Mr. ROOSEVELT. I think it accomplishes, besides the economic advantages, one of the basic safeguards against any one country becoming militarily independent from its own production point of view; that it eliminates the possibility of aggression between Western European nations.

Mr. STASSEN. It will be particularly important when we get the German angle tied in.

Mr. ROOSEVELT. That is the real key to the German question, I feel, and have felt it for a long time.

Now, what progress has been made in increasing offshore procurement with the French, that procurment, in turn, being earmarked for Indochina?

In other words, this is our indirect way of getting more American aid to the Indochina struggle.

Does this infrastructure include such facilities as airfields in nonmetropolitan Western Europe? Does it include airfields and storage facilities and naval bases in north Africa, for example? Does it include strategic airbases or are those carried out under our own construction of American strategic airfields in north Africa?

Mr. STASSEN. I am quite certain that it does not include bases in north Africa.

It does include northern Europe, central Europe, and southern Europe. It does include the three areas of the NATO command. Mr. ROOSEVELT. It does include Greece and Turkey?

Mr. STASSEN. That is right.

(Discussion off the record.)

Mr. ROOSEVELT. Now, Governor, we have heard in the past a lot of discussion based on the shortage of dollar balances, especially with regard to France.

As I interpreted the press reports, Secretary Dulles let it be generally known to the French that direct dollar aid, or what we called defense-support funds, is going to be greatly reduced with regard to the French.

Now, is that based on greater offshore procurement, and therefore an alleviation of their dollar-balance shortage, or is it a reflection of an improvement of their dollar balance, due to increased exports from France to the United States?

Mr. STASSEN. Both. It will involve greater offshore procurement; it will involve handling the support of the Indochina war in a way that will give them dollar-balance-of-payments aid; and it will involve greater French exports and the earning of more dollars from their established productive capacity.

Mr. ROOSEVELT. Does that contemplate a considerable change in our tariff policies with regard to French manufactured goods?

Mr. STASSEN. Not at this time, but it would involve the customs simplifications, so that French goods can flow in with a little less delay, because the French exporter particularly is rather thin on capital, and if he faces a long delay in the customs determination, he gets locked in.

Mr. ROOSEVELT. Is it fair to come to a conclusion that our increased offshore procurement for NATO in France, and our increased offshore procurement in France for goods to be used in Indochina will in effect total our previous defense support funds, and our previous offshore procurement, dollar total?

Mr. STASSEN. Probably not quite. There would have to be a further amount made up by the regular trade exports, and their earnings of dollars, either in the United States or in Canada, or from some third nation that in turn had earned dollars.

Mr. ROOSEVELT. Thank you, Mr. Chairman.

Chairman CHIPERFIELD. Governor, you have before you a question that Mrs. Church has submitted.

You may read it into the record.

Mr. STASSEN. Yes, I mentioned it earlier.

Mrs. Church's question was

Yesterday in his testimony Secretary Dulles referred to a 3-year plan adopted at the NATO conference. Will you, Mr. Stassen, please tell us whether or not the 3-year plan in its inclusion of infrastructure includes the second half of the fourth slice and any of the fifth slice?

The answer is that it does include the second half of the fourth slice and includes all of the fifth slice and thereby concludes infrastructure. Chairman CHIPERFIELD. Mr. Prouty

Mr. PROUTY. Governor, is there a chart available showing the various functions of the MSA and their relationship to the various departments of this Government and the NATO program generally? Mr. STASSEN. Yes.

Mr. PROUTY. Do you have a chart showing the number of personnel involved?

Mr. STASSEN. The numbers of personnel are in a report rather than in a chart. It has been furnished to the various members and committees of Congress who have requested it.

The chart that we have is what I call our transitional organization chart. Our organization now is in a process of transition from the old form of organization into what will be President Eisenhower's new form of organization.

Mr. PROUTY. For example, I understand that while theoretically the technical aid program comes under State in some countries, MSA assumes primary responsibility for such activities; in other nations, State directs the program.

Then the matter of ocean freight voluntary relief packages, some of that is under State and some under MSA. Duplication of effort certainly seems evident here.

Mr. STASSEN. The President does have in mind a reorganization of those matters.

Mr. PROUTY. Now would there be any advantage in awarding offshore contracts to American firms which, in turn, would sublet to European industrial organizations, the idea being that American firms would provide greater financial responsibility, technical knowhow, and so forth?

Mr. STASSEN. Yes.

As a matter of fact, we now have under negotiation a major transaction involving some Italian producers in which we could not contemplate putting the entire responsibility on Italian producers. We are making it a 3-way transaction in which we tie in a known, qualified American producer, into a 3-way transaction under which we feel we can be certain of getting the production results, while at the same time provide some employment, some earnings, and some balance of payments assistance to Italy. The transaction has not been consummated

yet so I do not wish to give the names of the individuals, but it is right in process now. We feel it will be a sound arrangement because it is somewhat in line with some of the best production results which we have obtained inside the United States where you have your prime contractor and your subcontractors working together in various parts of our own country.

Mr. PROUTY. Do I understand that the end items we are shipping to Indochina are distributed by the French?

Mr. STASSEN. That is right. We have a military assistance advisory group in Indochina and they turn the material over to the French and the French distribute it from that time on.

Mr. PROUTY. How effectively and efficiently are they doing it there? Mr. STASSEN. It is under a restudy at the present time. In other words, we are making a comprehensive effort to reach a conclusion with the French on a satisfactory plan for the winning of the Indochina war, and this delivery of equipment is one part of that study. Mr. PROUTY. I wondered if it worked effectively in Indochina, if it could be worked out on a similar basis in Europe?

Mr. STASSEN. In Europe you have no real problem in that you have the SHAPE command. The material comes to the country and the country puts it into its forces which are in turn under command of SHAPE. Therefore, you know the supplies are getting to the divisions and that the divisions are being built up and being inspected by SHAPE, and so forth. We do not have that problem in SHAPE. Mr. PROUTY. Would you care to comment on the report submitted to you by 55 businessmen who studied MSA activities?

Mr. STASSEN. I can only say that it has been extremely helpful and that we are furnishing copies to this committee and to the other committees involved in all those instances in which there is not a sensitive question with the Government of the other country involved, and, in those instances, we will furnish everything but that particular sensitive section.

The evaluators themselves are to come back in on the 7th of May and I am to report to them what I have done about their reports. Mr. PROUTY. One other question:

I understand, and I guess everybody has agreed, that the French financial crisis is due primarily to the Indochina war; is that correct? Mr. STASSEN. Primarily; yes.

Mr. PROUTY. A suggestion was made recently, and perhaps facetiously, that this country should agree to pick up the check in Indochina and then say to France, "Put your own internal affairs in order." Is there any merit in the suggestion? (Discussion off the record.)

Mr. STASSEN. It would depend a lot on what happens in the Korean and Indochina war, because those are heavy drains on (1) the United States, and (2) the French; it would depend on how successful we are in expanding the economies, the production base of our European partners, and on bringing the Germans into the picture, and factors of that kind.

You see, what you get into is this: For example, with the French, when they have an extremely unbalanced budget, then in order to stop a runaway inflation, they put extremely tight credit controls on their country and they dry up all the loose credit by the Government taking

hold of it. The result is then that a good manufacturer who could expand, cannot get the credit with which to expand; so you stop the expansion of the production base and of your economy in the whole country. It becomes a vicious circle.

We are in the process, we believe, with the policies we have just been working out and that we are putting into effect with the approval of Congress, we trust, in France, and in other countries, of dealing successfully with that situation. These policies would be based on not overextending them in military requirements, but keeping them building up in their military strength at such a rate as will make it possible to put their economies on a foundation which we feel will result in an expansion of their gross national output. As a result, they can carry more divisions in the future than they can if you keep them in this straitjacket with too high a goal right now.

Now this is a very intricate and a very difficult series of moves. I would be the last to say to you today that we are going to get it done. I will say that we are on the road toward getting it done and will keep you advised as to how it works out.

Mr. HARRISON. It is a question of some years, at any rate?
Mr. STASSEN. That is right.

(Discussion off the record.)

Mr. STASSEN. Now obviously this is a matter that is distinctly for expert military advice, so let me give you simply my impression from the standpoint of the Mutual Security program, of where we are.

I understand that we are at a point where we have enough divisions of good, combat readiness in Central Europe so that the Soviet could not just jump off on any given morning and come across Europe, that they would have a real fight on their hands.

Consequently, they would have to first, if they were to be successful, concentrate a forward concentration of divisions, more than they now have there.

As they move to concentrate in a forward position, we would have a warning from intelligence.

(Discussion off the record.)

Mr. STASSEN. I think it must be apparent to the men in the Kremlin today that there are no places in the world where they can with impunity walk on through as they thought they could when they started across the North Korean border.

Mr. BATTLE. Will the gentleman yield?

Mr. HARRISON. That answers my questions.
Thank you.

(Discussion off the record.)

Mrs. BOLTON. We were certainly not alert in Korea as to what has been going on and we were not ready for it. What of our knowledge of activity in China near the southeast border.

Apparently the Chinese had put rather heavy forces down north of Laos, and so on. We were told that there has been knowledge for some 3 or 4 months, from January on, relative to this matter, that they had known, yet nothing was done.

That is the rumor side of the picture.

There seems to me to be another side of the picture that naturally one does not put too much confidence in. It would be a reasonable thing to suppose that with all the satellites she has now acquired into

which she has had to put armies, there is such a thing as history repeating itself.

Rome did this and the armies got pretty comfortable in their placesand though they may not be as comfortable as the Roman legions were in England, still it is a different life from that in Russia and they are not loved by the satellites.

If there were movement forward, is it not conceivable that they could not perhaps count too well on some of their own groups, and that these divisions which are in Russia ready to come forward, would have not a friendly satellite to come through?

They would have to come through their own problem first. And perhaps isn't that one of the reasons that Russia does nothing?

Mr. STASSEN. That is a very wise observation. You could not count in your calculations on any given satellite country in fact rising against them, but you can certainly have it in mind as one of the possibilities.

Likewise, we know that in the early part of the war between Russia and Germany there were great defections on the part of the Red Army itself, and that really it was not until they reached the point where the Germans were committing atrocities in the Ukraine and the Soviet shifted its line from support of communism to the defense of mother Russia that they got the loyalty of the Red Army that was needed in order to be able to hold the Germans.

Again there is a matter you cannot calculate on in your military plans. For example, Ridgway cannot say, "I calculate that of the 250 divisions opposite me, 60 of them are going to defect." He cannot make that calculation. That may, if you come to the ultimate tragedy, be the kind of thing that would save the world picture right in Europe rather than the longer drawn-out struggle that might otherwise occur.

Mrs. BOLTON. That does not seem to you to be an unreasonable point of view?

Mr. STASSEN. No; it does not. I think it is a very wise observation on your part.

Mrs. BOLTON. Thank you.

I have no real questions except that.

Thank you.

Chairman CHIPERFIELD. Mr. Crawford has an announcement which will take but a second.

Mr. CRAWFORD. Mr. Chairman, I want to let the commitee members know that at 2:30 this afternoon in the caucus room of the House Office Building Mr. Thruston Morton and Mr. Grant, of the State Department, will have a briefing meeting for the freshmen Members of the House.

If any members of this committee would like to come they would be more than welcome, but it is primarily for the new members. Mr. STASSEN. There is to be an open hearing tomorrow morning at 10:30 on East-West trade?

Chairman CHIPERFIELD. That is my understanding.

Mr. Battle has talked with Mr. Wood and they have made arrange

ments.

Mr. STASSEN. If it is still your wish to do it, I have this situation: A special meeting of the National Security Council has been called