ment to their South American distributors. Their customers thus continued to look to the European-controlled firms in Latin America for steel, rather than to the branch offices there of the United States companies that actually manufactured it.

With their outlets assured of a source of supply, the European steel firms have been able to maintain the cartel connections that gave them control of this South American market. They have made an impressive display of their ability to operate in spite of all the difficulties.

Reservoirs of foreign exchange have been established in Latin America for any eventual needs, economic or political. Areas of German business activity have been kept alive, and their channels of communication with the home office maintained unimpaired. A strategically advantageous position is assured in the post-war scramble for markets.

German steel firms succeeded in building up huge inventories in South America and replenishing stocks, so that their engineering firms in South America, with supplies of American steel at their disposal, have continued bidding successfully on construction jobs in competition with other firms buying American steel. The metal-sash business in Argentina is dominated by the German steel firm of Klöckner, while the pipe and tube market is controlled by the Argentine agency of the Mannesmannröhren-Werke of Duesseldorf. This situation has caused some of our leading producers considerable concern. A representative of one of this country's largest manufacturers, in a South American survey, described the situation as follows in November 1942: It has become apparent * * * that at some time prior to this past year these Germans were able to import a tremendous amount of American steels. They now have made good use of this fact for propaganda, along with making a very nice profit. It does not add to our dignity to be unable at this moment to ship tool steels to Argentina when they can go to a German firm and get a steel which the German house invariably states is an American grade "as near as the Americans can come to equaling our 'this or that.'" In fact, in at least one specific instance ** * which was checked by the writer, an analysis of a sample revealed that the steel given to a certain customer "as the American equivalent of special K" was definitely nothing of the sort. It contained nowhere near the alloy content it should have. This is a foolproof set-up for them. They make a profit, get credit for doing their best to help out in trying times, and at the same time they discredit American tool-steel quality.

The CHAIRMAN. Isn't their position due largely to the failure to build our own sales agencies in South America?

Mr. CARTER. I think there is another consideration, Senator. It is that South American markets have been largely withheld from firms in the United States by cartel restrictions.

The CHAIRMAN. Yes. We have been blocked out of that market.
Mr. CARTER. That is right.

The CHAIRMAN. Instead of building up a market of our own, we were holding a market for the Germans.

Mr. CARTER. I think that is true, Senator; and I believe that some of the steel firms in the United States now realize that.

May I introduce as an exhibit the survey of special steels market in Argentina made for an American steel company by its sales engineer in 1942, from which I was quoting?

The CHAIRMAN. It will be printed as part of the record.

(Available in the files of the Economic Warfare Section, War Division, Department of Justice.)

Mr. CARTER. Six months later, on May 8, 1943, an official of the Argentine branch of this same steel company expressed his views to the parent company in the United States. Discussing the problem of post-war leadership in the Argentine steel market by European interests under German domination, he pointed out:

** certain post-war developments, this one in particular, will not wait until the war is over, but will be determined by preliminary plans now being made and by forces already set in motion.

The CHAIRMAN. If these markets are kept intact for Germany by German agents through the use of American steel, will not the result be that German steel mills will be able to make a quick recovery, which in turn may help them prepare for World War III? We have seen the German governmental domination of business; is it not reasonable to say that the activities which you are now describing are part of a general plan to prepare for the next war?

Mr. CARTI R. I think that is certainly a possibility.

May I submit the letter from which I quoted for the record?

(The letter referred to, dated May 8, 1943, available in the files of the Economic Warfare Section, War Division, Department of Justice.) Mr. CALTER. This situation was certainly fostered by pre-war cartel agreements to which United States firms were a party. More than half the iron and steel imports into the Argentine have consisted of the heavier, low-priced categories. By cartel arrangement, American exports of the most important product of the rolling mills, so-called merchant bars, were less than 2 percent of the world total. The minutes of the London Committee of the International Steel Cartel for May 11, 1939, indicate, moreover, that it was agreed Argentina would not be within the American sphere.

The CHAIRMAN. In other words, Germany, by using her dominant position in the International Steel Cartel, was able to preclude the United States from the Argentine steel market and further its business and political penetration in that country by that means, all of which worked against the unity and solidarity of the Western Hemisphere. Wasn't this in effect an attempt by Germany to establish a business bridgehead, which might develop into a military bridgehead in South America, for ultimate use against us when Germany came to conquer the United States?

Mr. CARTER. Yes, sir; I think that is true.

May I offer as an exhibit the minutes of the London Committee of the International Steel Cartel for May 11, 1939?

(The document referred to was marked "Exhibit No. 482" and appears on p. 2213.)

Mr. CARTER. In the years before the war American manufacturers were supplying less than 6 percent of Argentina's iron and steel imports. The bulk of the remainder came from firms in Belgium, France, and Luxemburg, that were later taken over by the Germans.

The activities of the German Steel Trust, commonly known as the Stahlverein, epitomize the methods used by German heavy industry to assure its post-war position. From Duesseldorf, the export division of the company, known as Stahlunion-Export, G. m. b. H., directs the

activities of 175 branches and agencies in nearly every country in the world.

The CHAIRMAN. You say that the Stahlunion directed the activities of 175 branches throughout the world. Were any of these located in the United States?

Mr. CARTER. Yes, Senator. I believe this diagram [indicating] will illustrate what the network looks like. This shows the countries in which the 175 branches and agencies of Stahlunion-Export G. m. b. H. are located.

The CHAIRMAN. That shows 10 centers in the United States.
Mr. CARTER. Yes, sir; at one time or another.

I offer this diagram for the record.

(The diagram from a 1937 publication of the parent German firm is available in the files of the Subcommittee on War Mobilization.) Mr. CARTER. Shortly after Stahlunion was organized, branches were established in the United States at the same time that American investment bankers were floating bond issues for the parent German firm, Stahlverein. Ownership of these branches was concealed from the start. The subterfuges of German firms in this country to escape collection on their defaulted bonds during the early 1930's later became a cloak for Nazi war preparations.

The controlling German interests, led by Fritz Thyssen, though busy floating their bond issues in the United States and launching the international steel cartel, had the forethought to safeguard their American affiliates. Edward Barreau, president of Stahlunion's New York agency, Steel Union-Sheet Piling, Inc., wrote to Attorney Eugene R. Pickrell on May 15, 1941:

You will remember that during the past few years the company was repeatedly attacked in the courts by bondholders of the German concerns with which we were dealing in an effort to collect from us on judgments which these bondholders obtained against these German concerns, and in each and every case these actions were thrown out of court because no relationship between us and the respective German concerns could be proven.

I offer the letter for the record.

(The letter referred to, dated May 15, 1941, was marked "Exhibit No. 484" and appears on p. 2215.)

The CHAIRMAN. By concealing the relationship between the Steel Union Co. and its German counterpart, did this not create the illusion that it was an American company operating when it was actually a German company operating?

Mr. CARTER. Yes, sir.

The CHAIRMAN. And didn't some of these activities contribute to the 1929 crash?

Mr. CARTER. That seems clear.

The CHAIRMAN. The cartel system has drawn capital from the United States while curtailing American activities. Take, for instance, Standard Oil of New Jersey which put $30,000,000 into a German firm, and got only releases from patent suits for their money.

Mr. CARTER. The Department of Justice has evidence that the German pattern, among other things, included the practice of subsidizing at the expense of American bondholders.

To continue: In 1937 Mr. Barreau had supplied Stahlverein's overseas customers. The German mills at that time were unable to do so,

owing to the overwhelming demand of German rearmament. Early in 1938 he wrote his clients:

We have received instructions from Stahlunion-Export G. m. b. H., Duesseldorf, to desist from further offering American material.

We have been informed that the conditions in the European steel business have changed drastically, and that our own mills are again in a position to make satisfactory deliveries.

The CHAIRMAN. Here was an American company speaking of their own mills at Duesseldorf.

Mr. CARTER. Yes, sir.

I offer that letter as an exhibit.

(The letter referred to, dated January 11, 1938, was marked "Exhibit No. 485" and appears on p. 2216.)

Mr. CARTER. Similarly, he informed a Peruvian company on March 8, 1938:

As to the question of furnishing you with american [sic] coal, I am sorry to say that we have orders from abroad to cease all activities with regard to the sale of american [sic] goods to the various foreign branches. This unquestionably embraces also coal, and I am sure that we would expose ourselves to severe criticism if we engaged in competition with a firm who is a direct subsidiary of the Vereinigte Stahlwerke. For these reasons, which I am sure you will appreciate, I am sorry that we are unable to be of service to you.

I offer the letter as an exhibit.

(The letter referred to, dated March 8, 1938, was marked "Exhibit No. 486" and appears on p. 2217.)

Mr. CARTER. Immediately after war broke out in September 1939, Steel Union once more took over the task of supplying the overseas agencies of its German principals. For this it became necessary to circumvent the blockade and the blacklist and censorship regulations. At the suggestion of Rudolph Schaur, traveling representative for Stahlunion and the German pipe and tube cartel, Mr. Barreau in October 1939 wrote to seven agents of Stahlunion in Latin America about the possibility of supplying American-made steel products "during the period when you will not be able to obtain supplies from your previous sources in Germany." He cautioned them:

It is necessary for you, however, to obtain the approval of our suggestion from the Stahlunion and the Roehren-Verband in Duesseldorf. We have no doubt that this approval will be forthcoming, but we think as a matter of form these two firms ought to be consulted by you before we commence with our negotiations. I offer these letters for the record.

(The letters referred to were marked "Exhibits Nos. 487-488" and appear on p. 2217.)

Mr. CARTER. Shortly after the outbreak of war, the Mexican firm associated with Mr. Schaur forwarded packets of letters to Steel Union in New York for transmission to Duesseldorf by the "safest and fastest method."

I submit that letter as an exhibit.

(The letter referred to was marked "Exhibit No. 489" and appears on p. 2219.)

Mr. CARTER. Steel Union acknowledged receipt of them and added: We have forwarded these letters in what we felt is the safest way for them to reach their destination; however, in view of present conditions in Europe, we cannot assume any guaranty that they actually will reach their addressee, although we trust that this will be the case.

I offer these letters for the record.

(The letters referred to were marked "Exhibit No. 490" and appear on p. 2220.)

The CHAIRMAN. It is possible, Mr. Carter, that the Mexican associate of Stahlunion was more interested in avoiding British censorship, which might discover the transmittal of economic intelligence than in using "the safest and fastest method"?

Mr. CARTER. That is possible, Senator, because at that time the mail from Mexico was subject to censorship by the British, whereas mai! from New York was not.

Rudolph Schaur, making his office temporarily with Stahlunion's Mexican agency, sent follow-up letters to Stahlunion representatives in Guatemala, Honduras, San Salvador, Nicaragua, and Costa Rica, asking that all orders be sent to Steel Union-Sheet Piling, Inc., in New York, in order "to maintain our connections with our old customers under all circumstances." Anton Zeiss, Cuban representative of Stahlunion, was informed by Mr. Schaur that "this cooperation between you and Steel Union-Sheet Piling, Inc., is definitely only for the duration of the war, and that out of this business relation no risk must be allowed to develop for the Steel Union in New York.”

I submit those letters as an exhibit.

(The letters referred to were marked "Exhibit No. 491" and appear on p. 2221.)

Mr. CARTER. Mr. Schaur's letter to Mr. Zeiss indicated that the arrangements for wartime cooperation with Steel Union had been worked out with Stahlunion, and that copies of the letter were forwarded to both New York and Duesseldorf.

The Brazilian branch of Stahlunion was informed on December 1, 1939, that "you may rest assured that we shall not fail to support your endeavors as far as this is possible under the prevailing circumstances." Mr. Barreau warned against writing indiscreet letters to Duesseldorf: Your letter *** to Duesseldorf * * contains certain references about our mutual relationship which under the present political conditions should not be discussed with anyone abroad for certain obvious reasons. Neither you nor we know whether someone may not be opening the mail while it is in transit to Europe who is not entitled to do so. We are making this statement to you without the slightest idea of withholding information from Duesseldorf, but merely as a precautionary measure to safeguard our business. You are aware of the fact that you are on the black list, and if anyone unqualified should get hold of your letter, which evidences a direct relationship between you and us, the next thing that would happen would be that we would also be on the black list. This being the case, we trust that you will understand when we caution you to use the utmost care in regard to your correspondence with Germany.

I offer that letter as an exhibit.

(The letter referred to was marked "Exhibit No. 492" and appears on p. 2221.)

Mr. CARTER. Similarly, on March 12, 1940, Mr. Barreau informed one of the Brazilian companies serving as a blind for Stahlunion's Brazilian agency:

*** none of our shipments to any destination is made in our name, but always in the name of some neutral party. Whether we have the name of the manufacturers appear as shippers, or whether we select for this purpose other companies than the manufacturers, must be left entirely to our discretion.

Here is that letter as an exhibit.

(The letter referred to was marked "Exhibit No. 493" and appears on p. 2222.)