itself. With the project built, the entire country will benefit in economic as well as security terms. These benefits will be shared even by those who are most concerned lest the project in some way affect their immediate interests unfavorably.

I should like to repeat here what I said on this a year ago [reading]: The railroads of the country, and particularly the eastern roads, have long opposed the seaway. As a matter of fact, of course, as has been shown, much of the traffic which we anticipate for the seaway is new traffic, such as Labrador iron ore, or traffic of a character which usually does not move by rail, such as petroleum. Accordingly it would be difficult to show that the railroads would suffer as the result of this traffic.

It is true, of course, that the railroads will lose some grain traffic from Buffalo to eastern ports and will lose some export and import traffic in general commodities. These losses, in terms of both ton-miles and revenue, represent less than 2 percent of the Nation's railroad traffic and less than 4 percent of the traffic of the eastern carriers. Fluctuations greater than this occur from month to month and from season to season in railroad operations and are met by corresponding adjustments in operating costs. It is difficult to see, therefore, how the St. Lawrence project can be considered as inflicting any severe damage upon the Nation's railroad system. As a matter of fact, the seaway project, through permitting continued full-scale industrial output in the Middle West and through stimulating the growth of new business in that area and elsewhere, will probably from a longrange point of view actually redound to the benefit of the railroads. I am convinced that this has been the effect of the Panama Canal, a project comparable in importance to the current St. Lawrence project, which was also attacked on the grounds that it would be ruinous to the Nation's railroads.

Port interests on the Atlantic and Gulf coasts have been similarly opposed and much is heard to the effect that the St. Lawrence project will destroy their business. There is no question but that a considerable amount of traffic now moving to and from the Middle West via these ports will be diverted to the seaway. The continued development of the Middle West, however, as well as the rapid development of the area within the vicinity of the power project, will certainly provide compensating advantages to offset the loss of the traffic which is diverted. Once again the analogy of the Panama Canal comes to mind. The effect of the Panama Canal was to destroy the advantage of distance which Middle West producers had in competing for western markets since shippers from the east coast could

actually deliver goods to the Pacific coast more cheaply through the use of the new low-cost water services through the Panama Canal. Nonetheless, looking at the picture some 35 years later, it would be difficult for anyone to claim that the general development of the country arising from the construction of the Panama Canal had not more than compensated the Midwest for its temporary loss of transportation advantages.

The plain fact of the matter, Mr. Chairman, is that this is a big and powerful country and it has got that way not only by possessing great resources but by knowing how to use them. Those who would have us turn our back on opportunities such as the St. Lawrence seaway and power project now offers us, would have us turn our back on the very thing that has made America great and the only thing on which we dare base the continuation of our national strength and our national security.

That is what I said a year ago, Mr. Chairman, and that is the view I hold today. It is on this broad basis that I urge this committee to report favorably on the legislation before it.

(The report of the National Security Resources Board is as follows:) REAPPRAISAL OF THE IMPORTANCE OF THE ST. LAWRENCE SEAWAY AND POWER PROJECT TO NATIONAL SECURITY

(Report of the Executive Office of the President, National Security Resources Board)

The international situation is dangerous. Risk of a third world war is great. The best possibility of avoiding war depends upon developing and maintaining strong defensive and offensive military power. If war cannot be avoided the probabilities are strong that a number of years will be needed to bring it to a decisive conclusion. Our ability to avoid war, or, if war comes, to win it, will depend in large measure on the amounts of resources we can command and harness and the effectiveness with which we use them.

Steel and power are key resources. Great quantities are vital to the conduct of modern warfare. Our present capacity for producing steel and power is barely adequate to meet even the demands of an active, peacetime, full employment economy. It is not adequate to meet those demands and at the same time the requirements of a major build-up in our military strength. Accordingly, capacity to produce both steel and power must be expanded as rapidly as our resources and circumstances permit.

SUMMARY OF THE RESOURCES BOARD REPORT ON THE ST. LAWRENCE PROJECT

Nearly a year ago the National Security Resources Board analyzed the National Security aspects of the St. Lawrence seaway and power project. At the time its report was issued-April 24, 1950-the international situation was considered serious but not alarming. The Board at that time found the St. Lawrence project to be "extremely important to national security."

In its report, the Resources Board called attention to (1) the rapid depletion of Lake Superior open-pit iron ore reserves, (2) the large degree to which the country will be dependent after 1955 on foreign ores to keep our steel industry operating at capacity, (3) the great importance, in case of war, of having a protected inland route over which the rapidly expansible Labrador iron-ore supplies could be transported to consuming centers, and (4) the economy of the St. Lawrence seaway as a transportation route.

The Board emphasized that "Our capacity to meet the tremendous demands for steel which would result from another war will, in large measure, determine our ability to win the war."

In addition, the Board stressed the critical electric power shortages suffered in both World Wars I and II in the great industrial region which would be served by the proposed power project. It stated that correspondingly large or larger power shortages were to be anticipated in this area in case of another war.

NEW DEVELOPMENTS

Since then the international situation has deteriorated and United States policy has charged significantly. The United States is committed to a speedy built-up of both its military and economic potential. It has appropriated $52 billion for military purposes. Many billions more may be needed before the close of the current fiscal year.