MUTUAL SECURITY ACT EXTENSION TUESDAY, MAY 26, 1953 HOUSE OF REPRESENTATIVES, COMMITTEE ON FOREIGN AFFAIRS, Washington, D. C. The committee met in executive session pursuant to call in room G-3, United States Capitol, at 10: 40 a. m., Hon. Robert B. Chiperfield (chairman) presiding. Chairman CHIPERFIELD. The committee will come to order. Mr. Wood, you have witnesses here. You may proceed in any order that you wish. STATEMENT OF HON. C. TYLER WOOD, DEPUTY TO THE DIRECTOR FOR MUTUAL SECURITY Mr. WOOD. Having covered in our preceding session, Mr. Chairman, our proposals for military end-item assistance and defense financing in the United Kingdom and France, it is our suggestion that we go on now to Italy. General Stewart would present the military end-item and training program in Italy, to be followed by Dr. FitzGerald who would deal with defense support and defense financing for Italy. Then, depending upon the wishes of the committee, we can go on with other countries, or use what we have presented as examples for Europe and proceed to the next area. Mrs. KELLY. Prior to going into this, Mr. Chairman, could I make a request of the committee at this time? Chairman CHIPERFIELD. You may. Mrs. KELLY. That if we have not received the status and the questions that Mr. Fulton asked with regard to offshore procurement, it be secured by this committee as quickly as possible because I read this past weekend of contracts of offshore procurement of $5 million to Yugoslavia and to several other countries and I would like a verification of those contracts for the record. Chairman CHIPERFIELD. Mrs. Kelly, you will be glad to know that the counselor to Yugoslavia wants to talk to me at 11: 15. Mrs. KELLY. I have heard of several other contracts that have already been given out, offshore procurement contracts, and I have also learned the subcontractor and it was the understanding of this committee that we could not find out the subcontractor. Chairman CHIPERFIELD. Will you try to furnish that information for the committee? Mr. WOOD. We are working on all those questions, and the answers to them will be put into the record, Mrs. Kelly. Mrs. KELLY. Could we have them prior to the release of these hearings and before we take action on this bill? Mr. WOOD. Certainly. They will go into the record of these hearings at the point where the question was asked. If you are interested, an additional copy can be made available to you directly. Mrs. KELLY. I think several members of the committee requested that. I think we would like to study them before we take action on this program. Mr. WOOD. Our usual course, Mrs. Kelly, is to insert in the record at the point where the question was asked, the paper which gives the answer. Now, at that time when we do so, we could call attention to the fact and ask that you be notified, if you like. Would that be satisfactory? Mrs. KELLY. I think all the questions asked by the committee should be answered prior to the study of the bill. Mrs. BOLTON. May I, too, say that we have been all too accustomed to having answers to our questions so delayed that they are of practically no use in our study of the bill. I understand Mrs. Kelly's point so well because there were questions asked the other day by Mrs. Church in which we were all deeply interested. If we wait until the hearings are printed which is usually on the morning the bill goes on the floor; such delay is perfectly stupid and gets us no place. Mr. WOOD. I raised that point, Mrs. Bolton, for the purpose of finding out whether there is some other method that would be more satisfactory to the committee. Mrs. BOLTON. Perhaps the clerk of the committee will find ways. We never know whether our questions are answered or not. Then, we come onto the floor and find the things we have been trying to find out that were supposed to be there, are not there. Then where are we? We then face the ridicule on the floor. Mr. Wood. Why don't Mr. Crawford and I see what better system can be arranged? Mr. CRAWFORD. Mrs. Bolton, anticipating that, I have instructed the staff assistant who is editing the hearings to give me copies of these inserts as fast as they come in and I have a few here which I will bring personally to the attention of the members who ask for them as they come in. Mrs. BOLTON. That is excellent. Mr. WOOD. I think that is a very good plan. Mrs. BOLTON. We have thought that for years. STATEMENT OF MAJ. GEN. GEORGE C. STEWART, DIRECTOR, OFFICE OF MILITARY ASSISTANCE, OFFICE OF THE SECRETARY OF DEFENSE General STEWART. Mr. Chairman and ladies and gentlemen, I refer to charts 18 and 19, which have been provided to each member of the committee. I refer to chart 19, first. This shows what we have shipped, the value of what we have shipped out of programs already approved and funded. (Discussion off the record.) General STEWART. The next section of the chart, this middle section, shows the same information in terms of certain major items. The first column shows what we have shipped out of approved programs and what remains to be shipped out of programs approved for fiscal years 1950 through 1953. The last part, the last column of the center part of the chart shows what we propose to include in the fiscal year 1954 program, using the same items we used to show what has been shipped and remains to be shipped. The lower part of the chart shows the number of spaces allocated to the MAAGS for training. We have here the number of training courses completed by individuals as of the 31st of March, and the proposed training spaces that we have for fiscal year 1954. In chart 18, we show the forces concerned. Answering the committee's questions posed in the memorandum to us, we have NATO force commitments in being as of December 1952. (Discussion off the record.) Mr. MORANO. They are in addition to the naval aircraft? Mr. MORANO. Any jets? General STEWART. Yes, sir; these are jets. Mr. MORANO. Those will be British Navy or French Navy? (Discussion off the record.) Mr. MORANO. How about the training of pilots program, is that proceeding as rapidly as you want it to? Mr. WOOD. Is the training of pilots program proceeding as rapidly as we would wish? I presume also, under those circumstances, you want to know if the pilots will be available when the aircraft are ready. Mr. MORANO. Yes. General STEWART. May I ask the Air Force that question? STATEMENT OF LT. COL. DANIEL D. DUFF, OFFICE OF ASSISTANT FOR MUTUAL SECURITY, UNITED STATES AIR FORCE Colonel DUFF. We are not training too many Italians in the United States. The Italians are training their own pilots and along with the ones they have on hand they are doing very well. We have no pilot problems in Italy. Mr. MORANO. They will be able to fly the type of plane they are going to be provided with that is in manufacture. Colonel DUFF. Yes, sir. Mr. MORANO. How many are we training in the United States, do you know? Colonel DUFF. For the Italians I do not know, sir, but very few. Italian airmen being trained in the United States are generally specialists, other than pilots. They have a going pilot training program in Italy. (Discussion off the record.) General STEWART. That completes the presentation of the Italian military program. Mr. WOOD. If there are no questions, Mr. Chairman, I should like to ask Dr. FitzGerald to fill in that part of the Italian presentation which relates to the economic situation and defense support. STATEMENT OF HON. D. A. FITZGERALD, DEPUTY TO THE Mr. FITZGERALD. Turning first of all, Mr. Chairman, to the question of use of funds made available to Italy to date, I call your attention to the chart that is entitled "Mutual Security Program, Summary Data for Selected Countries." (Two classified charts were referred to entitled "Italy-Defense Expenditure" and "Italy.") Mr. FITZGERALD. Cumulative shipments through March 31, 1953, amounted to $1,437,600,000. There are left to be shipped from currently available funds, $172.1 million excluding a proposed carryover of $37.5 million for aircraft production. The same table shows a brief summary breakdown of the more important commodities that have been shipped against this program up through March 31, 1953. The principal commodities in orders were cotton, machinery and vehicles, bread grains, petroleum products and coal. The two charts on the stands indicate the status of the Italian defense program. Defense expenditures and defense production. This chart shows, on the right hand side, the major materiel program in Italy, which started at a minimum level of $35 million per year in 1950, and is now at a rate of $130 million to $135 million. The components of that major materiel expenditures are shown in this chart, ammunition, ships, electronic and other communicating equipment, and noncombat vehicles. Italian defense expenditures of which major material is a component are shown on the left-hand side of the chart. In fiscal year 1953 and 1954 expenditures will reach a level of slightly under $1 billion a year. The committee will notice that particularly in the case of Italy expenditures are primarily for personnel and operations. The major materiel is a relatively small proportion of the total. "Construction and other," costs are also relatively small. Italy is one of the countries where our contribution is primarily in the form of the end-items which General Stewart mentioned. The Italian contribution is in terms of personnel and the maintenance of personnel from their own resources and the supply to that personnel of the so-called soft goods. As the committee knows well, the population of 47 million includes 112 million unemployed and as many as another 11⁄2 million underemployed. There has been substantial improvement in economic conditions in Italy in the last 5 years. Industrial production in that country is now running around 145 percent of prewar, and agricultural production around 115 percent of prewar. Per capita GNP, however, is the second lowest of the NATO countries with the exception of Greece and Turkey. Its ability to support a heavier military program than now envisaged by that country would be very doubtful. The central government finances are shown in the right-hand side of the chart. Total government expenditures have increased over the 5-year period. Defense expenditures have increased as shown both on this chart and the previous one. Expenditures have substantially exceeded receipts in every one of the 5 years of record here, even after including the value of the counterpart which is shown in the red top of the bars to the right. The central government has been running a deficit of 15 or 20 percent a year throughout this entire period. Its tax receipts are relatively high if one takes into account the low per capita income. Tax receipts run something in the order of 23 or 24 percent of gross national product. In spite of that, relatively large tax collections in the light of their low level of consumer income, expenditures generally have exceeded income and the Government has run a deficit which so far they have been able to finance largely through noninflationary, long-term loans. Mr. CARNAHAN. Are those debts cumulative? Mr. FITZGERALD. Each one of these is a deficit in the year shown. It will run approximately $500 million in fiscal year 1953 and fiscal year 1954 and somewhat smaller deficits in the previous 3 years, taking into account counterpart releases. The cumulative deficit over these last 5 years will be in the order of $2 billion. The program for fiscal year 1954 as compared with that in effect in fiscal year 1953 is shown in the part of this chart to the left. The fiscal 1953 defense financing for Italy amounted to $102 million. This in itself represents a substantial reduction from defense financing in the previous year; when it amounted to $162.5 million. In fiscal year 1953, the funds appropriated were used, obligated for commodities shown in the brown bars in this chart, cotton, coal, petroleum, nonferrous metals, and other things including freight. In fiscal year 1954, there is programed $57.5 million. There is $20 million of new obligational authority and $372 million of carryover funds contemplated to be used in connection with the expansion or continuation of an aircraft production program in Italy now being initiated by the Department of Defense. Mrs. KELLY. That was how much carry-over? Mr. FITZGERALD. That was $371⁄2 million from funds already available to the agency. Leaving out the carryover in the aircraft, you will note that assistance to Italy has declined very rapidly in the last 3 years. I will read the figures again. Fiscal year 1952 it was $162.5 million; fiscal year 1953, $102 million, and recommended for fiscal year 1954, exclusive of the carryover, only $20 million. That $20 million will be used first to prevent any further decline in Italian gold and dollar holdings which are estimated to decline some $20 million during the current fiscal year, primarily because Italy is running a deficit with the rest of the European countries, in the European Payments Union. That in turn was due primarily to the restrictions which the United Kingdom and France put on imports from other European countries |