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JGR/Executive Privilege (2 of 3)
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John Roberts' Subject Files
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/Executive Privilege
(2 of 3)
Box: 24
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
THE WHITE HOUSE
WASHINGTON
TO:
FROM: Richard A. Hauser
Deputy Counsel to the President
FYI:
COMMENT:
FYI
ACTION:
executive
\ OFFICE
EXECUTIVE OFFICE OF THE PRESIDENT
princlese
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
6:15 pm, April 18, 1985
MEMORANDUM FOR BRAD REYNOLDS, DEPT OF JUSTICE
DICK HAUSER
MIKE HOROWITZ
JOHN COONEY
BOB BEDELL
FROM:
DOUGLAS GINSBURG
Enclosed are draft letters to Chairmen Weiss and Dingell, and a
draft memorandum to the heads of those agencies that received
requests for their regulatory programs.
These drafts have been approved by everyone other than Brad
Reynolds. (There is one change that is new: in the second
sentence of the memorandum, reference is made to "the relevant
subcommittees" rather than "your oversight subcommittees" since
the latter term was not accurate).
The letters and memorandum will be sent as soon as we have heard
back from Brad Reynolds. Please phone any further comments to me
as early as possible on Friday, April 19. Agencies are to
respond to Dingell by c.o.b. Friday.
Attachments
And OFFICE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF management AND BUDGET
WASHINGTON, D.C. 20503
Honorable John D. Dingell
Chairman, Subcommittee on Oversight
and Investigations
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
I am enclosing a copy of my Memorandum to the Heads of Certain
Departments and Agencies that should be dispositive of your
letters of February 19 and April 15 to several of these agencies
requesting that they provide the Subcommittee with copies of
regulatory plans that they submitted to OMB pursuant to OMB
Bulletin No. 85-9.
As you will note, we have advised those agency heads that an
affirmative response to your requests for copies of the
regulatory plans would be appropriate given the unique
circumstances of this initial year of the program. Accordingly
the agency plans will be promptly made available to the
Subcommittee.
Sincerely,
David A. Stockman
Director
Enclosure
EXECUTIVE OFFICE OF THE PRESIDENT
3 SECTIVE State OFFICE
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
Honorable Ted Weiss
Chairman, Intergovernmental Relations and
Human Resources Subcommittee
Committee on Government Operations
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
I am enclosing a copy of my Memorandum to the Heads of Certain
Departments and Agencies that should be dispositive of your
letters of March 6, 1985, to several of these agencies requesting
that they provide the Subcommittee with copies of regulatory
plans that they submitted to OMB in February 1985 pursuant to OMB
Bulletin No. 85-9.
As you will note, we have advised those agency heads that an
affirmative response to your requests for copies of the
regulatory plans would be appropriate given the unique
circumstances of this initial year of the program. Accordingly
the agency plans will be promptly made available to the
Subcommittee.
Sincerely,
David A. Stockman
Director
Enclosure
OFFICE
EXECUTIVE OFFICE OF THE PRESIDENT
CRAIN
OFFICE OF MANAGEMENT AND BUDGET
STECUTIVE
WASHINGTON, D.C. 20503
MEMORANDUM TO HEADS OF CERTAIN EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT:
Congressional requests for draft regulatory
programs submitted pursuant to Executive Order
No. 12498
You have received requests from the Chairmen of the relevant
Subcommittees of Congress to provide a copy of your draft
regulatory plan submitted to this Office under Executive Order
No. 12498. After consultation with the Department of Justice and
the Office of Counsel to the President it has been decided that,
under the unique circumstances of this first year of the program,
you may provide access to your draft regulatory plan in response
to these requests.
This advice is based upon the fact that because the process set
forth in Executive Order No. 12498 has been instituted relatively
late in the planning period during this first year, agencies, in
an effort to meet new requirements and demanding deadlines, have
transmitted to us what often appears to be compilations of
pre-existing materials already available to Congress and the
public in other formats. In other words, much of what we have
received does not reflect the more considered and deliberative
regulatory planning process that the Order called for and that we
anticipate will be developed in future years of the program.
Furthermore, it appears that some of the draft plans have already
been made available to Congress, resulting in some Members of
Congress and Committees having access to some of the plans and
others not.
Therefore, although the draft regulatory plans are clearly within
the deliberative process, disclosure of them this year, given
these unique circumstances, is not likely further to impair that
process within the executive branch or other aspects of the
executive branch's constitutional duties.
The President promulgated E.O. No. 12498 in order to help ensure
that each major step in the process of rule development is
carefully considered by the agency head and consistent with
Administration policy. For next year, we intend to review OMB
Bulletin No. 85-9 and make modifications and changes to the
procedures, as necessary, on the basis of the experience gained
during this initial year. We intend to complete the process
early so that the program can be fully implemented next year on a
more timely and informed basis.
David A. Stockman
Director
To
John
ate 4/30
Time 930
WHILE YOU WERE OUT
M Don Phillips
of
USTR
Phone
7210
Area Code
Number
Extension
TELEPHONED
PLEASE CALL
CALLED TO SEE YOU
WILL CALL AGAIN
WANTS TO SEE YOU
URGENT
RETURNED YOUR CALL
Message
M; Cooper etc
Operator
X
AMPAD
EFFICIENCY@
23-020
THE WHITE HOUSE
WASHINGTON
April 23, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS 226R
SUBJECT:
Letters to Congress Regarding Copper
As discussed at this morning's staff meeting, I think this
would be better going out under your signature.
Attachment
THE WHITE HOUSE
WASHINGTON
April 23, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
FRED F. FIELDING Orig. signed by FFF
COUNSEL TO THE PRESIDENT
SUBJECT:
Letters to Congress Regarding Copper
Counsel's Office has reviewed the proposed letters to
Congress, advising that the President has decided not to
undertake to negotiate voluntary production restraint
agreements with foreign copper-producing countries. I have
no objection to the substance of the decision or to advising
Congress of it at this time, well in advance of the October
deadline.
I do, however, object to transmitting to Congress the
internal deliberative documents used within the Executive
branch in arriving at this Presidential decision. Such
documents could be protected from even compelled disclosure
by a claim of executive privilege. Indeed, since these
documents are clearly deliberative and pre-decisional, and
were prepared to offer advice concerning a decision that
must be made by the President, they lie close to the core of
the sort of materials protected by the privilege. We should
not gratuitously release such materials, even on a "confi-
dential basis," to Congress. Doing so creates a precedent
that will cause problems when we wish not to disclose
similar material in the future, and also whets the appetite
of Congress for additional protected documents.
Further, I see no need to disclose the actual internal
deliberative documents. There is no reason that a document
supporting the decision cannot be prepared specifically for
transmittal to Congress.
I would also point out that the first paragraph on page four
of the draft letter will create an advisory committee
subject to the various requirements of the Federal Advisory
Committee Act, 5 U.S.C. App. 2. If this is not intended,
the paragraph should be deleted or substantially revised to
reflect a less formal monitoring process.
FFF:JGR:aea 4/23/85
CC: FFFielding/JGRoberts/Subj/Chron
THE WHITE HOUSE
WASHINGTON
April 23, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Letters to Congress Regarding Copper
Counsel's Office has reviewed the proposed letters to
Congress, advising that the President has decided not to
undertake to negotiate voluntary production restraint
agreements with foreign copper-producing countries. I have
no objection to the substance of the decision or to advising
Congress of it at this time, well in advance of the October
deadline.
I do, however, object to transmitting to Congress the
internal deliberative documents used within the Executive
branch in arriving at this Presidential decision. Such
documents could be protected from even compelled disclosure
by a claim of executive privilege. Indeed, since these
documents are clearly deliberative and pre-decisional, and
were prepared to offer advice concerning a decision that
must be made by the President, they lie close to the core of
the sort of materials protected by the privilege. We should
not gratuitously release such materials, even on a "confi-
dential basis," to Congress. Doing so creates a precedent
that will cause problems when we wish not to disclose
similar material in the future, and also whets the appetite
of Congress for additional protected documents.
Further, I see no need to disclose the actual internal
deliberative documents. There is no reason that a document
supporting the decision cannot be prepared specifically for
transmittal to Congress.
I would also point out that the first paragraph on page four
of the draft letter will create an advisory committee
subject to the various requirements of the Federal Advisory
Committee Act, 5 U.S.C. App. 2. If this is not intended,
the paragraph should be deleted or substantially revised to
reflect a less formal monitoring process.
FFF:JGR:aea 4/23/85
CC: FFFielding/JGRoberts/Subj/Chron
ID # 27141455
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
0 - OUTGOING
H . INTERNAL
I . INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent: Dave chew
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: Letters to the Congress re: Capper
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
CUHOLL
ORIGINATOR 85,04,22
/ /
Referral Note:
CUAT18
R
85,04,22
5 85,04,23
Referral Note:
/ /
/ /
-
I
Referral Note:
/ /
/
/
-
Referral Note:
/ /
/ /
-
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
1. * Info Copy Only/No Action Necessary
A Answered
C Completed
C - Comment/Recommendation
R - Direct Reply w/Copy
B - - Non-Special Referral
S Suspended
D Draft Response
S For Signature
F . Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No. 271414ss
WHITE HOUSE STAFFING MEMORANDUM
DATE:
4/22/85
ACTION/CONCURRENCE/COMMENT DUE BY:
4/23/85
SUBJECT:
LETTERS TO THE CONGRESS RE COPPER
ACTION FYI
ACTION FYI
VICE PRESIDENT
OGLESBY
REGAN
ROLLINS
DEAVER
SPEAKES
STOCKMAN
SVAHN
BUCHANAN
TUTTLE
CHEW
P
SS
VERSTANDIG
FIELDING
WHITTLESEY
FRIEDERSDORF
RYAN
HICKEY
DANIELS
HICKS
KINGON
McFARLANE
REMARKS:
Please provide any comments/recommendations by c.o.b. tomorrow, 4/23.
Thank you.
RESPONSE:
David L. Chew
1835 APR 22 [i] 12:19
Staff Secretary
Ext. 2702
THE UNITED STATES TRADE REPRESENTATIVE
WASHINGTON
ReceivedS
20506
THEREA
April 15, 1985
MEMORANDUM FOR THE PRESIDENT
FROM : WILLIAM E. BROCK
B
SUBJECT: Copper
Section 247 of the Trade and Tariff Act of 1984 conveyed the
sense of Congress that you should negotiate voluntary production
restraint agreements with the principal foreign copper-producing
countries. This provision also called upon you to report to
Congress within 12 months of enactment of this Act to explain
either the results of such negotiations or why you felt it was
inappropriate or unnecessary to undertake them.
In light of this provision, I instructed my staff to establish an
interagency task force with the aim of examining once again the
possibility of negotiating such restraints. You will recall that
this possibility had been considered and rejected in the context
of the determination you made on September 6, 1984 on import
relief for the domestic copper industry.
The task force examined all questions relevant to the issue of
voluntary production restraints and produced a report detailing
its findings. Subsequently, a thorough review of this issue was
conducted within the framework of the interagency Trade Policy
Committee. With the exception of the Department of Interior, all
agencies agreed that the Administration should not seek to
negotiate voluntary production restraints with foreign copper-
exporting countries. An attempt to negotiate such restraints was
felt to be inadvisable for the following reasons:
1. It would be inconsistent with the overall market-oriented
trade and economic policy objectives of this Administration.
2. It would incur losses to U.S. consumers substantially in
excess of any gains accruing to U.S. producers.
3. Neither negotiation nor implementation of such restraint
agreements appear to be feasible. The major copper-producing
countries have made it clear that they are strongly opposed to
such negotiations.
- 2 -
I urge that you approve the recommendation of the Trade Policy
Committee that the Administration should not seek to negotiate
voluntary production restraint agreements on copper. If you
concur, I have enclosed the necessary letters to the Vice President
and the Speaker of the House of Representatives advising them of
this decision. Although the deadline set by Section 247 for
reporting your decision is not until the end of October, Congress
is already well aware of the strong opposition to the negotiation
of such restraints within the Administration. Therefore, I see no
benefit in delaying the communication of your decision on this
issue to Congress.
Attachments
THE WHITE HOUSE
WASHINGTON
Dear Mr. Speaker:
[ Dear Mr. President:-
In accordance with Section 247 (c) (2) of the Trade and Tariff
Act of 1984, I am writing to inform you of my decision not to
seek to negotiate voluntary production restraints on copper.
Section 247 (b) conveyed the sense of Congress that I should
negotiate "with the principal foreign copper-producing coun-
tries to conclude voluntary restraint agreements with those
governments for the purpose of effecting a balanced reduction
of total annual foreign copper production for a period of
between three and five years. " In light of this pro-
vision, an interagency task force, chaired by the Office
of the United States Trade Representative, was formed to
take another look at the possibility of negotiating such
restraints -- which had been considered, and rejected, in
the context of the determination made on September 6, 1984,
on import relief in accordance with Section 202 (b) (1) of the
Trade Act of 1974.
The task force reviewed all questions relevant to the issue
of voluntary production restraints, including:
1. the consistency of voluntary production restraints
with the basic policies of this Administration;
2. the situation of the U.S. copper industry;
3. the extent of subsidization or unfair trade practices
in the world copper economy;
4. the probable economic effects of production
restraints; and
5. the feasibility of negotiating and implementing such
restraints.
A summary of the task force report along with a copy of the
complete report is attached for the benefit of interested
Members of Congress on a confidential basis. The report was
prepared with the aim of aiding our internal review of this
issue and is not for public dissemination.
2
Following the completion of the task force report in early
March, the possibility of negotiating production restraints
was carefully reviewed by the interagency Trade Policy Com-
mittee, chaired by the U.S. Trade Representative. In light of
this review, I have determined that it would be inappropriate
for this government to seek to negotiate voluntary production
restraint agreements with the governments of the principal
foreign copper-producing countries.
An attempt to negotiate such restraints would be inconsistent
with the overall, market-oriented trade and economic policy
objectives of this Administration. It would set an undesir-
able precedent in light of both our efforts to increase the
responsiveness of the domestic and international economy to
market forces and our continued opposition to cartels or other
arrangements aimed at controlling or influencing world
markets. Moreover, any effort by this government, in the
context of production restraint negotiations, to give foreign
producers assurances regarding the intentions of U.S. copper
producers would raise serious antitrust concerns.
Efforts to raise world copper prices through the restraint
of foreign production would also be inefficient and expensive
for the U.S. economy; they would incur losses to U.S. con-
sumers substantially in excess of any gains accruing to U.S.
producers.
Finally, I do not believe it would be feasible either to
conclude or to implement production restraint agreements.
The major copper-producing countries have made it clear that
they are opposed to the negotiation of such restraints --
largely because they do not feel they will be effective in
improving the longer term situation in the world copper
market. Moreover, past experience shows that production
restraint agreements are extremely difficult to implement
effectively and that any benefits from restraints tend to be
eroded or reversed in the years following their termination.
While I do not believe that the negotiation of voluntary
production restraints is an appropriate course of action, I
remain deeply concerned about the problems facing many workers
in the U.S. copper industry. In response to my directive of
September 6, 1984, the Department of Labor has developed a
plan for a special effort to assist workers displaced from the
copper industry.
The major source of retraining and relocation assistance
available to such workers is the Dislocated Worker Program
under Title III of the Job Training Partnership Act (JTPA).
Services are available under (a) a program of formula grants
to the States, which accounts for 75 percent of Title III
3
funds, and (b) the remaining 25 percent or national reserve,
which is available to the States on application to the
Secretary. Workers may also receive training and related
services in their local service delivery areas (SDAs) if they
are economically disadvantaged under the terms of Title II-A
of JTPA. In addition, up to ten percent of participants in
local Title II-A programs need not meet the income requirement
if they face special barriers in the labor market.
In addition to assistance under JTPA, copper workers may
receive counseling, referral, and placement services at the
local offices of the Federal-State employment service. The
unemployment compensation system provides partial income
replacement for qualifying workers (the vast majority of
dislocated workers qualify for these benefits); for those
workers who have been certified pursuant to the Trade Adjust-
ment Assistance program, these benefits are available for as
long as 18 months (if the individual is enrolled in training).
The plan developed by the Department of Labor consists of
three elements. First, of the funds reserved by the Secretary
under Title III of JTPA, $2.5 million will be earmarked spe-
cifically for retraining programs to assist copper workers in
heavily impacted States and localities. To assure that a
maximum effort is made in the States to assist copper workers,
the States will be asked to contribute an amount equivalent
to twice the Federal allocation to support these projects.
The source of the contribution can be State training funds,
received under JTPA or other legislation, or private sector
funds. In total this will amount to approximately
$7.5 million in new training and employment services for
copper workers.
Second, a team of senior Department of Labor staff will be
designated to work with State and local governments in the
impacted areas to help establish programs of retraining,
relocation, and related assistance for displaced copper
workers. The heavily impacted States will be asked to
identify special liaison staff to work with the DOL team.
The Federal team members will provide technical assistance to
help State and local staff in the design of programs which can
be of maximum assistance in enabling displaced copper workers
to be placed in suitable employment. They will assist staff
to make maximum and effective use of Federal resources,
particularly those available under JTPA.
4
Third, a task force composed of industry, labor, and officials
from all levels of government, chaired by the Under Secretary
of Labor, will monitor these efforts and suggest ways to
improve upon them.
I have directed Secretary-Designate Brock to ensure that this
plan is implemented in an expeditious and effective manner.
Sincerely,
The Honorable Thomas P. O'Neill, Jr.
Speaker of the
House of Representatives
Washington, D.C. 20515
ID #. 27141455
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
o . OUTGOING
H * INTERNAL
COPY
I . INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
from ORM
Name of Correspondent: Dave chew
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: Letters to the Congress re: Capper
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
CUTTOLL
ORIGINATOR 85,04,22
C - 85,04123
Referral Note:
CUAT18
D
85,04,22
C 85,04,23
Referral Note:
CUFIEL
5
85,04,23 FF A85,0423
Referral Note:
/
/
/
/
-
Referral Note:
/
/
/
/
-
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
I * Into Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R - Direct Reply w/Copy
B * Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
THE WHITE HOUSE
WASHINGTON
April 23, 1985
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
FRED F. FIELDING Orig. signed by FFF
COUNSEL TO THE PRESIDENT
SUBJECT:
Letters to Congress Regarding Copper
Counsel's Office has reviewed the proposed letters to
Congress, advising that the President has decided not to
undertake to negotiate voluntary production restraint
agreements with foreign copper-producing countries. I have
no objection to the substance of the decision or to advising
Congress of it at this time, well in advance of the October
deadline.
I do, however, object to transmitting to Congress the
internal deliberative documents used within the Executive
branch in arriving at this Presidential decision. Such
documents could be protected from even compelled disclosure
by a claim of executive privilege. Indeed, since these
documents are clearly deliberative and pre-decisional, and
were prepared to offer advice concerning a decision that
must be made by the President, they lie close to the core of
the sort of materials protected by the privilege. We should
not gratuitously release such materials, even on a "confi-
dential basis," to Congress. Doing so creates a precedent
that will cause problems when we wish not to disclose
similar material in the future, and also whets the appetite
of Congress for additional protected documents.
Further, I see no need to disclose the actual internal
deliberative documents. There is no reason that a document
supporting the decision cannot be prepared specifically for
transmittal to Congress.
I would also point out that the first paragraph on page four
of the draft letter will create an advisory committee
subject to the various requirements of the Federal Advisory
Committee Act, 5 U.S.C. App. 2. If this is not intended,
the paragraph should be deleted or substantially revised to
reflect a less formal monitoring process.
FFF:JGR:aea 4/23/85
CC: FFFielding/JGRoberts/Subj/Chron
THE WHITE HOUSE
WASHINGTON
April 23, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS off
SUBJECT:
Letters to Congress Regarding Copper
As discussed at this morning's staff meeting, I think this
would be better going out under your signature.
Attachment
Document No. 271414ss
WHITE HOUSE STAFFING MEMORANDUM
DATE:
4/22/85
ACTION/CONCURRENCE/COMMENT DUE BY:
4/23/85
LETTERS TO THE CONGRESS RE COPPER
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
OGLESBY
REGAN
ROLLINS
DEAVER
SPEAKES
STOCKMAN
SVAHN
BUCHANAN
TUTTLE
CHEW
P
SS VERSTANDIG
FIELDING
WHITTLESEY
FRIEDERSDORF
RYAN
HICKEY
DANIELS
HICKS
KINGON
McFARLANE
REMARKS:
Please provide any comments/recommendations by c.o.b. tomorrow, 4/23.
Thank you.
RESPONSE:
David L. Chew
1985 APR 22 Pil 12: 19
Staff Secretary
Ext. 2702
THE UNITED STATES TRADE REPRESENTATIVE
WASHINGTON
ReceivedSS
20506
THERES
April 15, 1985
MEMORANDUM FOR THE PRESIDENT
FROM : WILLIAM E. BROCK
B
SUBJECT: Copper
Section 247 of the Trade and Tariff Act of 1984 conveyed the
sense of Congress that you should negotiate voluntary production
restraint agreements with the principal foreign copper-producing
countries. This provision also called upon you to report to
Congress within 12 months of enactment of this Act to explain
either the results of such negotiations or why you felt it was
inappropriate or unnecessary to undertake them.
In light of this provision, I instructed my staff to establish an
interagency task force with the aim of examining once again the
possibility of negotiating such restraints. You will recall that
this possibility had been considered and rejected in the context
of the determination you made on September 6, 1984 on import
relief for the domestic copper industry.
The task force examined all questions relevant to the issue of
voluntary production restraints and produced a report detailing
its findings. Subsequently, a thorough review of this issue was
conducted within the framework of the interagency Trade Policy
Committee. With the exception of the Department of Interior, all
agencies agreed that the Administration should not seek to
negotiate voluntary production restraints with foreign copper-
exporting countries. An attempt to negotiate such restraints was
felt to be inadvisable for the following reasons:
1. It would be inconsistent with the overall market-oriented
trade and economic policy objectives of this Administration.
2. It would incur losses to U.S. consumers substantially in
excess of any gains accruing to U.S. producers.
3. Neither negotiation nor implementation of such restraint
agreements appear to be feasible. The major copper-producing
countries have made it clear that they are strongly opposed to
such negotiations.
- 2 -
I urge that you approve the recommendation of the Trade Policy
Committee that the Administration should not seek to negotiate
voluntary production restraint agreements on copper. If you
concur, I have enclosed the necessary letters to the Vice President
and the Speaker of the House of Representatives advising them of
this decision. Although the deadline set by Section 247 for
reporting your decision is not until the end of October, Congress
is already well aware of the strong opposition to the negotiation
of such restraints within the Administration. Therefore, I see no
benefit in delaying the communication of your decision on this
issue to Congress.
Attachments
THE WHITE HOUSE
WASHINGTON
Dear Mr. Speaker:
[ Dear Mr. President:]
In accordance with Section 247 (c) (2) of the Trade and Tariff
Act of 1984, I am writing to inform you of my decision not to
seek to negotiate voluntary production restraints on copper.
Section 247 (b) conveyed the sense of Congress that I should
negotiate "with the principal foreign copper-producing coun-
tries to conclude voluntary restraint agreements with those
governments for the purpose of effecting a balanced reduction
of total annual foreign copper production for a period of
between three and five years. In light of this pro-
vision, an interagency task force, chaired by the Office
of the United States Trade Representative, was formed to
take another look at the possibility of negotiating such
restraints -- which had been considered, and rejected, in
the context of the determination made on September 6, 1984,
on import relief in accordance with Section 202 (b) (1) of the
Trade Act of 1974.
The task force reviewed all questions relevant to the issue
of voluntary production restraints, including:
1. the consistency of voluntary production restraints
with the basic policies of this Administration;
2. the situation of the U.S. copper industry;
3. the extent of subsidization or unfair trade practices
in the world copper economy;
4. the probable economic effects of production
restraints; and
5. the feasibility of negotiating and implementing such
restraints.
A summary of the task force report along with a copy of the
complete report is attached for the benefit of interested
Members of Congress on a confidential basis. The report was
prepared with the aim of aiding our internal review of this
issue and is not for public dissemination.
2
Following the completion of the task force report in early
March, the possibility of negotiating production restraints
was carefully reviewed by the interagency Trade Policy Com-
mittee, chaired by the U.S. Trade Representative. In light of
this review, I have determined that it would be inappropriate
for this government to seek to negotiate voluntary production
restraint agreements with the governments of the principal
foreign copper-producing countries.
An attempt to negotiate such restraints would be inconsistent
with the overall, market-oriented trade and economic policy
objectives of this Administration. It would set an undesir-
able precedent in light of both our efforts to increase the
responsiveness of the domestic and international economy to
market forces and our continued opposition to cartels or other
arrangements aimed at controlling or influencing world
markets. Moreover, any effort by this government, in the
context of production restraint negotiations, to give foreign
producers assurances regarding the intentions of U.S. copper
producers would raise serious antitrust concerns.
Efforts to raise world copper prices through the restraint
of foreign production would also be inefficient and expensive
for the U.S. economy; they would incur losses to U.S. con-
sumers substantially in excess of any gains accruing to U.S.
producers.
Finally, I do not believe it would be feasible either to
conclude or to implement production restraint agreements.
The major copper-producing countries have made it clear that
they are opposed to the negotiation of such restraints --
largely because they do not feel they will be effective in
improving the longer term situation in the world copper
market. Moreover, past experience shows that production
restraint agreements are extremely difficult to implement
effectively and that any benefits from restraints tend to be
eroded or reversed in the years following their termination.
While I do not believe that the negotiation of voluntary
production restraints is an appropriate course of action, I
remain deeply concerned about the problems facing many workers
in the U.S. copper industry. In response to my directive of
September 6, 1984, the Department of Labor has developed a
plan for a special effort to assist workers displaced from the
copper industry.
The major source of retraining and relocation assistance
available to such workers is the Dislocated Worker Program
under Title III of the Job Training Partnership Act (JTPA)
Services are available under (a) a program of formula grants
to the States, which accounts for 75 percent of Title III
3
funds, and (b) the remaining 25 percent or national reserve,
which is available to the States on application to the
Secretary. Workers may also receive training and related
services in their local service delivery areas (SDAs) if they
are economically disadvantaged under the terms of Title II-A
of JTPA. In addition, up to ten percent of participants in
local Title II-A programs need not meet the income requirement
if they face special barriers in the labor market.
In addition to assistance under JTPA, copper workers may
receive counseling, referral, and placement services at the
local offices of the Federal-State employment service. The
unemployment compensation system provides partial income
replacement for qualifying workers (the vast majority of
dislocated workers qualify for these benefits); for those
workers who have been certified pursuant to the Trade Adjust-
ment Assistance program, these benefits are available for as
long as 18 months (if the individual is enrolled in training).
The plan developed by the Department of Labor consists of
three elements. First, of the funds reserved by the Secretary
under Title III of JTPA, $2.5 million will be earmarked spe-
cifically for retraining programs to assist copper workers in
heavily impacted States and localities. To assure that a
maximum effort is made in the States to assist copper workers,
the States will be asked to contribute an amount equivalent
to twice the Federal allocation to support these projects.
The source of the contribution can be State training funds,
received under JTPA or other legislation, or private sector
funds. In total this will amount to approximately
$7.5 million in new training and employment services for
copper workers.
Second, a team of senior Department of Labor staff will be
designated to work with State and local governments in the
impacted areas to help establish programs of retraining,
relocation, and related assistance for displaced copper
workers. The heavily impacted States will be asked to
identify special liaison staff to work with the DOL team.
The Federal team members will provide technical assistance to
help State and local staff in the design of programs which can
be of maximum assistance in enabling displaced copper workers
to be placed in suitable employment. They will assist staff
to make maximum and effective use of Federal resources,
particularly those available under JTPA.
4
Third, a task force composed of industry, labor, and officials
from all levels of government, chaired by the Under Secretary
of Labor, will monitor these efforts and suggest ways to
improve upon them.
I have directed Secretary-Designate Brock to ensure that this
plan is implemented in an expeditious and effective manner.
Sincerely,
The Honorable Thomas P. O'Neill, Jr.
Speaker of the
House of Representatives
Washington, D.C. 20515
TOTAL USE
Summary Of Task Force Report
- --An initiative by the USG to negotiate restraints on foreign
copper production would be inconsistent with the basic thrust
of this Administration's trade and commodity policy.
--Any USG efforts to secure foreign production restraints would
lead to counter-requests by those foreign countries for commitments
on U.S. copper production. The USG does not have any legal
authority to make such commitments. Moreover, discussions with
domestic copper producing firms aimed at developing production
"forecasts" for use in negotiations with foreign countries could
expose U.S. producers to significant risks of anti-trust liability.
--The evolution of the world copper market over the past few
years has seriously injured the U.S. copper industry. Larger
losses have been incurred over the past four years and most
firms are in a precarious financial position. Although market
fundamentals improved substantially in 1984, prices weakened
further.
--If prices continue at current levels, a further severe shrinkage
of U.S. copper production will likely occur. Only about 275,000
mt of U.S. production can meet breakeven costs at these price
levels. However, even if the anticipated increase in prices
occurs (to about 75 cents per lb), a further shrinkage of U.S. pro-
duction from current levels is likely.
--The U.S. industry has made strenuous cost-cutting efforts.
Although U.S. production costs are still well above those of
the lowest cost producers (Chile and Zaire), they would appear,
on average, to compare favorably with the costs of most other
major producers.
--No significant net government subsidies by foreign governments
to their copper-producing industries were found, although governments
in several key producing countries were involved in the financing
of the copper industry (Interior believes the situation with
respect to subsidies is inconclusive and questions the net subsidy
concept.)
--The role of multilateral development banks (MDBs) in financing
copper projects appears to be minor. MDB financing of copper
projects over the past decade has amounted to less than 5 percent
of total financing of copper projects.
--Although the IMF has made large loans to major copper exporting
countries in recent years (about $3.8 billion outstanding as
of 8/31/84) these loans go to the central banks of foreign
governments and not to the copper-producing industries in those
countries.
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-2-
--Market behavior of some government owned or controlled copper
enterprises appears to be significantly different from that
of private sector firms and to result in maintenance of higher
levels of production when prices are low.
--Copper is classified as a strategic and critical commodity
vital to the national defense (U.S. stockpile policy is currently
under review). The shutdowns in capacity now threatening the
U.S. copper mining industry could make the U.S. more dependent
on imports from outside North America.
--Econometric analysis shows that losses to consumers resulting
from production restraint would substantially exceed gains to
producers.
--The U.S. copper fabricating industry has indicated that it
could support the negotiation of production restraints.
-Econometric analysis gives no clear cut answer as to whether
or not the export earnings of participating foreign countries
would increase as a result of their imposition of production
restraints. Where U.S. production is "frozen", the analysis
usually shows such increases occurring. On the other hand,
the analysis tends to show that gains in revenue enjoyed while
restraints are in place may be largely lost in the longer term.
--Any U.S. efforts to negotiate production restraints would
meet strong resistance from the key copper exporting countries.
Both Chile and the CIPEC Secretariat have advised the U.S. in
writing of their opposition to such negotiations (see Attachments
2 and 3 to the task force report.) It seems unlikely that the
U.S. could successfully negotiate such restraint agreements
unless major enticements were offered (or pressures exerted)
outside the copper area.
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Report of the Copper Task Force
Section 247 of the Trade and Tariff Act of 1984 (signed by the
President on October 30) contains a sense of Congress resolution
urging the President to negotiate voluntary production restraint
agreements on copper. It also calls for the President to report
to Congress within a year on either the results of such negotiations
or the reasons why he felt it was inappropriate or unnecessary
to undertake this course of action. In view of the enactment
of this resolution, Ambassador Brock directed that the interagency
task force formed to handle the 201 complaint be reconvened
with the aim of objectively reviewing the possibility of negotiating
such agreements. The initiation of this review was not meant
to imply any commitment to negotiate such agreements.
The option of pursuing some sort of voluntary production restraint
arrangement was, of course, considered and rejected by the President
in making his determination on the Section 201 complaint. The
task force reviewed both the arguments made and the data developed
in preparation for the President's decision as well as new facts
or factors arising since the September 6 decision. The task
force concentrated its efforts on fact-finding and analyses;
therefore, this report contains no specific recommendations
for USG actions.
The major areas covered by the Task Force were:
1. Consistency of voluntary production restraints with the
basic policies of the Administration.
2. The situation of the U.S. copper industry.
3. The extent of subsidization or unfair trade practices in
the world copper economy.
4. The strategic importance of copper.
5. The probable economic effects of production restraints.
6. The feasibility of negotiating and implementing such restraints.
The findings of the task force with respect to each of these
areas are elaborated below:
A. Policy Considerations
The basic thrust of this Administration's economic and
trade policy is to reduce the role of government and to encourage
greater reliance on the market. While exceptions have been
made to this policy, an initiative by the USG to negotiate restraints
on copper production in the major copper exporting countries
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2
would, nonetheless, be inconsistent with it. In the area of
trade policy, it would run counter to our efforts to persuade
other countries to place more reliance on market forces and
to reduce government intervention in the world market place.
With respect to commodity policy, this Administration has made
it clear that we have serious doubts about the value or effectiveness
of attempts to "stabilize" market prices through international
commodity agreements. While we have demonstrated a willingness
to consider continued participation in those agreements in which
we are already members (coffee, sugar, and rubber), we have
also made clear that we have a strong presumption against entering
into any other agreements which contain market-stabilizing features.
The U.S. copper industry (and the Congress) have not, of
course, suggested that we negotiate a formal commodity agreement.
Instead, they envisage a less formal, temporary arrangement
employing the mechanism of voluntary production restraints to
attain the same objective (price stabilization or price support)
as an international commodity agreement -- at least over the
next few years.
Finally, we should recognize that any United States Government
effort to secure foreign commitments regarding production restraints
will inevitably lead to counter-requests by those foreign countries
for commitments on United States copper production. Acceding
to such requests would take any arrangement well beyond previous
VRAs, which involved only restrictions on exports to the United
States by foreign producers. Rather, such an arrangement would
mean actual involvement (however informal or indirect) of the
United States industry in a worldwide agreement to reduce production
in order to raise prices. We do not have any legal authority
for the United States Government to make such commitments (or,
more specifically, to impose any restraints on domestic copper
production.) The best the United States Government could do
would be to offer estimates or forecasts of what would likely
be produced by the United States copper industry under various
market scenarios. Such estimates would have to be developed
on the basis of individual discussions with the domestic copper
producing firms. Even such discussions, however, in any realis-
tically probable scenario, would expose United States producers
to significant risks of antitrust liability if the worldwide
production restraints were successfully concluded.
The Interior Department has suggested the possible application
of the antitrust immunity provisions of the Defense Production
Act as a vehicle to immunize any participation of domestic copper
producers in the production restraint arrangement. Preliminary
analysis by the Justice Department has suggested that, for both
substantive and procedural reasons, the use of the immunity
provisions of the Act would not be appropriate. Justice is
continuing its research on these issues and will present further
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3
comments shortly.
Exceptions are, of course, made to these trade and commodity
policies (Representatives of the U.S. copper industry often
cite U.S. negotiation of restraints on steel imports -- or textiles
or automobiles -- as a precedent for a similar effort for copper
and suggest that copper could be treated as one exception among
others.) Three reasons are frequently advanced as warranting
a departure from basic Administration trade and commodity policies
in the case of copper:
1. The seriousness of the injury to the domestic copper industry
resulting from low world copper prices.
2. Trade in copper is not "free" but rather greatly distorted
by the important role played by governments and the international
financial institutions (IFI's) in foreign copper production.
3. The strategic importance of U.S. copper production.
These issues are examined in subsequent sections.
B. The Situation of the U.S. Copper Industry
The grave injury caused to the U.S. copper industry by
the evolution of the copper market over the past few years cannot
be disputed. The USITC found the industry to be injured in
June 1984 and the situation has worsened since then. If the
market conditions that prevailed throughout 1984 persist much
longer, a further severe shrinkage of the U.S. copper-producing
industry will likely occur.
A few facts will serve to illustrate the depressed state
of the U.S. copper industry in recent years (which was thoroughly
documented in both the USITC report and the earlier 201 task
force report.)
--U.S. mine production of copper fell from 1.5 million
mt in 1981 to an estimated 1.05 million mt in 1984.
Capacity utilization is now only about 60 percent.
--Employment in the copper mining industry has dropped
from 28,000 in 1979 to an estimated 13,000 in 1984 and
further decreases are expected (In part, this decline
is due to productivity gains.)
The U.S. copper industry has suffered major losses over
the last three years: $410 million in 1981; $1,154 million
in 1982; and $605 million in 1983; Losses in 1984 are
thought to have been even larger than 1983. Confidential
discussions indicated that 1984 losses for five out of
the nine U.S. copper firms totaled over $500 million.
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4
The world price of copper fell from an annual average price
of $1.01/lb. in 1980 to an average annual price of 65 cent/lb. in
1984, as a result of increasing supplies of copper from foreign
producers and a decline in copper demand caused by the recent
worldwide economic recession. Nineteen mines have closed since
1981. The total capacity for those mines was 504,000 metric
tons. An estimated additional 300,000 metric tons of mine capacity
was placed in shut-in status during 1984, i.e., existing production
capacity was not utilized. Lost domestic mine capacity thus
totaled 804,000 metric tons in 1984. Regionally, Arizona absorbs
an estimated 53 percent of the loss, Utah 20 percent, Montana
12 percent and Michigan 9 percent. Tennessee, Idaho, Nevada,
and New Mexico absorb smaller losses. Both smelter and refinery
capacity also declined between 1981 and 1984. Eight smelters
were closed with a capacity of 699,000 mt and eight refiners
with a capacity of 775,000 mt.
Attachment I describes in detail the mine closures and other
cutbacks in production and employment that have occurred over
the past few years.
At the time of the President's decision on the 201 case,
most market analysts predicted that copper prices would rise
significantly in the fall of 1984; this increase did not occur.
Instead, between the President's decision and the end of the
year, the price of copper in the U.S. declined by 6 1/2 percent.
The average copper price for 1984, was about 15 percent below
the 1983 average price and 39 percent below the 1979 average.
The 1984 year end price of about 60 cents/pound was 20 percent
below the 1983 year end price.
While prices failed to improve in 1984, the fundamentals of
the market pointed, and continue to point, in the direction
of a recovery. World copper consumption was strong in 1984,
increasing by 6 percent. (In contrast, world mine production
increased by only about 2 percent.) World stock levels fell
by nearly 450,000 mt in 1984. Among the reasons cited for the
continuing failure of the copper market to respond to these
changes in market fundamentals are: the strength of the dollar,
the willingness of most countries to continue to produce at
high levels even at the very low dollar prices prevailing in
1984, the threat of further expansion in Chilean copper mine
capacity, the fact that stocks still remain above "normal" levels,
particularly in the United States, and the widespread availability
of unused or underutilized copper production capacity.
Nevertheless, it is still reasonable to expect an increase in
copper prices both because of the improvement in fundamentals
and because current prices are not viable in the longer-term
100 THICHIP
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5
for most of world production -- they are below the production
costs of nearly all major producers except Chile and Zaire even
after allowing for progress in cost reduction in the U.S. and
elsewhere. The market outlook for copper over the next few years
will, of course, be heavily influenced by the rate of world
and U.S. economic growth. Economic forecasts generally indicate
continuing world economic expansion over the next few years
and moderate U.S. growth in 1985. Given these prospects, copper
prices are expected to increase 5 to 10 percent during 1985
or into the 65-70 cents/pound range. If world economic expansion
continues in 1986, prices of about 75 cents/pound are anticipated.
Given expected production increases, however, (particularly
in Chile, where an increase in CODELCO's production capacity
from 1.0 to 1.6 million mt is planned by the end of this decade),
it would appear that downward pressure on prices will generally
be maintained and that prices are unlikely to rise much further
for any prolonged period. World consumption increases through
1999 have been forecast at about 125,000 to 150,000 mt/year.
Production increases are seen as having potential to match or
even exceed this growth.
The above forecasts should, of course, be viewed with great
caution. The copper market has, in recent years, consistently
defied the optimistic prognostications of experienced market
analysts. Whether the price recovery will come soon enough
and be sufficiently strong to prevent further massive dislocations
in the U.S. copper industry must remain a major question mark
and seems unlikely in the view of some analysts.
The approximately 1 million metric tons of U.S. mined copper
production in each of the last three years have been sold at
average prices which were less than average costs. Of the 1
million mt produced domestically during 1984, approximately
100,000 mt were produced at a profit and another 175,000 mt
at breakeven cost. Were prices to remain at end-of-1984 levels,
one would expect U.S. mine production to contract to an economic
production level of about 275,000 mt/year. Assuming price increases
to about 75 cents/pound, U.S. economic production could be maintained
at 800,000 mt/year. Thus, even under what appears to be generally
favorable conditions of world economic growth, it is estimated
that the equilibrium point for U.S. copper mine production will
be at production levels 20 percent less than current levels.
If current prices were to persist, U.S. mine production could
decline by more than 70 percent from current levels. (Note:
The above analysis takes into account depreciation costs and
profit and, thus, differs somewhat from the estimate shown in
Table 3.)
The above analysis is, of course, based on an abstract comparison
of industry costs and possible price levels. The length of
time that such prices would have to continue in order to effect
further shrinkage of the U.S. industry is uncertain. But the
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6
current financial situation of most of the U.S. copper industry
is so precarious that dramatic reductions in copper production
could take place in the near future. The bankruptcy of a major
copper firm appears to be a possibility. In addition, divestiture
of major copper holdings by parent companies could occur. Four
of the major copper firms now operating in the U.S. are owned
by oil companies (Anaconda, Duval, Cyprus Bagdad, and Kennecott.)
Except in the case of Kennecott, the parents of these companies
have announced their desire to sell those properties.
In reviewing the situation of the U.S. industry, attention should
be devoted to its considerable efforts to cut costs over the
past few years. Kennecott, for example, indicated that, in
terms of 1984 dollars, production costs in its three mining
properties have been reduced by 40-60 percent since 1975. During
1984, most U.S. copper companies reduced their labor and overhead
costs through employee and management layoffs and wage cuts.
They continued at an accelerated pace production cost reduction
programs begun in 1981, which reduced their cash costs to a
1984 average of 65 cents/pound. These costs do not include
depreciation and profit charges, which as a rule of thumb, average
5 cents/pound. Thus, with by-product credits, average full-cost
production in the U.S. during 1984 was approximately 70 cents/pound.
The decline in costs was substantial given the inflation since
1981 and the fact that by-product credits were 8 cents/pound
less in 1984 than in 1981. These data indicate that the U.S. in-
dustry has made major efforts to become competitive with the
lower-cost world copper producers. Tables 2 and 3, prepared
by the Bureau of Mines, detail the changes in costs over the
past four years and outline the current cost structure of the
industry.
While it appears that the cost reductions achieved by U.S. industry
in recent years can basically be maintained, further significant
cuts in costs will probably depend on major new investments
-- a questionable development in light of the depressed market
situation. Industry success in negotiating reduced wage/benefit
packages with U.S. workers could also yield some important cost
reductions.
The reduction in the average U.S. production costs has been
accomplished both through positive cost-cutting programs and
through the closure of less productive facilities. Although
U.S. production costs are still well above those of the lowest
cost producers such as Chile and Zaire, they would, on average,
appear to compare favorably with the costs of most other major
producers -- e.g., Australia, Canada, Peru, the Philippines,
and Zambia. A weakening of the dollar would, of course, further
strengthen the U.S. competitive position. On the other hand,
further devaluations by LDC producers for general BOP reasons
could make them more competitive. Changes in by-product prices
could also significantly alter competitiveness -- e.g., much
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7
of the strength of Zaire's current competitive position on copper
is due to increased cobalt prices. In sum, while U.S. costs
will almost surely remain well above those of Chile, there is
nothing inherent in the international cost structure that permits
us to predict with certainty whether further adjustments in
supply should come largely at the expense of U.S. industry or
of other producers at the mid to high end of the international
production cost scale.
C. Subsidies and Unfair Trade Practices
As part of its case for import relief, the U.S. copper industry
has complained about the "unfair" or "economically irrational"
practices of foreign copper producers and the "subsidization"
of these producers by the International Financial Institutions
(IFI's) -- both the multilateral development banks (MDB's) and
the IMF. In treating these allegations in the context of the
201 investigation, three questions were addressed:
1.
Do the copper industries in the major foreign producing
countries benefit from government subsidies that give them
a significant advantage over U.S. producers?
2.
Do IFI programs affect the production policies of foreign
copper industries in such a way as to disadvantage the
U.S. copper industry?
3. Are the production policies of the state-controlled or
owned copper producers in foreign countries significantly
different from those of the private sector? If so, do
they unfairly disadvantage the latter?
The conclusions reached in that investigation are outlined and
reviewed below.
With respect to the first question, no significant net government
subsidies were found. In the case of Chile, it was noted that
the copper industry is clearly a large net contributor to the
government; in 1983 Codelco paid an estimated $675 million to
the Government of Chile in the form of dividends and taxes.
A more recent and more detailed examination of the subsidy question
by Treasury generally supports this conclusion. Treasury examined
net subsidies to the copper mining industries of Chile, Indonesia,
Mexico, Peru, the Philippines, Zaire and Zambia, attempting
to weigh financial and technical assistance provided by governments
to domestic copper industries against the burdens imposed on
those industries (e.g., taxes, special payments, and required
provisions of services.) They concluded that, while there may
be modest economic assistance through the tax system, favorable
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8
investment policies, and technical and financial assistance,
these benefits are nearly always offset over time by financial
burdens placed on copper mining in such countries to contribute
to the general welfare of the country or the overall operations
of the government. (A combination of managerial neglect and
the burdens placed on copper producers, particularly in the
African countries, have sometimes resulted in decapitalization
and, over time, reduced production capability.) Nevertheless,
government infusions of capital into those industries during
times of low prices may in some cases be instrumental in preventing
shutdowns of some mines. Even though this subsidy may be recovered
in the long run, it would still give those mines a distinct
advantage at a very critical time.
Interior believes that the situation with respect to subsidies
is inconclusive. They question the "net subsidy" concept on
the basis that it subjectively assigns certain costs of doing
business by foreign industry as costs to meet social burdens,
a process that has the effect of arithmetically cancelling out
assistance from their government and international lending insti-
tutions.
While the task force's basic conclusion is that identifiable
government subsidies do not in themselves appear to be significant,
there are a few question marks.
-- The Treasury paper shows that the governments of most of
the countries, including Chile, are involved in the financing
of the copper industry -- sometimes through loans, sometimes
through equity. Chilean investment in Codelco could presum-
ably be regarded as a sound business investment but, in
the case of Zaire, Zambia, and the Philippines, it appears
that some financing has been provided without requiring
a reasonable rate of return.
-- Even if "subsidies" and "burdens" cancel each other out
over a period of years that does not necessarily mean that
the effect of government intervention is neutral. Provision
of loans or equity financing in depressed market situations
may enable production to be maintained at a significantly
higher level than would otherwise be the case.
It should be noted that the fact that the U.S. industry did
not make use of U.S. trade laws governing countervailing duties
would also seem to indicate that foreign practices in copper
mining are not countervailable under U.S. law.
The second question involved consideration of the programs both
of the MDB's and the IMF's Compensatory Financing Facility (CFF).
The 201 task force report deemed the role played by MDB's in
financing LDC copper projects to be minor and not an important
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CCE
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9
contributor to the world copper supply. MDB financing of copper
projects over the past decade has amounted to less than 5 percent
of total financing of copper projects. Since 1977, MDB's have
participated in a total of 9 copper project loans to LDC copper
exporters which will result in estimated additions to annual
capacity of about 244,000 metric tons by 1989, or about 3 percent
of 1983 world copper output. The presence of MDB's in these
projects appears to provide an implicit benefit, encouraging
private sector financing which might otherwise stay away from
the project.
MDB financing of mineral projects is generally done in conjunction
with funds from other sources. The presence of the MDBs, parti-
cularly the World Bank, gives the projects an aura of safety
against nationalization. In this context, recent MDB funding
probably has enabled countries such as Zaire and Zambia to attract
new capital and surmount the adverse effects of a spate of hard
currency allocation and decapitalization policies pursued during
periods of depressed prices. Equally important in Zaire, the
MDB presence helped to restore confidence in the viability of
Zairean copper mining after the 1978 Shaba I and 1979 Shaba
II incursions by Zairean rebels. The 1983 IDB loan to Chile,
on the other hand, was transferred to Codelco as a contribution
to capital in the form of equity.
IMF loans, including those under its Compensatory Finance Facility
(CFF), assist countries in correcting their temporary balance-of-
payments difficulties. Outstanding loans to seven major copper
exporting countries (Chile, Peru, the Philippines, South Africa,
Zaire, Zambia and Zimbabwe) totaled about $3.8 billion as of
8/31/84, about half of which were CFF loans. Countries are
entitled to CFF loans if the total value of merchandise exports
falls short of its trend growth, but for these countries copper
often is a leading cause of such fluctuations in total exports.
The sharp declines in earnings from copper exports over the
past few years have resulted, for the most part, from the drop
in prices rather than from any decrease in the quantities exported.
An important factor in considering a petition for a CFF loan
for an export earnings shortfall is that the shortfall must
be beyond the control of the petitioning government. Thus,
a country would not qualify if it curtailed exports to build
inventories. Moreover, all of these funds are loaned directly
to the central banks of the borrowing countries to finance any
of a wide variety of international payments. None of the proceeds
of these loans are transferred to the copper-producing industries
in those countries. The IMF sets the interest rate charged on
its CFF loans somewhat below market rates; currently the rate
is 7 percent. Loans must be repaid over a 3-5 year term, sooner
if the country's balance of payments and reserve positions improve.
With respect to the third question, the 201 report found good
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reason to believe that the market behavior of some government-owned
or controlled copper enterprises is significantly different
from that of private sector firms. Some government-influenced
firms appear to maintain production at higher levels when prices
are low than do their private sector counterparts.
Para-statals in Zambia and Zaire are clearly influenced by govern-
mental commitments to maintain high production levels so as
to maximize foreign exchange earnings and employment. This
influence has been a mixed blessing with respect to its impact
on production levels. In both countries, decapitalization of
the mining industry has occurred and, as noted earlier, they
have had difficulty in maintaining production levels (Zambia's
production has declined significantly).
The case of Codelco in Chile is less clear because its low production
costs and the efficiency of its operation tend to undermine
any suspicion of "uneconomic" behavior. Even here, however,
it would appear that the institutional framework within which
Codelco functions causes it to act as a revenue rather than
a profit maximizer. The inflexibility of its payment schedule
to the Chilean government (which is fixed in advance of actual
earnings) would seem to provide a strong stimulus for Codelco
to keep production high regardless of market conditions. In
addition, Codelco has plans for substantial capacity expansion
and expects to keep that capacity fully employed. Nevertheless,
its production costs were amply covered even by the low prices
of the 1982 - 1984 period. (Production at prices below average
cost is not necessarily economically "irrational" -- given the
existence of fixed costs, it can be a loss-minimizing strategy.
In recent years, the U.S. industry has produced the bulk of
its copper at average costs which exceed prices.)
The impact of the emergence of the para-statals has been reinforced
by the decreasing concentration of the copper industry. In
1960, 12 firms, all in the private sector, controlled 84 percent
of western world copper output; today, the 12 top enterprises
(including para-statals) control only 49 percent of output.
Table 4 compares production in the major copper-producing countries
over the 1979-84 period. Between 1979 and 1984, annual world
copper mine production in the market economy countries increased
by several hundred thousand tons. Production in the centrally--
planned countries, for which data is questionable, steadily
increased. Refined consumption, on the other hand, fell by
about 1 million mt per annum between 1979 and 1982, but has
since increased by about 800,000 mt.
Against this backdrop, we see a diversity of production trends.
U.S. production shows the only clear response to the decline
in prices, falling by nearly 400,000 mt in 1982 and an additional
100,000 mt in 1983. In total, U.S. production fell by nearly
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one-third between 1979 and 1983. Canadian production was also
down in 1982 and 1983 but, surprisingly, increased in 1984 almost
to peak 1980 levels. There was a fairly steady decline in Zambia
(8 percent between 1979 to 1984), reflecting the longer term
trend in that country. Peru and the Philippines which have
essentially private copper sectors, also showed a significant
decline in production between 1979 and 1984.
The major increases in production over this period came from
Chile (about 240,000 tons or 22 percent), Zaire (nearly 100,000
tons or 22 percent), and Mexico (about 70,000 tons or 66 percent.)
It should be noted, however, that the 1979 level of production
in Zaire was abnormally low as a result of the invasion of Shaba
by insurgents from Angola. More modest increases were registered
in Australia and South Africa, where by-product credits are
of major importance. A substantial production increase 165,000
mt in aggregate) was also registered by the smaller market economy
producers.
At least at the outset of the recent recession, average production
costs in the U.S. tended towards the higher end of the international
scale -- the competitive position of the U.S. was also worsened
by the major devaluations in the currencies of the key copper
exporting countries. Between the third quarter of 1981 and
that of 1984, the Chilean peso depreciated 145% against the
dollar, the Zambian kwacha by 52%, the Zaire by 5638, and the
Peruvian sol by 752%. Thus, to some extent, it was inevitable
that the brunt of adjustment would fall on the U.S. industry.
But an examination of average costs masks the fact that, for
a significant portion of foreign industry, production costs
are higher than those of certain U.S. mines and certainly higher
than the level of world prices in recent years.
Tables 5 and 6, for example, estimate that production costs
for much of the output of other major producers are above 70
cents/pound.
D. Strategic Considerations
Copper is classified as a strategic and critical commodity vital
to the national defense. It has also been designated as one
of five "Controlled Materials" whose central management has
been essential to past mobilization efforts.
Copper has numerous direct defense uses. It is used in ammunition
and shell casings, and copper wire is a critical component of
all communication and control systems, and advanced weapon systems.
Copper and brass components are used extensively in all forms
of military transportation, and waterborne weapons systems.
While these direct uses are vital to any defense effort, they
are relatively small when compared to the quantity of copper
used by the civilian economy. These uses include electrical
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12
transmission, communication, transportation, and capital goods.
The shutdowns in capacity which are now threatening the U.S. copper
mining industry could not be easily reversed in the short-term
and could make the U.S. more dependent on imports from outside
North America. Such an eventuality would need to be taken into
account in formulating U.S. policy regarding strategic materials.
(That policy is now under review.)
E. Economic Impact of Production Restraints
The economic implications of negotiated production restraints
were examined as part of the 201 investigation along with the
estimated impact of quotas and tariffs. In attempting to assay
these implications, the task force utilized an econometric model
developed internally; in addition, it examined available outside
analysis -- in particular, that submitted by interested parties
in the course of the 201 procedure. The two hypotheses most
often employed in that examination were a 5-year 200,000 mt
annual cutback by the CIPEC-4 (Chile, Peru, Zambia, and Zaire)
and a 5-year 300,000 mt annual cutback by that group of countries.
Variations on these hypotheses were introduced by assuming either
a "freeze" on U.S. production or no restraint on U.S. supply
response.
In re-examining the impact of production restraints, the internal
model was revised somewhat on the basis of more recent data
available and, in addition, a number of new hypotheses were
used -- e.g., freezes in CIPEC-4 production and a 2 or 3-year
time period of restraint (rather than a 5-year period.) The
recent suggestion of Kennecott that a cut of 12 percent (300,000
mt) by the CIPEC-4 over a 3-year period would bring supply and
demand into equilibrium was explicitly incorporated into the
analysis. In all cases, the internal model generated results
over a 5-year period.
In all the cases analyzed, world copper prices increased as
a result of the production restraints. Depending on the assumption
postulated -- particularly with regard to U.S. production, the
extent of the cutbacks, and the length of time they were applied,
however, the average increase in price over the 5-year period
varied widely. As would be expected, the smallest increases
(only 1-2 percent) occurred when the cutbacks or freeze applied
for only two years and U.S. supply was unrestricted. The largest
increases (25-30 percent) occurred when the restraints were
imposed for five years and U.S. production was also frozen over
that period. Kennecott has estimated that a 3-year 300,000
mt cutback in production would raise world prices by 15 cts/lb.
Most of the other analyses available show copper prices increasing
by 7-17 cts/lb as a result of 200 - 300,000 mt cutbacks by the
CIPEC-4.
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The impact on jobs and production in the U.S. industry shown
by the internal model was small. Job gain did not exceed 1300
under any of the scenarios examined and, in fact, where a freeze
in U.S. mine production was postulated, the model showed net
losses of U.S. jobs.
Losses to consumers (measured by changes in consumer surplus)
substantially exceeded gains to producers (measured by changes
in producer surplus) under all of the hypotheses examined.
In those cases where the greatest gains were registered by producers,
net losses to the U.S. economy (consumer minus producer surplus)
totaled over $3 billion over the 5-year period. Under those
scenarios where U.S. jobs were created, cost per job gained
was high - usually about $250,000.
These estimates indicate that production cutbacks by leading
copper producers would be inefficient and expensive for the
U.S. economy. If, however, large parts of the U.S. copper industry
are on the verge of going out of production, the production
and employment effects of successful production restraints could
be much more significant. The potential imbalance between producer
gains and consumer losses might, thus, be significantly less
(although costs to consumers would still substantially exceed
the gains to producers).
The attitude of the copper fabricating industry is of some relevance
in considering the question of consumer impact. Spokesmen for
that industry, while adamantly rejecting any sort of quota or
tariff, have made it clear that they could accept, or even support,
negotiated production restraints. The main reason for this
position is that, since the price rise from cutbacks would affect
all countries, U.S. fabricators would not be disadvantaged against
their foreign competitors. The fabricators also would appear
to believe that given the extremely low current level of copper
prices, a significant increase in copper prices could be absorbed
without impairing the competitiveness of copper products.
A major point of uncertainty is the probable impact of production
restraints on the export earnings of the countries participating
in such restraints. Representatives of the U.S. copper industry
(and economists employed by them) have argued that restraints
would increase the export earnings of even those countries parti-
cipating. Economists employed by CODELCO and other foreign
producers have come up with a contrary conclusion.
The investigation of the 201 task force disclosed that alternative
methods produced widely differing estimates of changes in export
earnings. This was, of course, due to differing predictions
as to the price impact of the restraints. The internal econometric
model used in that exercise estimated that, with a 300,000 mt
cutback over a 5-year period, the LME price would average 13
cents a pound higher (about 15-20 percent) than with no production
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14
cut. Another estimate, using the Takeuchi formula (and higher
demand and supply elasticities), indicated a 10-15 percent increase
in price. This difference in price effects was critical in
determining whether production restraints would cause an increase
or decrease in export earnings. The 15-20 percent price increase,
when combined with the lower quantity of exports, resulted in
an increase in earnings, while the 10-15 percent price rise
resulted in a decrease in earnings. The first model showed
production cuts yielding a $170 million increase per year in
the export earnings of the CIPEC 4; the second showed a $180
million decrease.
The results obtained using the revised model and a greater number
of restraint variations may be summarized as follows:
1. In all cases where U.S. production is "frozen", the
CIPEC-4 export revenues rise substantially as a result
of production restraints. Except in cases where restraints
applied for only 2 years, U.S. revenue increases are
also substantial.
2. Where U.S. production is not frozen, CIPEC-4 export
revenues generally decrease. Chile and Peru, where
further expansion of production is expected, are hit
harder than Zaire and Zambia.
3. Where restraints are imposed for only 2-3 years, revenues
both of the CIPEC-4 and the U.S. begin to go down
as soon as the restraints are lifted. This suggests
that the limitation of the analysis to 5 years
(all that the model is capable of) is misleading and
that gains in revenues enjoyed while the restraints
are in place may be largely lost in the longer term.
The dispute over export revenues boils down to a question of
supply and demand elasticities. Moreover, it is essentially
a dispute over short-run elasticities. Most observers accept
the fact that in the longer run, both supply and demand elasticities
will be sufficiently high so as to erode any effort to maintain
price through production restraints and that they would, in
the long term, reduce the export earnings of participating countries.
A related issue is whether the short-run is the relevant time-frame
to use in evaluating the impact of production restraints. CIPEC
economists have argued that long-run elasticities should be
used.
Both demand and supply price elasticities for copper are thought
to be quite low in the short-run. Everest Consulting Associates,
Inc. (consultants for the 201 petitioners) used a demand elasticity
of - 0.17 in making their calculations as to the effect of
production restraints. This figure was the median of computed
short-term elasticity values compiled by them and seems generally
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15
reasonable and in line with the elasticities generated by the
internal model. If anything, it may be on the high side. Given
the very low levels of current prices, there is good reason
to believe that the demand reaction to a modest price increase
would be muted. The Bureau of Mines suggests that the short-run
price elasticity of demand, under current circumstances, would
be less than - 0.1.
With a short-run demand elasticity of - 0.17 (and given the
CIPEC-4's market share of 37 percent), the non-CIPEC-4 supply
elasticity must be below 0.25 for the production cutback to
increase CIPEC-4 export earnings. (If, of course, the demand
elasticity were significantly lower, then a significantly greater
non-CIPEC supply response could be permitted. Similarly, if
a larger number of countries were covered by production restraint
agreements, such restraints would more readily work to the benefit
of those countries participating.) Everest Associates found
most computed supply elasticities to fall between 0.1 and 0.3;
they used 0.2 as the most representative value. While this
estimate seems reasonable, there is a great deal of uncertainty
regarding supply elasticities. Given excess capacity in the
United States and in a number of other countries, the elasticity
of supply for those areas could be considerably higher. The
internal model, for example, generated an elasticity of supply
of .43 for the U.S. Allowance for the higher short-run supply
elasticity, for "secondary" copper, which represents 15 percent
of the market, might also generate a greater overall supply
response.
The reaction of U.S. producers to production cutbacks would
appear to be a decisive factor in determining the effectiveness
of such restraints. Kennecott estimates that breakeven production
costs of shut down facilities are 80 cents/pound or higher and
argues that the modest price increases likely to result from
production restraints would not be enough to cause a reopening
of U.S. mines. Some U.S. mines are, however, operating at reduced
levels (rather than being totally shut down), and even a small
increase in price might suffice to raise capacity utilization
rates in those units.
If U.S. supply response was minimal -- either for policy reasons
or because the price increase generated by cutbacks was not
sufficient to cause resumption of idle U.S. production, the
likelihood of such restraints being effective would be much
greater. However, even under those circumstances, it could not
be regarded as sure thing. As indicated earlier, producers
outside of CIPEC and the U.S. have accounted for a substantial
increase in copper production over the past five years and such
increases are likely to continue.
Given the uncertainties surrounding elasticity analysis and
computation and the shortcomings of the models available, econometric
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16
analysis can give no clearcut answer as to whether or not the
export earnings of the CIPEC-4 would increase as a result of
their imposition of production restraints. On econometric grounds
alone, the possibility that increases in export revenues could
result from such restraints cannot be ruled out. On the other
hand, the econometric evidence in support of a conclusion of
increased revenues depends heavily on the questionable assumption
that U.S. production will not increase and is marred by too
short a time horizon. The apparent lack of enthusiasm for the
CIPEC-4 counties for such restraints indicates that most of
these countries do not believe that such benefits would occur.
E. Feasibility of Negotiating Restraints
The foregoing section on economic impact begs two major questions:
Could such restraints be negotiated? If so, could they be effec-
tively implemented?
Any U.S. effort to negotiate production restraints would meet
strong initial resistance from the CIPEC -4 countries -- especially
Chile. The economies of all four CIPEC "majors," Chile, Peru,
Zaire and Zambia, are characterized by serious external debt
problems, depressed domestic demand, high unemployment, and
internal budget deficits. This situation poses a major threat
to stability in all four countries. Under these circumstances,
they are likely to be extremely sensitive to any perceived U.S. in-
tervention in their economies -- no matter how altruistically
packaged. The fact that acquiescence in a production restraint
arrangement would (presumably) tend to result in reduced employment
would only serve to heighten this sensitivity.
In the interest of clarifying Chile's position (and because
of rumors in the U.S. industry that this position had changed)
USTR contacted the Chilean Embassy in Washington. The Chileans
made it clear that their position has not changed. They remain
opposed to restraints on copper production. Their written response
on this point, which the Embassy indicated had been cleared
with Santiago, is shown as Attachment II.
USTR also received an unsolicited letter from the Secretary
General of CIPEC (Attachment III), advising us that "from a
CIPEC point of view such negotiations, which could be particularly
directed against four of our members -- Chile, Peru, Zaire,
and Zambia -- do not appear to be an appropriate remedy for
the difficulties of the U.S. domestic copper industry." This
document has been ratified by CIPEC's Executive Committee as
representing the views of the member countries of CIPEC.
There is some evidence that several CIPEC members might be favorably
disposed towards production restraint arrangments. Both Peru
and Zambia have called for such cutbacks in the past and, more
recently, the Philippines urged the U.S. to take an active role
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in initiating production restraint negotiations. These countries
tend to be the higher cost producers and, moreover, their production
has declined in recent years. They would more than likely feel
that an "equitable" allocation of production cuts would entail
significant cuts by Chile and maintenance of the status quo
on their part. However, given the firm attitude of Chile on
this question, its dominant position in the market, and the
mutual suspicion of other foreign producers, it seems unlikely
that the U.S. could successfully negotiate such restraint arrange-
ments unless major enticements were offered (or pressures exerted)
outside the copper area.
Even if negotiations were successfully concluded, implementation
would pose a major problem. Restraints on production or exports
would be difficult to monitor and there would be no penalties
for evading the rules. The failure of previous CIPEC efforts
is instructive in this regard.
Toward the end of 1974, as copper prices began to decline, CIPEC
agreed to cut member country exports by 10 percent. This was
followed rapidly by a decision to cut member country production
by 15 percent. Production statistics for this time period indicate
that none of the CIPEC countries complied fully with their joint
decision. By November 1975, the Members agreed to end these
fictional production cuts. Since that time, CIPEC as an organization
has not taken any serious steps to influence the copper market.
CIPEC's past failure to improve market stability has been attributed
to a number of factors:
--strong political differences among member countries,
particularly in the aftermath of the coup in Chile in
1973 which ousted Salvador Allende. These political
differences were particularly acute between the Governments
of Zambia and Chile, the two leading CIPEC members at
the time;
-CIPEC's organizational weakness;
-High rates of production in many countries outside CIPEC;
also, many mines in the U.S. and Canada were closed or
operating at reduced capacity and were perceived as being
in a position to fill any gap in production.
-high inventory levels;
-Producing countries were economically weak and dependent
on copper for most of their foreign exchange earnings.
Most CIPEC members' international currency reserves were
very weak and most believed that cutbacks in production
would hurt their export revenues significantly without
generating large price increases.
UCE
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In 1985, the CIPEC producers probably see few changes in the
underlying market, economic, or political factors which were
responsible in varying degrees for their failure 10 years ago.
They still have major political differences. They only control
a marginally greater share of mine production; they believe
supply and demand are fairly elastic in the medium to long term;
they are worried about inroads by substitutes, particularly
in the telecommunications industry; and most producers face
precarious economic conditions, perhaps worse than in 1975.
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Table
1
Copper Prices, Demand and Supply, 1979-1984: United States and World
Year
1979
1980
1981
1982
1983
1984
Prices (e/Tb. cathode)
Domestic Delivered
92.20
101.31
84.21
72.80
76.53
66.0
LME (High Grade)
90.07
99.25
79.00
67.14
72.13
63.0
Consumption (1000 mt)
United States
2432
2175
2278
1760
2020
2100
World
10338
9954
10065
9344
9625
10180
Production (1000 mt)
U.S. - Refined
2013
1726
2038
1695
1583
1530
- Mined
1447
1181
1538
1147
1038
1050
World - Refined
9020
9103
9441
9224
9445
9450
- Mined
7690
7739
8191
8072
8044
8200
Stocks (1000 mt)
United States
252
314
485
696
692
550
(weeks consumption)
(5.4)
(7.5)
(11.1)
(20.6)
(17.8)
(13.6)
World
1130
1040
1116
1597
1667
1223
(weeks consumption)
(5.7)
(5.4)
(5.8)
(8.9)
(9.0)
(6.2)
U.S. Imports (1000 mt)
Total
289
554
438
513
654
540
From Chile
116
127
138
233
292
138
Mine Capacity (1000 mt)
United States
1840
1835
1730
1750
1780
1760
(Operating Rate)
(78%)
(64%)
(89%)
(65%)
(58%)
(60%)
Rest of World
7890
8215
7790
7990
8510
8560
(Operating Rate)
(79%)
(79%)
(85%)
(85%)
(82%)
(83%)
Estimated
Source: U.S. Bureau of Mines
Table 2
Cash production costs for major producing U.S. copper mines¹
Production costs
1981
1982
1983
1984
Long Run2
$/lb Cu
Mine op cost
$0.32
$0.26
$0.22
$0.20
$0.26
Mill - Float op. cost
.27
.24
.24
.23
.22
Mill - leach op. cost
.08
.09
.07
.07
.05
Smelt/Refine/Trans-
portation
.28
.28
.26
.24
.24
Taxes
.03
.03
.03
.02
.03
Total cost
.98
.90
.82
.76
.80
Byproduct credits
(.19)
(.13)
.13)
(.11)
(.11)
Cash Cost4
.79
.77
.69
.65
.69
Production 5,
1000mt Cu
1,238
897
932
1,002e
1,364
e - estimated
U.S. Bureau of Mines, Minerals Availability
1 Includes 16 mines most of which were producing from 1981-1984. However, capacities
for many of the mines were greatly reduced from 1982-1984. Costs are in current
dollars for 1981-84; in constant 1984 dollars for long run estimates.
2 Long run costs include depreciation allowances to sustain production.
3 Property and severance taxes and royalties, if applicable.
4
Includes all cash costs of production and credit for byproducts but excludes
depreciation and profit (except long run column). Costs are in actual dollars for
each year shown.
5 Based on the production of the 16 mines analyzed. "Long Run" production is estimated
full capacity level.
Table
3
Estimated capacity levels and reserves for selected U.S. copper mines by 1984 costs!
Incremental
Capacity
Cumulative
Ore Reserves
Cost Range2
1000 MT/Yr
Capacity
1000 MT Metal³
Less than $0.60
273
273
4,805
0.60 - 0.65
284
557
6,236
0.66 - 0.70
416
973
11,175
0.71 - 0.75
73
1,046
1,524
0.76 - 0.80
-
1,046
-
0.81 - 0.85
258
1,304
6,493
0.86 - 0.90
-
1,304
-
0.91 ** 1.00
60
1,364
469
Total
1,364
30,703
U.S. Bureau of Mines, Minerals Availability
1 Based on 16 mines.
2 Includes all costs of production and credit for byproducts
but does not include depreciation and profit. Costs are in
constant 1984 dollars.
3 Recoverable copper
TABLE 4
COPPER MINE PRODUCTION
(Metal content, 1,000 metric tons)
Year
1979
1980
1981
1982
1983
1984 /
Australia
238
244
231
245
256
250
Canada
636
716
691
612
625
712
Chile
1,063
1,068
1,081
1,241
1,257
1,300
Indonesia
60
59
63
78
79
64
Mexico
107
175
231
239
250
178
Papua New Guinea
171
147
165
170
183
164
Peru
391
367
342
369
322
370
Philippines
298
305
302
292
273
220
South Africa
191
201
209
189
220
202
United States
1,447
1,181
1,538
1,147
1,038
1,087
Zaire
430
540
555
519
535
525
Zambia
588
596
588
567
563
540
Other MEC's
527
507
549
620
639
692
Total MEC's 1/
6,147
6,106
6,545
6,288
6,240
6,304
CPE's 2/
1,544
1,633
1,646
1,784
1,833
1,960
World Total
7,691
7,739
8,191
8,072
8,073
8,264
/
Estimated
1/
Market Economy Countries includes Yugoslavia.
2/
Centrally Planned Economies, includes the East European countries,
USSR, China, Mongolia, Cuba, Congo Brazzaville, and North Korea.
Production data for these countries is sketchy and with exception
of Poland and China, they rarely trade in the world market.
Source: U.S. Bureau of Mines
Table 5
Estimated annual copper production cash costs, production and demonstrated
reserves for operating mines in selected countries with cash
costs less than and greater than $0.70 per pound1 (1000 MT)
Average
Production²
Reserves, recoverable copper
costs all
greater
greater
production
less than
than
less than
than
$/lb.
$0.70/lb.
$0.70/lb.
$0.70/lb.
$ 0.70/lb.
Country
Australia
.63
181
22
5,206
227
Canada
.91
163
419
2,407
5,007
Chile
.50
1,129
30
61,225
194
Philippines
.85
142
254
2,209
5,202
Zaire
.35
565
35
15,452
1,379
Zambia
.70
581
119
14,270
3,048
Total
2,761
879
100,769
15,057
Bureau of Mines, Minerals Availability. 1/17/85
1Costs are in 1984 dollars and include all cash costs of production and credit for byproducts, but
do not include depreciation or profit. Estimates are derived from 1981 data. Reserves have been
updated to 1984 by subtracting production at full capacity since 1981. Some of these mines have
since closed. however, current produciton and reserve information are not available.
²Assumes full production level at indicated cost.
Table 6
Estimated annual copper production breakeven costs, production and
demonstrated reserves for operating mines in selected countries
with production costs less than and greater than $0.70 per pound¹ (1000 MT)
Average
Production²
Reserves, recoverable copper
costs all
greater
greater
production
less than
than
less than
than
$/lb.
$0.70/lb.
$0.70/lb.
$0.70/lb.
0.70/lb.
Country
Australia
.69
163
40
4,869
564
Canada
1.00
154
428
2,365
5,049
Chile
.54
1,015
144
57,945
3,474
Philippines
.94
.71
325
752
6,659
Zaire
.40
565
35
15,452
1,379
Zambia
.75
353
347
6,961
10,357
Total
2,321
1,319
88,344
27,482
Bureau of Mines, Minerals Availability, 1/17/85
¹Costs are in 1984 dollars and include all cash costs of production, depreciation,
and credit for byproducts, but not profit. (Costs are at breakeven level - 0 pct ROR -and
provide for recovery of capital but not profit). Estimates are derived from 1981 data. Reserves
have been updated to 1984 by subtracting production at full capacity since 1981. Some of these
mines have since closed, however, current production and reserve information are not available.
²Assumes full production level at indicated cost.
Table 7
Employment of Mine, Mill and office workers in U.S. Capper Industry
State
Average
Average
Average January-June
1979
1983
1984
Arizona
17,209
8,315
7,895
Idaho
31
52
33
Montana
1,278
612
72
Nevada
411
25
25
New Mexico
2,433
1,053
1,142
Tennessee
491
921
946
Utah
5,888
3,533
3,221
Total
27.713
14,690
13,333
Employment at copper smelters and refineries averaged 9,700 workers in 1983; data
for 1984 are not yet available. Total employment in the copper producing industry
has declined since 1981, when 44,600 were employed, to 31,800 in 1982, and 24,400 in
1983. Although data for the second half of 1984 are not yet available, we estimate
that total employment is now below 23,000. In other words, employment in the U.S.
copper producing industry ahs fallen a little more than 50 percent in the last three-
year period. Arizona. where several mines have shut down over the past three years,
Montana. where the Berkeley Pit closed last year, and Utah, where production at the
Bingham Canyon Mine was cut by two-thirds in July, have suffered the greatest loss
of jobs.
Attachment I
SELECTED CLOSINGS. POSTPONEMENTS. LAYOFFS. AND PRODUCTION DECREASES: UNITED STATES
JUNE - JULY 1953
Action taken,
Effective
Commodity and Company Operation and/or Locz:im
Employees affected
Date
Duration
Notes
COPPER
Asscond. Copper Cc.
East Berkeley Pit and
SALT oor facility; 200
June 30.
Temporary.
Anaconca Minerals employee
concentrator, Butte, MT.
employees retained to
1,800 workers in Butte 3
close own facility;
years ago. Main pit closed
500 workers laid off
mid-1952.
since January.
Kennecott.
Copper refinery and
Refinery closing; 175
June 30.
do
Recently modernized
rod mill,
workers laid off by
180,000-1py continuous
Baltimore, MD.
mid-July. Rod mill
cast rod mill operating at
remaining open at
reduced output 10 meet
reduced capacity.
customer demand.
Do
McGill, NV.
Shut down its Nevada
July 1.
6 months.
The company has been un.
Mines Division: about
successful in obtaining
113 employees laid off.
enough copper concentrate
supplies for smelting.
AUGUST - SEPTEMBER 1923
Inspiration
Inspiration, AZ.
Laid c:! 225 workers
Consolicate
August.
Indefinite.
Efforts are continuing 10
because of a lack of
Copper Cc.
obtain material until
copper concentrate
January, when a Duval
1cr the smelter.
Corp. contract to supply
Inspiration with a
substantial amount of
concentrate becomes
effective.
Notands Lakeshore
South of
Shut down underground
Sepbember.
do
Mines, Inc.
About 65 workers remain TC
Case Grance, AZ.
mine and vat leaching
operate the in SITU leaching
operation. Laic off
operation and the solvent.
250 workers.
electrowinning plant.
OCTOBER NOVEMBER 1923
ASARCO Incorporated. Mission Mine, AZ.
Laid c!! 120 workers.
Sept. 30,
Indefinite.
High inventories of copper
1983.
and low prices were citec 2:
reasons for the efforts "
reduce COSTS.
DECEMBER 1923 - JANUARY 1984
AMAX Inc.-United
Carterel, NJ.
Permanently reduced secondary copper
The resulting curtailment 5 No. 2
States Metal
production, 375 workers laid off.
scrap purchases should not have a n.ajor
Refining Co.
effect on the scrap market. The
facility will concentrate on specialty
copper and precious metals refuning.
Cyprus Bapcad
Cyprus Begdad
Mine closed.
Depressed copper prices and surplus
Copper Co.
Mine, AZ
copper cited. Electrowinning plant
will continue to operate.
Kennecott.
Operations in UT.
Announced layo!! of 400 employees and
About 2,500 of the 7,300 workers
reduction in production of 13 percent
employed by Kennecon in Feb. 1982
in 1916, due to low prices.
have been laid off.
Phelps Dodge Corp.
Laurel Hill, NY.
Electrolytic copper refinery shut
The company's EJ Paso, TX, plant will
down indefinitely.
process blister that "2" previously
processed at Laurel Hill.
CLOENCE DOSTHONEMENTS. LAYDEFS. AND ODUCTION DECREASES: UN. TD STATES
FEBRUARY MARCH 1926
Comments ex Compent
Operation and/or Location
Notes
COPPER
ASAF CO Incorporated.
Sacaton Mine, near Cau
Announced April shutdown of open pit mine because of import competition
Grande, AZ.
and low prices. Sacaton ranked 16th in output among U.S. copper mines in
1923.
Inspiration Consolidated
Inspiration Operations, A=.
Laid off 95 workers Only 2 of 3 converters are operating at smelter.
Copper Co.
Kennecoil
Utsh Copper Division, UT.
Announced additional layoff of 100 workers following January announcement
of 400 layoffs. The total workforce at the Utah Copper Division has been
trimmed 10 4,800 employees (from a peak of 7,300 in 1931).
IRON AND STEEL
:
CF&) Steel Corp.
Sunrise Mine,
Shut down blast furnaces. Mine is reportedly being allowed to flood. About
Guerniey, BY.
123 workers have been laid off since the mine closed in July 1930, and the
remaining 13 are expected to be laid off.
U.S. Steel Corp.
Fairless Borks, PA.
Announced that coke production operations will be shut down indefinitely in
May with production 10 be shifted to the Clairton, PA, plant;
300 workers will be laid off.
Johnstown, PA.
Announced April I shutdown of plant following a worker vote against a
33-per-hour CUT in wages and benefits. The plant currently employs about
323 workers, with another 350 on furlough.
APRIL . MAY 1984
Hussey Metals Cc.
Leeisdale, PA.
(subsidiary o: Louisiana
Shut down permanently. 300 workers were laid off. Hussey, a fabricator of
Lene & Expioration Cc.).
copper and brass for the electricial, electronics. and construction indus-
tries, operated in the area for 126 years. Depressed conditions in the copper
industry were cited for the closure.
Phelps Docge Cort
Hidzige, NM.
Announced plans to close Hidalgo smelter for 14 weeks beginning in June
for rebuilding of its flash furnace.
JUNE/JULY 1984
Kennecett
Hurley, NM.
Shu: down fire refinery on account of depressed copper prices and decreased
demane for fire-refined copper.
Utah Copper Division.
Reduced output of its 200,000-1py operations by 2/3 beginning in July.
The cutback look place after labor officials refused Kennecott's request
10 reopen negotiations on a 3-year contract ratifed in mic-1983.
AUGUST/SEPTEMBER 1984
ASARCO
Silver Bell, AZ
Shot down open pit mine AUE. 15. idling about 170 of 243 workers The
leaching facilities will continue to operate. If the copper market improves
by yearend. the mine could be reactivated in January.
Copper Renge Cc.
While Fine, All.
Announces a temporary closing of Its Stite Pine Copper Division, citing
depressed copper prices, imports, and labor problems. The
plant and equipment will be kept on a standby basis during the shutdown.
White Pine had 111 salaried employees on Its active payroll processing
scrap at the firm's new electrolytic refinery. Union employees have been
on strike since Aug. 1, 1913.
OCTOBER/NOVEMBER 1984
ASARCO Incorporated.
Alission Mine,
Laid off 120 workers in October, prompted by the continuing slump in
Sahuarite. AZ
copper prices. About 286 hourly and 132 salaried employees remain
working at the operation.
Chemeico Vetal Corp.
Alion, IL
Shut down 110-1pd secondary electrolytic refinery. The low margin between
scrap and refined copper prices was cited as the reason for the shutdown
SELECTED NEE CONTRACTS INVESTMENTS. EXPANSIONS, AND EXPLORATION ACTIVITIES: UNITED STATES
AUGUST - SEPTEMBER 1983
Commedity and Company Operation and/or Location
Action or Event
Notes
COPPER
/
ASARCO Incorporated. Silver Bell operation,
Restarted Silver Bell operation, effective
Full production is timed to coincide
October 1. About 193 hourly workers will
with the commission of & new INCO
A2, and Hayden, A2.
be employed, compared with 240 at
flash furnace in November at the
closing in 1981.
Hayden smelter, which will process
concentrates from Silver Bell.
Kennecott.
Ray Mines Division, A2.
Resumed mine and mill production at
Company's smelter and electrowinning
or near full concentrate capacity by late
plant remain closed. 25,000 stpm c:
August. 573 workers were recalled.
concentrate will be sold to ASARCO
Incorporated for smelting at
Hayden, AZ Capacity is 823 mipc.
FEBRUARY. MARCH 1980
ASARCO Incorporated
Mission Unit, AZ
Planned to recall 70 workers beginning April 1.
Sherburne Metal Products,
Sherburne, NY.
Began operation of 30,000-mipy continuous cast copper red facility. The
Inc. (subsidiary of
plant will be a major supplier of rod to Rome Cable and other independent
Rome Group, Inc).
wire mills in the area
APRI. MAY 1924
Pnelps Do=ge Corp.
Ajc, A2.
Restarted smelter, which had been closed since April 1982, after completion
of a SI million repair project on the smeller's acid plant. Other repairs
necessary 10 comply with EPA standards have been completed.
Finic Valley Copper Corp.
Miami, AZ.
Reopening open pit mine, with full production of 70,000 tpy of copper in
(subsiciary e: Newmon:
concentrates expected in June. 373 workers were recalled. The reopening
MININE Corp.).
was made possible by a $2-per-hour wage reduction for hourly workers for
the 1st 6 months of renewed operations and by the cancellation of a high-
cost 1011 smelling contract in January 1984.
JUNE/JULY 1984
Amiñoc Co.p.
Fort Newark, NJ.
Announced plans 10 build a 60,000-spy, state-of-the-art, continuous-cas:
copper rod mill, to be operational in 1st quarter 1985. The facility will be
built by Southwire Co. and will employ the Southwire continuous rod system.
Along with producing rod, the plant will provide a completely imegrated,
high-quality copper processing facility.
Nippert Cc
Delaware, OH.
(subsidiary c!
Announced plans to build a 30-million-pound-per-year copper rod and
Outober O,,
wire mill, 10 be operational January 1925. The mill's production will replace
Finiand.
imports from Outokumpu Oy as well as domestic purchases of materials for
Nippert's copper redraw business.
Prielps Dooge Co.c.
Tyrone, NM.
Began operation of a new solvent extraction electrowinning plant, producing
copper a: about half the cost of more conventional copper producing
methods; 2: workers are employed. The plant has a production capacity of
13,000 Dy.
AUGU'ST/SEPTEMBER 1984
Chins Mines Cc.
Hurley, NM.
(Division o:
Closing copper smelter from Sept. 3 10 OCL , to tie in new, Canadian-
Kennecott).
designed INCO flash furnace with the overall smelter environmental-control
system. The state-of-the-art INCO system will improve the operating flexi-
bility of the smeller and meet all the environmental constrains imposed on
it. Total cost of the project is estimated at $130 million, 1/3 of which is
being paid by the Japanese partner, Mitsubishi. About 1/2 of that total cost
was used 10 add to or improve the pollution-control equipment and
facilities
OCTOBER/NOVEMBER 1984
Cyprus Bagded Copper Co.
Bagdad, AZ
(subsidiars of Amoco
Minerals Co. of Sundard
Resumed About mining and milling operations Nov. 3 at 75 percent of capacity.
On Co., Indiana).
February. 330 employees returned 10 work. The mine had been closed since
Dural Corp.
Sierria, AZ
Implemented a 13-percent wage CUI for all employees at the operation in
mid-October: added 2 extra shifts per month; and planned 10 increase
production from 83,000 10 100,000 tons per day. Duval's employees
have been working without a contract since OCL 1. 1923.
CLOENES DOSTPONEMENTS LAYOFFS. AND ODUCTION DECREASES: PA. TD STATES
FEBRUARY MARCH 1984
Commetts in Compeny
Operation and/or Location
Notes
COPPER
ASAF CC Incorporated.
Sacaton Mine, near Care
Amounced April shutdown of open pit mine because of import competition
Grande, AZ.
and low prices. Sacaton ranked 16th in output among U.S. copper mines in
1923.
Inspiration Consolidated
Inspiration Operations, AZ.
Laid off " workers Only 2 of 3 converters are operating at smelter.
Copper Cc.
Kennecoil
Utsh Copper Division, UT.
Announced additional layoif of 100 workers following January announcement
of 400 layoffs. The total workforce at the Utah Copper Division has been
trimmed to 4,800 employees (from a peak of 7,300 in 1981).
IRON AND STEEL
CF&J Steel Corp.
Sunrise Mine,
Shut down blast furnaces. Mine is reportedly being allowed to flood. About
Guernsey, BY.
123 workers have been laid off since the mine closed in July 1980, and the
remaining 13 are expected 10 be laid off.
U.S. Steel Corp.
Fairless Borks, PA.
Announced that coke production operations will be shut down indefinitely in
May with production to be shifted to the Clairton, PA, plant;
300 workers will be Laid off.
Johnstown, PA.
Announced April 1 shutdown of plant following a worker vote against a
S-per-hour cut in wages and benefits. The plant currently employs about
325 workers, with another 350 on furlough.
APRIL MAY 1984
Hussey Metals Co.
Leeisdale, PA.
(subsidiary o: Louisiana
Shut down permanently. 300 workers were laid off. Hussey, a fabricator of
Land & Expioration (c.).
copper and brass for the electricial, electronics, and construction indus-
tries, operated in the area for 126 years. Depressed conditions in the copper
industry were cited for the closure.
Phelps Docge Corp
Hidalge. NM.
Announced plans to close Hidalgo smelter for 14 weeks beginning in June
for rebuilding of its flash furnace.
JUNE/JULY 1984
Kennecott.
Hurley, NM.
Shu: down fire refinery on account of depressed copper prices and decreased
demand for fire-refined copper.
Utsh Copper Division.
Reduced output of its 200,000-1py operations by 2/3 beginning in July.
The cutback look place after labor officials relused Kennecoil's request
10 reopen negotiations on a 3-year contract ratifed in mic-1983.
AUGUST/SEPTEMBER 1984
ASARCO Incorporated
Silver Bell, AZ
Short down open pit mine AVE. 13. idling about 170 of 243 workers The
leaching facilities will continue to operate. If the copper market improves
by yearend. the mine could be reactivated in January.
Copper Renge Cc.
White Fine, MI.
Announces a temporary closing of Its White Pine Copper Division, citing
depressed copper prices, imports, and labor problems. The
plant and equipment will be kepi on a standby basis during the shutdown.
While Pine had 123 salaried employees on its active payroll processing
scrap at the firm's new electrolytic refinery. Union employees have been
on strike since Aug. 1, 1923.
OCTOBER/NOVEMBER 1984
ASARCO Incorporated.
Alission Mine.
Laid off 120 workers in October, prompted by the continuing slump in
Sahuarite. AZ
copper prices. About 786 hourly and 132 salaried employees remain
working at the operation.
Chemeico Vetal Cerp.
Alton, IL
Shut down 110-1pd secondary electrolytic refinery. The low margin between
scrap and relined copper prices was cited as the reason for the shutcown
Closings, Loyolls, ac.
COPPER
December 1984-January 1985
Kennecott, U:a Copper
Salt Lake City, UT.
Laid off 100 workers on January 13; total employment is down 10 2,379
Division
from 6,637 workers at the end of 1981. The division was operating 0:
one-third capacity after a major layoll in July 198%
Phelps Dodge Corp.
Morenci, AZ.
Shut down copper smeller indefinitely in late December, citing the his
of complying with Federal and State air pollution standards, depressed
copper prices, and high operating expenses. Approximately 430 workers
were affected; some were transferred to other company operations, but
most were laid off indefinitely. Closing of the 160,000 mtpy smelter
reduce the domestic operating rate to 1.3 million metric tons of copper
about 75 percent of total U.S. copper smelting capacity.
Tennessee Chemical Co.
Copperhill, TN.
Announced that its mines in the Ducktown Basin will cease operations to
end of 1987 because they are no longer economical to operate. The
company will purchase scrap copper and sulfur to continue chemical 077
tions. About 900 employees and 12,000 tpy of copper production capac.
will be allected by the closure.
Openings, Expansions, New Contracts, &c.
COPPER
Kennecott and Anaconda
Bingham North Ore Sheet
Announced a letter of intent leading to a joint operating agreement for
Minerals.
Extension (Nennecott
the 2 adjacent properties. Under the proposed agreement, Kennecott
and Carr For Mine
would receive 96 percent of the ore output from the joint venture. Its
(Anaconda). UT.
Bingham Canyon open pit has been operating at about one third of its
200.000 tax capacity since July. The Carr Fork Mine has been closed
since November 1981. Conclusion of the agreement, which is subject to
approval by the U.S. Justice Department, reportedly could alter
Kennecott's plans for a 5400 million modernization program for the
Bingham Pit, allowing it to opt for a smaller but higher grade
underground operation.
Magma Copper C=.
Cicero, IL.
Purchased the continuous-cast, copper-rod Hawthorne mill from American
(subsidiary of Newment
Telephone and Telegraph Co. The 50,000 tpy mill has been closed since
Mining Corp..
July but will be reopened in early 1985. Magma is expected to furnish
most of the copper for the mill. The acquisition moves Magma closer to
major rod-consuming markets, and wire and cable manufacturers, in the
Midwest and East.
JANUARY - FEBRUARY 1985
Kennecott said that it had "no announcement" regarding any production moves in the
aftermath of the collapse of labor negotiation meetings. While a source confirmed
that "we said the closure of Bingham Canyon was likely if talks were not "fruitful."
he added that the shutdown of Utah Copper Division is just "one of several
alternatives." Utah is running at slightly under one-third of its 200,000-typ refine
capacity.
Phelps Dodge has announced a proposed equity sale of its Morenci, Arizona,
operations to Sumitomo Corp, of Japan.
Both partners is in the struggling Anamax Mining Co. continue to search for buyers
for their shares in the copper and molybdenum mine more than five years after a
consent order required one of the partners, Atlantic Richfield Co., to divest its 50
percent ownership.
Officials at both Arco and Amax Inc., the joint owners of Anamax, acknowledged
they were continuing to look for buyers for the mine, but both admitted the search is
unlikely to produce any prospective buyers in current market conditions. The mine.
located at Twin Buttes. Montana. has been shut down since February 1983, although
production of copper cathodes continues using existing stocks of copper oxide at the
site.
Echo Bay Mines (Canada) completed its acquisition of Copper Range from Louisiana
Land & Exploration on January 11, 1984. It is not known what the new owner intends
to do about the idled White Pine. Michigan, copper complex. A vice president of
Echo Bay said. "We are going to look at the assets and talk to the employees. There
might be a sale. we might lease out the refinery. However, anyone can read the
handwriting on the wall -- at these prices we are not going to get the underground
segment running again."
Standard Oil of Indiana announced that it plans to spin off the metals, industrial
minerals. and coal operations of its Amoco Minerals subsidiary in a tax-free
distribution of shares to Standards stockholders. Cyprus Minerals, the new company.
will be comprised of three divisions metals, industrial minerals, and coal. Cyprus
Bagda, Cyprus Pima. Cyprus Thompson Creek, and the Nothumberland gold mine in
Nevada will fall under the new entity's metals divisions. Only the industrial minerals
and coal sectors were profitable last year. Cyprus Bagdad increased output at its
Bagdad, Arizona, mine to capacity 85,000 typ of contained copper -- at the end of
1983. Cyprus Pima's copper mine at Pima, Arizona, halted mining on June 4, 1982,
and milled the last of its stockpiled ore on October 1 of that year. It is expected to
operate only as a swing mine.
Pennzoil has announced that its Duval mining assets are for sale.
Sources: Minerals and Materials, U.S. Bureau of Mines
(June/July 1983 - October/November 1984).
American Metal Market
(various issues Jan-Feb. 1984)
Metal Week
(various issues Jan. 1984))
ATTACHMENT 2
Position Recardinc Production Restraint on Copper
The Government of Chile opposes restraints on the
production of copper. We believe copper prices exceed
production costs, that is, production remains profitable.
The Government of Chile rejects in principle attempts to
exercise monopoly power to manipulate world supplies and
prices of basic commodities. It is not in Chile's long
term interest to engage in such practices.
Moreover, in reality, Chile would not benefit from attempt
to manipulate world copper supply and prices through
production restraints it has been objectively demonstrated*
that production cutbacks even by four major copper
producers -Chile, Peru, Zambia and Zaire- would not benefit
them. Nor would such cutbacks by these countries
materially benefits copper miners in the United States.
World supply and demand for copper is relatively elastic.
In these circumstances, the impact of production cutbacks
on copper prices would be too small to compensate copper
producers for the loss of revenue from lower production.
Thus for reasons of sound government policies and because
of the realities of the market, Chile maintains its firm
opposition to restrictions on copper production.
"See "Would CIPEC Nations benefit from production
cutbacks?" paper by Robert S. Pindyck (Professor of Applied
Economics, Massachusetts Institute of Technology), August
7. 1984, for the D.S. Government Interagency Task Force on
Copper. Pindyck demonstrates a 15 percent production
cutback by Chile, Peru, Zambia and Zaire would raise world
copper prices only three percent but cause a 13 percent
drop in their gross revenues.
ATTACHMENT 3
CIPEC
177
:
c.
livence:
It
758 11 55
Adresse
telect
MEDICAL
Teles
Cign:
$30
Ref. 19.933
Mr. D. Phillips
U.S.T.R.
600, 17th Street N.W.
Washington DC 2050€
U.S.A.
Paris, 11th January 1953
Dear Mr. Phillips,
I a- writing CE C COnsEGuence of your telephone conversation with my colleacur
Peter Parkinson. or. 1821. December 1984, wren you discussed the renewed activity
of the Interagency Ics: Force or. copper prompted by section 247 of the Irade
and Tariff Act passed by Congress in October 1984. That urged the President
to negotiate voluntary restraint acreements with the major copper-exporting
countries. I understand that your Task Force is carrying out a major review
of the U.S. copper industry τc enable you to decide whether or not to recommend
such a voluntary approach, cx.d that your work is expected to be completed by
the end of January 1985.
From C CIPES point of vier such negotiations, which could be particularly
directed against four cf our members - Chile, Feru, Zaire and Zambia - do r.c:
appear to DE ar. appropriate remedy for the difficulties of the U.S. domestic
copper industry. ME have 56: ou: our reasons, supported in general == published
statistics, ir. the attached document. I hope that you and your group will
find it useful. If you need ar.y further explanation, please contact either
myself or Mr. Parkinson.
I succeeded Edvardo Llosa, whom you met in Washington in April 1984, QE
Secretary-General of CIPEC at the beginning of 1985.
Yours sincerely,
RWr.
Donge Nigu
Secretary-General
Encl.