Hearings

accumulated in the British banks arising out of French exports to England and from other sources. In the case of Italy the figure was somewhere around $85,000,000. Both economies had counted on those funds to procure goods, and food and fuel in particular, from this country. Consequently the combination of these three coincidences brought about the emergent situation which faces us today.

Generally speaking, the proposals which we are making today relate to relief. That relief, of course, as was pointed out this morning, is in substance very much like the relief which is covered under the relief assistance bill, Public Law 84. There are, however, certain differences. Those differences center for the most part in the commodities as well as in the shortness of time. We are talking in effect of about 42 months. The 42-month period places several limitations on the form of action which we recommend.

The first of those is the urgency of the problem. That has a direct bearing on the form of organization which we have recommended; that is, the utilization of existing procedures, in general established in the Relief Assistance Act.

The second complication arises out of the fact that the materials, the commodities, included in this are not altogether similar to those in the Relief Act, although I think it is fair to say that they closely approximate them in certain respects.

But there is a third and, in my opinion, a rather over-riding aspect which relates to the limitation of 6 percent prescribed in Public Law 84 on what we call offshore purchases-a word you will hear a great deal about later. By it we mean purchases outside of the United States.

In general, it has been our hope to get as much flexibility as possible in this respect, for two reasons. The first is, of course, that many of these items are in extreme short supply and the ability to buy outside of this country commodities not readily available here, would, to a certain extent, we hope, lessen the impact of these transactions on the domestic economy.

The second aspect of it is, of course, that by such purchases we assist in some measure in maintaining the status quo by making those dollars available to other members of the European or Western Hemisphere economies. Most of those countries, of course, are in urgent need of dollars at the present time.

It is my belief that a large part of the problem which we face today arises out of the general world shortage of production. It is very difficult to attribute one of these major calamities to a single thing. But by the mere fact that the production, notably in western Europe, is inadequate, their problem, of course, of restoring monetary stability and fiscal and economic stability is greatly enlarged.

One of the matters of cardinal importance which will be dealt with at some length in the European recovery program is, of course, the removal of the artificial barriers between shipments from the farm communities to the city, and vice versa. The farmer, naturally, is under the temptation, when he cannot get what he needs through the use of the proceeds of his sales, to feed his grain to animals or to reduce his crop plantings. We are accustomed to seeing that occur even in this country.

The interim aid program, so-called, as suggested this morning is in effect a preface to the long-range program. And the question was

quite properly asked as to why we should undertake it unless and until we had made up our mind that we were going to undertake an over-all recovery program. Of course, the reverse of that question is equally pertinent; that in effect you cannot even consider a recovery program unless you have some basis on which recovery can be built. Ambassador Douglas, I believe, covered that point at some length, and I shall not expand it further.

Another suggestion was made with respect to the organization. As I indicated, I believe that 42 months represents so short a period that we would be well advised to use those facilities presently in hand. The Relief Assistance Act was set up and as a result of it Mr. Richard Allen who has had long experience in the matter of overseas relief, was put in charge of that aspect of the work by Presidential appointment and approval of the Senate. I think it is fair to say that the work, by and large, has been well done. Certainly it has been a vast improvement over anything we have seen heretofore.

The present organization would require some expansion in that France was not included-was not a recipient under the Relief Assistance Act. But the organization abroad and the Commodity Credit Corporation, the Bureau of Federal Supply and the Treasury Department and various other governmental agencies involved in this are at hand, and ready to proceed.

In considering the form in which we would request congressional consideration of this notably with respect to organization, we had discussions within the various interdepartmental committees on the subject of whether or not this should more appropriately take the form of an amendment to Public Law 84 as was suggested in a line of questions from Mr. Vorys this morning.

While I cannot say that a very clear case can be made for the use of a completely new act, the three points that I mentioned earlier in respect to our decision do represent our basic feeling; that is, we have a somewhat different problem here because we are dealing with relief in the sense of meeting a series of conditions in anticipation of the continuation of a program which would expand that relief into recovery, whereas under Public Law 84, we were dealing with the human necessities without considering the operation as a prelude to a further recovery program.

The matter of offshore purchases was in large part, Mr. Chairman, an item which loomed largest in our minds. By that we mean the ability to buy some of the short items outside of this country.

I think in the case of these three countries in particular our problem is really to hold the line insofar as possible so that during the winter months, as Mr. Douglas pointed out, their economies do not disintegrate or at least suffer retrogression to the point where we lose the ability of the western European community to operate as an economic unit. It is highly integrated, industrial complex. If these three countries should drop out of it, it would multiply the problem and considerably increase the cost of a recovery program. It might even make it impossible of accomplishment, although I cannot say that that would necessarily be the result. There are strong reasons to believe that it would.

Therefore the project with which we approach you today is designed for a purpose, in general, along the lines of that which you considered before, but as a prelude in effect to a course of act

with which we will come before you shortly to expand in great detail and which we earnestly hope will make it at least unnecessary for us to deal with these emergency situations in a recurring fashion.

We do not like the idea of having to deal with crises any more than you gentlemen do. In fact, the hope of the economic recovery program is that by some orderly over-all approach we can get out of the relief business, help these people get back on their feet, make them self-supporting, restore them as a contributor to world peace and at least reduce the possibility of crises.

I am sure I cannot-I doubt whether anyone can-give any positive guarantees that even the most perfect recovery program could reduce or eliminate completely the possibility of some wholly unforeseen crisis occurring. Nevertheless, it is our honest belief that if this important section of the world can get back on its feet, the likelihood of recurring crises would quite obviously be reduced.

I think that covers two of the aspects, Mr. Chairman, which were not fully dealt with this morning by the Department in answer to certain questions.

Chairman EATON. Have you completed your statement and are you ready to answer questions at this point?

Mr. LOVETT. I am completely at your disposition, sir. I have finished what I had to say.

Chairman EATON. The Chair would like to ask one question. I find on all sides this question raised: What has happened to the $350,000,000 that were appropriated under Public Law 84? How far has that been expended, and where and how?

Mr. LOVETT. Mr. Chairman, we brought the figures up here and Mr. Dort who has been in charge of that particular aspect of the program can give you the complete details.

Chairman EATON. We should be glad to hear Mr. Dort.

Mr. DORT. I think, Mr. Chairman, I can best answer this question by handing to the members of the committee a complete statement on the status of the program and I then could discuss it briefly, if that is satisfactory.

Chairman EATON. Can you answer the question in a condensed form? It is very difficult for us to ask questions on details contained in a long document here. We will put this in the record at this time. (The statement referred to is as follows:)

UNITED STATES FOREIGN RELIEF PROGRAM AS OF OCT. 31, 1947