Mr. CLAYTON. I cannot speak with authority on that, Mr. Mansfield. I just do not know. I am so busy with my economic matters that I do not go very much into politics.

Mr. MANSFIELD. It is my impression that as far as Austria is concerned you have it divided into four zones.

You have Greece as a government under a king with outside backing, that Hungary is under control of the small landholders party which is distinctly anti-Communist, that Italy is by no means Communist at the present time and China certainly is not except in the northern part.

Therefore, that would leave only Poland.

In all these countries, therefore, to which supplies are to be sent, you have pointed out that those people are going to know that those supplies came from the United States, which will be in contrast to the way lend-lease was handled in some countries during the war, is that correct?

Mr. CLAYTON. Yes, they will know about it.

Mr. MANSFIELD. I suppose these boxes will be marked so that there will be further identification?

Mr. CLAYTON. I have not myself thought of that detail but I think that might be a good suggestion.

My point was that the press of the receiving country must be allowed to publicize the source of the supplies and details as to what they are and how they are being distributed.

Mr. MANSFIELD. I think you are taking every possible safeguard, Mr. Secretary.

That is all, Mr. Chairman.

Chairman EATON. Mr. Javits.

Mr. JAVITS. May I thank the chairman on behalf of myself and on behalf of the other members because of this 5-minute rule. I know nothing of any previous procedures, but this is a great boon to us.

Mr. Secretary, you have stated in your report that the agreements in question will also relate to economic problems; may I ask whether it is intended to include in these agreements or to cover the following specific situation which I found in Greece.

In Greece, the difficulties of the country directly contributing to its condition of food shortage, I found, were attributable to a very poor taxation policy, a very bad policy on the use of Greece's gold reserves, the bank was paying out gold bullion in return for local currency which was then able to be hidden away.

It is no criticism, it is just the way they thought they had to stabilize their currency.

I heard considerable criticism of their handling of funds out of shipping, because they were not getting nearly as much out of their shipping pool as they could.

Is it contemplated in those agreements that you have the right to cut off relief if it is found that the country is not doing all it can for its own economy, or all it should?

That is the first question.

This is the second question which you can include in the same answer: What mechanics will you set up to see that the country is doing all it can with its own economy?

Mr. CLAYTON. That would be pretty difficult to do, and the rather comprehensive exposition that I think I gave here as to what we intended to include in these agreements does not include the matters of which you have just spoken.

I certainly would be glad to take under consideration what you evidently intend as a suggestion about the matter.

I can only say that there is a limit beyond which we could not very well go in this agreement, and we think that we have made it so tight, or will make it so tight, that there is a chance that one or more of these countries may not accept it.

Mr. JAVITS. Mr. Secretary, I want to point out that it is all right to make it tight in respects which may not be too critical but this is a .critical respect because it goes to the nubbin of what these countries are going to do for themselves.

Mr. CLAYTON. You are exactly right but as I have tried to indicate there is a limit to which you can go in respect to dictating to these people, what they must do with regard to their financial policy and other policies, which have a pretty close relationship to this very thing,

I admit there would be some countries in a much better position, to pay if they were handling their affairs in a more careful and intelligent manner than they are now handling them, but I just do not know how far we could go in that way.

Mr. JAVITS. I might tell the Secretary that it is my own conviction that such an effort by the United States with respect to Greece, insofar as the Greek people are concerned, would be welcome by them as a great boon to them and as a way of resolving their very knotty political problems.

Mr. CLAYTON. You have touched on something there with which I am fairly familiar.

As you probably know, we have a mission in Greece at the present time headed by Paul Porter, and a very good and competent mission. They are making a very careful study of that whole situation there and reporting to us from time to time.

Mr. JAVITS. Mr. Secretary, I have just one other question. I find I have but 1 minute left and my time is running out.

Assuming that it is advisable for this kind of relief to move from people to people, that is, from the American people to the Greek people, which is what we are all aiming at, would it not have been better to have negotiated these agreements first? You must negotiate them anyhow. We could then have the Congress, which is the organ of the people, pass on relief for country A, country B, and country C. You have to have the agreements anyhow. It is just a question of when you make them.

Mr. CLAYTON. I think you must recognize that you cannot negotiate for relief for a country until Congress gives you the money.

Mr. JAVITS. The Government has made agreements subject to congressional approval before.

Mr. CLAYTON. Not to really operate. Now, what you are talking about would be an operating agreement and obviously we could not. do that until the Congress authorized us. We would be subject to very great criticism, not only here but all over the world if we were to enter into these agreements and then Congress turned us down.

Mr. JAVITS. The Secretary does not feel that would be practicable? Mr. CLAYTON. That is right.

Mr. JAVITS. That is all.

Chairman EATON. Mr. Morgan.

Mr. MORGAN. No questions, Mr. Chairman.

Chairman EATON. Mr. Lodge, do you have any questions?

Mr. LODGE. Mr. Secretary, am I correct in assuming that this resolution was drawn up on the hope that the four-party treaties made in Paris would be ratified by the Senate?

Mr. CLAYTON. It does not depend upon that.

Mr. LODGE. Might I suggest to you that those treaties might very well affect the relief situation in those countries.

Mr. CLAYTON. They may.

Mr. LODGE. It seems to me that is of great importance, because after all these parties are bound to pay out large sums in reparations and it has been rather assumed on the part of a great many people that we will have to render additional assistance to these countries in order to help them to pay these reparations.

Mr. CLAYTON. I do not think that is a proper assumption. May I just say that, so far as I am aware, the provision for reparations in the treaties to which you refer will not operate as a hurden on the economies of these countries.

Take, for example, the reparations Italy is obligated to pay. The receiving countries are obligated to furnish the raw materials from which the goods will be made.

Italy has unemployed people at the present time. They have unutilized factory space. In paying reparations they will be furnished the raw material by the receiving country for the reparations. They will take that and use it and use the unemployed people and the unemployed factory space in order to make the goods.

I do not think that will be a burden on their economy.

Mr. LODGE. As I understand the Italian treaty with respect to Russia, reparations in the sum of $100,000,000 are to be paid for as follows: That Russia will ship in the raw materials, the Italians will manufacture the product, and then the cost of the raw materials will be deducted and the balance will go toward payment of the Italian reparations, constituting in effect a mortgage on Italian labor.

Do you not believe that that is bound to affect the entire economy of the country, especially in view of the fact that a total of $365,000,000 will have to be paid?

Mr. CLAYTON. Mr. Lodge, I think you must be mistaken about that. You have described the plan correctly: That Italy will receive the raw material from the country that is to be paid reparations. That she will use her manpower, her factory space, and facilities to manufacture that and process those raw materials into goods, deliver them to the receiving country and get credit for the value of the goods, less the value of the raw materials that went into them.

Mr. LODGE. That is right.

Mr. CLAYTON. You have described it correctly and there is no gold involved of which I am aware.

Mr. LODGE. I naturally bow to your superior knowledge in these matters but it would seem to me that insofar as these treaties placing eco

nomic burdens on these countries this must necessarily affect the relief needs of these countries.

I would suggest that this matter should be considered from the point of view of the over-all picture.

Now, of course, the Senate has the right to pass on these treaties but it seems to me that it has extremely pertinent importance as far as the whole relief problem is concerned.

Mr. CLAYTON. It would if it were true that the payment of reparations by any of these countries would place a heavy burden on their foreign exchange resources. That is what is involved here in thisrelief matter. It is the ability to pay abroad for these imports that are involved.

If it were true that the payment of reparations would be a burden on the foreign resources of the countries paying, then I think you are quite right, that it would be something Congress would have to take into account. But I think I am correct in saying that that is not true.

I do not think that in any of the countries we have under consideration here their foreign resources, their foreign dollars, or gold will be tapped in order to pay these reparations.

They will pay it by their labor and by their processing facilities, and not have to lay out any foreign exchange in order to buy the raw materials which enter into these goods.

Mr. LODGE. In other words, you believe that relief needs can be measured entirely by foreign exchange and not in any way by the material resources in labor and raw materials and consumer goods of the country in question?

Mr. CLAYTON. If the country in question had its labor fully employed and its facilities fully employed then it would be a burden, but in these countries like Italy that have to pay reparations, that is not

true.

They have at least 1,500,000 unemployed now in Italy and they have many factories or parts of factories not being run.

In a sense, it is of some assistance, perhaps, to the country, strange as it may seem, to pay reparations because the receiving country furnishes the raw materials, the paying country gets its labor and its factory employed in order to process the goods, and reduces the number, thereby, of unemployed.

I am not espousing the cause of reparations in making that argument. I am only pointing out that it is not a great burden, necessarily, on the country under the conditions on which we insisted in Paris and which we got.

For example, Greece gets some reparations, from Italy. Greece must furnish the raw materials out of which the material is made and must come to agreement with the Italians as to what goods they will furnish.

By the way, Italy does not start paying reparations until 2 years after the treaty becomes effective.

Mr. LODGE. Thank you, very much.

Chairman EATON. Mr. Colmer.

Mr. COLMER. No questions, Mr. Chairman.
Chairman EATON. Mr. Jackson.

Mr. JACKSON. Mr. Chairman, from the foot of the class to the top of the class, I would like to add a word of thanks for this 5-minute rule. Otherwise the prospects of some of us saying anything more than good morning for the next two years would be very slight.

Mr. Secretary, I think, so far as I am concerned, the plan is an excellent one. I think it is one that is going to meet with the approval of the American people.

It seems to me that the gist of the matter, and the thing that should appear definitely in the record as a positive statement of fact on which we can justify our position to the House is the fact that these agreements when drawn and settled upon will become inviolate.

With all due regard to your statement on Poland, there is a popular conception that freedom of action is not a fact in Poland.

What I should like to know, and I am sure all of the members of the committee in the House would like to know definitely, is that when these agreements are once drawn, that it is the intention of the State Deparment to carry them out to the letter of the agreement, that any violation, by a recipient country or government, of the terms of the agreement would be sufficient reason to withdraw all of the program as affecting that particular nation.

Mr. CLAYTON. Certainly that is correct.

As I have emphasized here, I would like the committee to fully understand that we have the right in the agreement to stop the flow of supplies immediately at any time, for any reason we may want to stop it.

Now, obviously, minor mistakes can always be made. If we stop the flow of supplies because of a report we receive that a certain thing is done contrary to the agreement and the country represents that it has not been done or that it is not contrary to the agreement and we look into it and find they are right, obviously we would not want to continue to stop all shipments.

Mr. JACKSON. I think it is fine that we have an American program for a change.

That is all, Mr. Chairman.

Chairman EATON. Mr. Secretary, are you through?

Mr. CLAYTON. Yes, sir.

Chairman EATON. I would like to use a little time to ask just one question:

We are supposed to sell a part of this material to somebody who needs the food but has the money, is that right?

Mr. CLAYTON. The country receiving it will of course perform the distribution and will make sales of some of it to people who need it, but who have the local currency with which to buy it.

Chairman EATON. When that money is turned over, it is to be turned over to our people or to the local facilities?

Mr. CLAYTON. No, sir; it is our intention to turn it over to the treasury of the local government, but in a special account under conditions which we would outline.

Chairman EATON. I wondered whether that would be an addition. or a subtraction as far as our funds were concerned.

Mr. CLAYTON. It would really not be either, because the problem here is dollars and not local currency. These countries require a cer