market. With the break-down of these trade patterns, supplying countries, to a substantial degree, have had to accept nonconvertible currency or extend credit in order to sell in the European market. Neither of these procedures has given them dollars with which to purchase in the American market. The net result has been that trade continued around the world in large part on the basis of American grants or credits which made dollars available to other countries to meet, their import requirements. The diminishing supply of dollars is restricting trade everywhere.

The European recovery program will be quickly reflected in other countries, if the important element of flexibility in purchasing is provided. To the extent that supplies for Europe are procured from nonparticipating countries for dollars, the trade position of these countries with the United States will be improved. In this way we feel that the problems of the other Western Hemisphere countries can be met through a combination of the European recovery program purchases and normal Export-Import Bank transactions.

More important in a fundamental sense, with increases in production in Europe such as those contemplated in the Paris report, exports from Europe will increase, and the necessity for the various supplying countries to accumulate nonconvertible currencies or to extend credit will diminish. Just as the progress of each individual country among the 16 will affect the progress of the others, so the recovery of Europe will inevitably be a significant link in a chain reaction creating or maintaining economic activity in other countries.

The situation in China continues to cause us deep concern. The civil war has spread and increased in intensity. The Chinese Communists by force of arms seek control of wide areas of China.

The United States Government and all other world powers recognize the National Government as the sole legal government of China. Only the Government and the people of China can solve their fundamental problems and regain for China its rightful role as a major stabilizing influence in the Far East. Nevertheless we can be of help and, in the light of our long and uninterrupted record of friendship and international cooperation with China, we should extend to the Government, and its people, certain economic aid and assistance. A definite proposal is under preparation for early submission.

I do not have to tell you that this foreign economic program of the United States seeks no special advantage and pursues no sinister purpose. It is a program of construction, production, and recovery. It menaces no one. It is designed specifically to bring to an end in the shortest possible time the dependence of these countries upon aid from the United States. We wish to see them self-supporting.

This is certainly not the program of a country seeking to exercise domination or to influence unduly any foreign country. The nations and political groups which have now declared their opposition to the program apparently wish to block for their own reasons the revival of western Europe.

Interim aid program: I have gone at some length into the major features of the long-range plan for European reconstruction and the part that the United States can prudently and wisely contribute because I fully realize that the speedy and adequate consideration of the interim aid program, which will be the first item of business presented

to you, cannot be dealt with by the Congress without understanding its relationship to the program of long-range reconstruction of Europe.

I would, however, urge upon you the necessity of a speedy decision in regard to the interim aid program. What is immediately needed is aid to maintain the status quo in food and in the material necessary to keep the wheels turning and people at work.

It will do little good to discuss the merits of a recovery program for Europe if in the meantime political and economic conditions have deteriorated to a point where such a program could not possibly succeed. The problem of overseas payment has become particularly acute in the case of Austria, France, and Italy. It is clear that the people of these countries in the absence of immediate assistance will, during the next few months, begin to suffer from a lack of food and other necessities of life and the whole economic and social life of the people will be seriously affected. Within a short time these countries will have exhausted all of the dollar resources which they can muster to maintain the flow of essential supplies.

Austria, whose economy is carrying the weight of a military oceupation of four powers, has been able to survive in recent months largely through the assistance rendered to her under the United States foreign relief program. These funds will be exhausted shortly after the beginning of the year. The dollar resources of France. will permit her to procure essential food and fuel from abroad only until the end of December. Because of her rapidly dwindling reserves, she took steps at the end of August to reduce sharply the placement of contracts for most other imports. Italy's financial situation is even more serious than that of Austria or France. Last June the Italian Government took steps to eliminate the purchase of most of the raw materials and supplies which she required for the operation of her economy. The United States foreign relief program has been able to provide food and coal until the present time. Funds are not in sight, however, beyond the first of December to maintain the flow of these necessary commodities.

In order to meet this emergency, I recommend that you give immediate and urgent consideration to a bill authorizing the appropriation of sufficient funds to provide the supplies necessary to permit the people of these countries to continue to eat, to work, and to survive the winter. This is not a recovery program. It is designed to help provide the essentials of existence to the people of these three countries.

To accomplish this purpose it is recommended that the Congress authorize an appropriation of $597,000,000. Of this amount Austria needs $42,000,000, France needs $328,000,000, and Italy needs $227.000,000. These funds should be sufficient to meet the situation until March 31, 1948, before which time we hope that some decision may have been taken by the Congress regarding a broad recovery program. In the absence of a recovery program the problem of maintaining existing levels in Europe rapidly becomes more complex after March 31. Additional countries will by that time practically have exhausted their dollar resources, and the cumulative effect of the uncertainties as to the future and the continued low levels of production and consumption will have serious consequences throughout Europe.

The program of interim aid would be concentrated largely on such items as food, fuel, fertilizer, fibers, seeds, and medical supplies. With such resources as they can make available, the countries should be able themselves to procure other imports needed to prevent economic deterioration. The program should be sufficiently flexible to take account of such changes in requirements and availabilities as

may occur.

Interim aid should be given to these countries under agreement to make efficient use of the commodities which we would supply. The bilateral agreements would also require that the local currency equivalent of the value of the commodities which we supply would be used only for such purposes as we and the recipient country might agree. They should also include a provision that the receiving government make known to its people the purpose and source of our supplies and that it would make available full information concerning their distribution and use.

The operation of a program of the type which is proposed can be handled expeditiously by existing agencies of the Government. The procedures and machinery which are being used in the current relief program have been set up in accordance with the relief bill enacted last

summer.

The urgency of the situation is so great that I recommend that no new agency be set up to handle this interim program. The time required to organize such an agency, to hire personnel, and establish new procedures would defeat its very purpose. Whatever agency might be created to administer the long-term European recovery program could, of course, take over the operation of interim aid as soon as it comes into existence.

There is one further element. It is my understanding that the Department of the Army will be presenting certain additional requirements for funds for occupied areas above the present appropriations available for this purpose during the current fiscal year. I am told that these will be on the general order of $500,000,000 of which slightly more than $300,000,000 will be for additional requirements in western Germany.

I have endeavored to present in broad outline the long-range European recovery program and, in somewhat more detail, the interim-aid program. The proposals will be presented in full to your respective committees.

Conclusion: In considering them I know you are aware of the momentous importance to the world of your decisions. While we are dealing at the moment with the drab though vital facts of economic life, they carry with them fateful consequences.

The automatic success of the program cannot be guaranteed. The imponderables are many. The risks are real. They are, however, risks which have been carefully calculated, and I believe the chances of success are good. There is convincing evidence that the peoples of western Europe want to preserve their free society and the heritage we share with them. To make that choice conclusive they need our assistance. It is in the American tradition to help. In helping them we will be helping ourselves-because, in the larger sense, our national interests coincide with those of a free and prosperous Europe.

We must not fail to meet this inspiring challenge. We must not permit the free community of Europe to be extinguished. Should this occur, it would be a tragedy for the world. It would impose incalculable burdens upon this country and force serious readjustments in our traditional way of life. One of our important freedoms-freedom of choice in both domestic and foreign affairs-would be drastically curtailed.

Whether we like it or not, we find ourselves, our Nation, in a world position of vast responsibility. We can act for our own good by acting for the world's good.

Senator VANDENBERG. Thank you very much, Mr. Secretary.

It is my understanding now, under the tentative arrangements made by Chairman Eaton and myself, that you and the Under Secretary and your staff will return tomorrow morning at 10 o'clock and we will devote the day to a public cross-examination in respect to these problems, in this room.

On Wednesday you will similarly appear, according to the tentative program, before the House committee for a similar public crossexamination.

I simply want to ask you this one question with regard to procedural information: When will you be prepared to submit to us the specific legislative proposal respecting stopgap legislation?

Secretary MARSHALL. It is ready.

Senator VANDENBERG. I think if it might be submitted today in connection with this present hearing it would facilitate matters.

Mr. LOVETT. Your clerks have that, Mr. Chairman.

The CHAIRMAN. Very well. The proposal will be printed at this point in the record.

(The proposal is as follows:)

DRAFT, EUROPEAN INTERIM AID BILL

A BILL To promote the general welfare, national interest, and foreign policy of the United States by providing supplies to certain European countries on an emergency basis

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as "the European Interim Aid Act of 1947."

SEC. 2. It is the purpose of this Act to provide immediate assistance in the form of food, fuel, and other commodities urgently needed by the people of Austria, France, and Italy, hereinafter referred to as the recipient countries, to alleviate conditions of intolerable hunger and cold and prevent serious economic retrogression which would jeopardize any general European economic recovery program based on self-help and cooperation.

SEC. 3. The President, acting through such departments, agencies, or independent establishments of the Government as he shall direct, may, by allocation of funds to any such departments, agencies, or independent establishments, or by making funds available to the government of a recipient country, whenever he finds it in furtherance of the purposes of this Act and upon the terms and conditions set forth in this Act and upon such other terms and conditions as he may determine

(a) Procure, or provide funds for the procurement from any source, by manufacture or otherwise, food, seed, and fertilizer; coal, petroleum, and petroleum products; other fuel; fibers; and such other commodities as are necessary for the accomplishment of the purposes of this Act as set forth in section 2;

(b) Transport, or provide funds for transportation of, such commodities; (c) Transfer such commodities to any recipient country;

(d) Incur and defray expenses, including accessorial and administrative expenses and expenses for compensation and travel of personnel, for carrying out the purposes of this Act.

SEC. 4. (a) There is hereby authorized to be appropriated not to exceed $597,000,000, out of any money in the Treasury not otherwise appropriated, to carry out the provisions and accomplish the purposes of this Act.

(b) Funds authorized under this Act, when allocated to any department, agency, or independent establishment of the Government, shall be available for obligation and expenditure in accordance with the laws governing obligations and expenditures of such department, agency, or independent establishment or organizational unit thereof concerned, and without regard to sections 3709 and 3648 of the Revised Statutes, as amended (41 U. S. C. 5; 31 U. S. C. 529). SEC. 5. After March 31, 1948, no funds may be obligated under this Act.

SEC. 6. Before any commodities or funds are made available to any recipient country under the authority of section 3 of this Act, an agreement shall be entered into between such country and the United States containing an undertaking by such country

(a) To make efficient use of any commodities made available under the authority of this Act and to take insofar as possible the economic measures necessary to increase its ability to achieve a self-sustaining economy;

(b) To make, when any commodity is made available under this Act, a commensurate deposit in the currency of such country in a special account under such terms and conditions as may be agreed to between such country and the Government of the United States, and to hold or use such special account only for such purposes as may be agreed to between such country and the Government of the United States;

(c) To give full and continuous publicity within such country as to the purpose, source, character, and amounts of the commodities made available by the United States under this Act;

(d) To furnish promptly upon request of the President information concerning the method of distribution and use of commodities made available under this Act. SEC. 7. The President shall promptly terminate the provision of assistance under this Act for any country whenever he finds that such country is not adhering to the terms of its agreement entered into in accordance with section 6 of this Act.

SEC. 8. All commodities made available pursuant to this Act or the containers of such commodities shall, to the extent practicable, be marked, stamped, branded, or labeled in a conspicuous place as legibly, indelibly, and permanently as the nature of such commodities or containers will permit, in such manner as to indicate to the people of the country of destination that such commodities have been furnished or made available by the United States.

SEC. 9. The President may, from time to time, promulgate such rules and regulations as he may find necessary and proper to carry out any of the provisions of this Act; and he may delegate to the Secretary of State or any other official or officials of the Government any of the powers or authority conferred on him under this Act.

SEC. 10. Personnel employed to carry out the purposes of this Act shall not be included in computing limitations on personnel established pursuant to the Federal Employees Pay Act of 1945 (59 Stat. 298), as amended by section 14 of the Federal Employees Pay Act of 1946 (60 Stat. 219).

SEC. 11. The President, from time to time, but not less frequently than once every calendar quarter, and until the end of the quarterly period after all operations under the authority of this Act have been completed, shall transmit to the Congress a report of operations under this Act. Reports provided for under this section shall be transmitted to the Secretary of the Senate or the Clerk of the House of Representatives, if the Senate or the House of Representatives, as the case may be, is not in session.

SEC. 12. If any provisions of this Act or the application of such provision to any circumstance shall be held invalid, the validity of the remainder of the Act and the applicability of such provision to other circumstances shall not be affected thereby.

Senator VANDENBERG. Have you anything you wish to say, Congressman Eaton?

Representative EATON. Only that we are very anxious to have the proposed legislation in our possession at the earliest possible moment for further study before the hearings go on.

Secretary MARSHALL. It is being delivered now.
Representative EATON. Thank you very much.