Special Message to the Congress on Synthetic Rubber.

[Released January 16, 1950. Dated January 14, 1950]

To the Congress of the United States:

The tremendous increase in the use of rubber is one of the outstanding features of our industrial development in the last 50 years. Rubber has become indispensable to the United States, in both peace and war. Yet, 10 years ago this country was dependent for practically all of its supply of this essential material on areas halfway around the world. Early in World War II these areas were lost, and it became necessary to develop a domestic source of rubber. The creation, in the midst of war, of a new industry capable of supplying a million tons of synthetic rubber a year was one of the great achievements of our war effort.

Since the war, the sources of natural rubber have again become available to us, and production has increased as the destruction and dislocations of war have been overcome. At the same time, the world demand for rubber has risen so far above the prewar levels that the supply of natural rubber is still less than demand. Thus, continued production of synthetic rubber in this country has prevented a serious world rubber shortage.

Facilities for producing general-purpose synthetic rubber, commonly called GR-S, are owned by the Government, as are the plants for producing butyl, the type of synthetic rubber used primarily in inner tubes. Facilities for producing other types of synthetic rubber are now all privately owned. In 1949 about 289,000 long tons of GR-S and 52,000 long tons of butyl were produced by the Government. In addition, about 53,000 long tons of other synthetic rubbers were produced in privately owned plants.

It is essential to our national security that facilities to produce enough high-quality synthetic rubber to meet our needs in an emergency be continuously available. We must build up a stockpile of natural rubber, and we have been doing so, but the accumulation of a stockpile large enough to meet all emergency needs for rubber is impractical. We must be equipped to meet the bulk of our needs from domestically produced rubber.

The Government's synthetic rubber activities are now conducted under the Rubber Act of 1948, which expires on June 30, 1950. This legislation provides that capacity for production of synthetic rubber shall be maintained in the United States at all times, and requires that minimum quantities shall be produced and consumed each year. It provides authority for continued Government production of synthetic rubber, for regulations requiring its consumption in certain products, for stand-by maintenance of plants not in operation, and for continued Government research in synthetic rubber. Although the act prohibits the disposal of the facilities in the synthetic rubber program, it declares it to be the policy of the Congress that Government ownership shall terminate whenever consistent with national security. The act provides that on or before January 15, 1950, the President shall recommend to the Congress "legislation with respect to disposal of Government-owned rubber-producing facilities... together with such other recommendations as he deems desirable and appropriate."

As a basis for making recommendations to the Congress, I have had made a thorough investigation of all aspects of the rubber problem. A report summarizing the results of this investigation is transmitted to the Congress with this message. The detailed recommendations in that report have my approval.

The rubber policy of the United States should be based upon the fundamental national objectives of protection of the national security, promotion of a free competitive economy, and achievement of a peaceful and prosperous world. I recommend that legislation succeeding the Rubber Act of 1948 be enacted, setting forth this rubber policy, and providing for continuation of the synthetic rubber industry in a manner consistent with these objectives.

In order to maintain the productive capacity needed in the event of emergency, the President should have the authority to designate the plants which must be kept available at all times for synthetic rubber production. On the basis of present technology and estimated requirements, it appears that our .present plant capacity of nearly a million tons a year should be maintained to be prepared to meet emergency needs for synthetic rubber. It is not necessary, however, that all this capacity be in operation. Maintenance in a stand-by condition of those plants which are not being used should, therefore, be authorized.

In order to encourage technological development in the production and use of synthetic rubber and to provide a basis for rapid expansion of production if this proves necessary, at least a minimum quantity of each type of synthetic rubber must be produced and consumed. Certain types of synthetic rubber, which are privately manufactured, have established a sufficiently strong position in the competitive market to assure a continuing demand for them. Recent improvements in butyl rubber, which is produced only in Government-owned plants, make it superior to natural rubber for use in inner tubes, its major use. It is probable, therefore, that as soon as private production of butyl begins, this type of synthetic rubber will be produced and consumed in adequate volume in a competitive market. Until butyl is privately produced, however, the President should have the authority to determine the minimum quantities of butyl which must be produced and consumed, and to the extent necessary to require its use in specified products.

The situation with respect to general-purpose synthetic rubber (GR-S) is not quite so favorable. Since it is not yet a satisfactory substitute for natural rubber in all of the products for which it would be used in an emergency, it is desirable that the Government's authority to conduct research in this field continue. The physical properties of GR-S have been steadily improved in recent years, and at present the quality differences between GR-S and natural rubber for peacetime general-purpose uses (chiefly passengercar tires) are not significant. Price differentials are likely to be the determining factor in the choice between the two rubbers for most uses. It is very possible that for some time to come a considerable volume of GR-S production will be required, since the supply of natural rubber is not likely to be sufficient to meet world market demand. This possibility, however, is not an adequately dependable base for national security planning.

I believe that, at the present time, at least one-quarter of total consumption of GR-S and natural rubber, and not less than 200,000 long tons annually, should be GR-S. However, the needed level of production and consumption may change over the next few years with changes in world conditions. Therefore, the President should be given the authority to establish from time to time the minimum level of production and consumption necessary to the national security.

The present technological position of general-purpose synthetic rubber is such that it probably could not compete for bulk uses with natural rubber offered at significantly lower prices. There is thus no adequate assurance that the demand for GR-S either because of the possible shortage of natural rubber or because of its technological qualities, will be sufficient to insure production and consumption at levels necessary for national security. The President should, therefore, have authority to require the use of GR-S in certain products to the extent necessary to assure such production and consumption.

The minimum level of production and consumption should not be higher than the national security requires, for if it were, it would unduly prevent consumers in this country from realizing the benefits of market competition, and interfere with our objectives of expanding world trade and world prosperity.

It is my earnest hope that controls on consumption of GR-S may be reduced or suspended over the next few years, as technological improvements result in increasing quantities of general-purpose synthetic rubber being consumed without Government support. This development should be stimulated by the disposal of the Government's plants to private owners.

The President should be authorized to dispose of the synthetic rubber facilities to private owners, under conditions which will protect the national security and promote effective competition.

The disposal of these plants while promoting effective competition will present many difficult problems. The plants are large and involve large-scale operations. Furthermore, only a few plants are required to meet the probable demand for both required and anticipated voluntary consumption of synthetic rubber. The legislation authorizing disposal should take account of these facts, and provide specific standards designed to assure that the disposal program will actively promote effective competition and avoid monopolistic concentration.

A special problem will arise when general-purpose synthetic rubber plants are privately owned, if the Government continues to require the use of synthetic rubber in certain products. In this situation, the Government must see that synthetic rubber is made available on fair and reasonable terms and conditions to those required to use it. Such Government intervention in the normal buyer-seller relationship will present difficult practical problems for both industry and Government. Development of a vigorous private synthetic rubber industry, however, may soon result in adequate consumption of synthetic rubber to permit removal of Government regulation.

I believe that the policies outlined in this message and the detailed recommendations contained in the accompanying report provide a sound program for action. For this reason, the legislation establishing these policies can be of relatively long duration. Furthermore, a firmly established legislative framework is highly desirable if disposal of the Government's synthetic rubber plants is to be successful. I recommend the adoption of legislation of ten years duration in order to provide adequate protection of the national security and to contribute to the development of a vigorous, competitive, and privately owned synthetic rubber industry in the United States.

HARRY S. TRUMAN