Mr. LODGE. I was struck by the exact difference of $100,000,000 there. That is rather baffling.

Mr. HERTER. There is also a difference in that the first estimates given us were for a 6-month period and the second estimates for a 4-month period.

Mr. LODGE. I am a little puzzled by the Export-Import loans on available funds, because it seems to me that since the Export-Import Bank lends money only on the basis of a bankable loan, there must be a question as to whether that money should be spent in connection with consumer purchases, which we do not lend, but which we give as a grant-in-aid. In other words, they could not borrow the money from the Export-Import Bank to make these purchases, and therefore, how could that be a part of it?

Mr. HERTER. That is what I tried to point out in the very beginning of my testimony. The Export-Import Bank loan of $100,000,000 has already been made. That is now in existence. That came up long before this interim aid did. In fact, that was made last June. The Export-Import Bank and the Italian Government have been dickering as to what it should be used for and they have been signing up agreements. That loan is actually for a good deal more than is indicated in these figures. The State Department has cut out $45,000,000 of that loan because they say the materials that will be available under it will not be available until after March 31 and hence they have cut it out of this estimate.

Mr. LODGE. Does it not seem to you better for the Congress to appropriate the money under this bill rather than to use the Export-Import Bank for that purpose?

Mr. HERTER. That is something beyond the control of the Congress at the moment because the loan has already been made. The point that I tried to illustrate was that there is a complete inconsistency in the one case of requiring Italy to pay cash, or make a loan for coal and petroleum and certain cereals, and in the other case get in under the grant-in-aid basis.

Mr. LODGE. This money which they would obtain from the ExportImport Bank can actually be spent for relief by them?

Mr. HERTER. You will find on page 61 of the blue book, if you will look at that, exactly what the Export-Import Bank situation is, and it is completely inconsistent, to my mind, because we are asking either for a repayment or for dollar payment for the very same type of thing which, on another page, we are going to make a grant-in-aid for. Mr. LODGE. That is the point that I had in mind.

May I ask you if your committee investigated in any way the revision of the surplus-property agreements which we have made with these various countries? What I have in mind is this: Under these surplus-property agreements, as I understand it, we receive only 18 cents or 20 cents on the dollar, and we receive that in local currency.

Now, we have bound ourselves, in addition, to spend this money only at a certain rate per year over a period of years, and also for only certain items. Did your committee go into that situation with a view to revising those surplus property agreements so that the proceeds of surplus property sales would be available for other purposes?

Mr. HERTER. We did not go into that directly, but it enters into this whole problem. That is why I felt that the whole question of the use of local currencies ought to be reserved for the time being until we set

up some administrative organization and lay out the general principles under which those surplus funds would be used.

Mr. LODGE. You will agree with me that it would be a good idea to give us more latitude as to the expenditure of that money?

Mr. HERTER. That is right. I would like to see all of those local currencies put under a Board of Administrators who would have very broad powers to use it to the best advantage of the country itself. Mr. LODGE. And there are many things it could be used for?

Mr. HERTER. Yes.

Mr. LODGE. In your opinion, Mr. Herter, should price controls in western Europe be retained?

Mr. HERTER. There you are getting into a really tough question. I do not know. I think that it would be very difficult to pass intelligent judgment on that. You actually do not have price control in certain countries.

Mr. LODGE. In view of the black markets?

Mr. HERTER. Continuing black markets. I think that that question ought to be reserved in connection with the complete reorganization of the currency systems.

Mr. LODGE. To the extent that there is a black market the Government of the country concerned does not receive revenue from taxes on those commodities and that is bound to have an effect on the burden of the American taxpayers.

Mr. HERTER. It also has a very serious effect on incentives for people to produce when production is a most important problem.

Mr. LODGE. Exactly. Do you believe that any rehabilitation program can really be successful while the Communist disruptive forces continue their activities?

Mr. HERTER. Well, there I would limit myself almost entirely to labor unions. If Communist leadership in the labor unions insists on disrupting production through general strikes, or through other sabotage without proper justification, merely for the sake of creating chaos, it can be a very difficult problem.

Mr. LODGE. I would like to thank you for answering all these questions and I would like to say one thing more.

With respect to the situation in northern Italy, I was there recently, and unemployment in northern Italy has suddenly taken a rise because the big industrialists in northern Italy do not have enough money to pay wages, and the whole problem of credit from private banks in northern Italy is becoming extremely tight. I am inclined to think that the picture in northern Italy is not quite as optimistic. as some people suppose, and I think that is another factor which makes this aid all the more urgent. I thought you might be interested to know that.

Mr. HERTER. Yes. I think that there has been a slowing down ever since there was a tightening on the remaining dollar resources from the standpoint of the purchase of raw materials.

Chairman EATON. Mr. Herter, on behalf of the committee I wish to thank you for your very, very illuminating testimony. Permit me to say that, in the 23 years that I have served on the committee, this is the first time that I have ever known a witness to receive the acclaim and the affectionate regard of every member.

(Whereupon, at 5:05 p. m., the committee adjourned to meet at 10 a. m., on Friday, November 14, 1947.)

EMERGENCY FOREIGN AID

FRIDAY, NOVEMBER 14, 1947

HOUSE OF REPRESENTATIVES, COMMITTEE ON FOREIGN AFFAIRS, Washington, D. C.

The committee met at 10 a. m., Hon. Charles A. Eaton (chairman), presiding.

Chairman EATON. The committee will be in order.

Our first witness this morning is Mr. Mundt, who has done a very remarkable piece of work in his studies in Europe and will have something important to tell us. Mr. Mundt.

STATEMENT OF HON. KARL E. MUNDT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH DAKOTA

Mr. MUNDT. Mr. Chairman and colleagues, this is going to be an experience, I am sure, for all of us who are coming down as members of the committee today to double in brass as witnesses and then go hack as members of the committee to interrogate our colleagues. While it is going to be a little bit hard experience at the time we are down here I think the idea is good because I am certainly glad to share the information which the others secured in their parts of this study which was made during the summer.

Our particular committee, which is comprised of six members of the House Foreign Affairs Committee and four members of the Senate Foreign Relations Committee, covered 22 countries, all of them in Europe, spending just about 6 weeks at the job.

The members of my committee are as follows: Smith of Wisconsin, Judd of Minnesota. Lodge of Connecticut, Jarman of Alabama, Gordon of Illinois, Mansfield of Montana. From the Senate we had: Smith of New Jersey, Hickenlooper of Iowa, Barkley of Kentucky, and Hatch of New Mexico.

As you know, we visited all of the countries over there except Russia and Yugoslavia. We did not visit Albania either because we were not positive whether it was an autonomous country, since we no longer have any diplomatic mission there. As to Yugoslavia and Russia, we did not even ask permission to go. We were interested more in studies of conditions outside that particular area.

I want to say now a few things based on our experience, and, of course, we have not completed the committee's report and what I say will be speaking as an individual observer and not speaking for the committee, as its chairman, because we have not yet compiled our written report.

On the basis of my observations and my discussions with my colleagues, the discussions we had over there, I am happy first of all that we are considering an emergency-aid program separately from an extended economic-aid program, because I think there is an urgency about this immediate situation.

In the first place, we could not give the consideration now which we are going to do, if we are to do the job adequately in working out an extended, more comprehensive aid program.

I think, therefore, that while both have the same objective, that of primarily strengthening the hands of those standing firm against communism, and that while both should be projected in conformity with largely the same principles and policies that there is in the countries listed-France and Italy especially, and to a lesser extent in Austria-there is an urgency about the needs which makes it necessary to give those countries prompt attention in this extra session of Congress.

I think that our committee, however, must give a considerable amount of careful screening in order to make sure that every dollar which we spend in an area which is going to seek aid, and perhaps needs many more dollars than we can probably make available, that every dollar that we spend must produce the maximum dividends in the three things, essentially, as I see it, that we seek to achieve by this whole program.

The first is the development of an economy among the free countries of the world which is going to provide the basis upon which they can build for security and for independence and for the development of institutions increasingly in line with the type of institutions we have in America.

Our second objective is to help maintain and develop political stability in the areas over there where political instability is threatening to bring about world insecurity.

And third, we hope to secure dividends in international peace, good will, and order.

As far as I am concerned, it seems to me that candor and honesty and integrity in good government require that we give the people of America the complete story, the true report of this program, and let it be fully understood that what we are providing here is not certainly what could be provided in a long and more comprehensive program of relief from starvation nearly so much as relief from subjugation, from an aggressive communism, because the number of people who are starving, or will starve from no aid at all from us is not so great as exists elsewhere. If we were looking at it purely as a matter of protecting people from starvation, there are other areas outside of Europe-in India and in China, for instance-where people are starving in much greater numbers than in Europe. But, it is the impact of the hunger that confronts them, as I see it; what happens politically from minds which are undernourished by bodies which are underfed and the very direct and immediate danger of the rights of others being subjugated to a way of living which has announced itself as being in opposition to our own ideas that provide the very persuasive arguments in support of such a program as we can supply and afford to support free peoples who are resisting the further advances of godless communism in Europe and China.