MUTUAL SECURITY ACT EXTENSION MONDAY, MARCH 30, 1953 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee convened, pursuant to call, in room G-3, United States Capitol, Hon. Robert B. Chiperfield presiding. Mr. CHIPERFIELD. The committee will be in order. The committee will at this time hear from Harold E. Stassen, Director for Mutual Security and Administrator of the Mutual Defense Assistance Control Act, and from Mr. Kenneth R. Hansen, Acting Deputy Administrator for the Mutual Defense Assistance Control Act. STATEMENT OF HON. HAROLD E. STASSEN, DIRECTOR FOR MUTUAL SECURITY Mr. STASSEN. Mr. Chairman, I am pleased to meet with you this afternoon to discuss the East-West controls under the Battle Act. I think I might make a very brief opening statement of our present situation, of our objectives, and of our problems, looking forward to your later consideration of this legislation and consulting with you on our administration of it. I appear before you in my capacity as Administrator of the Mutual Defense Assistance Control Act, Public Law 213, 82d Congress, commonly known as the Battle Act. In carrying out this responsibility, Mr. Kenneth Hansen, who is here with me, is my Acting Deputy. This afternoon's session with the committee gives me the opportunity to discuss various aspects of our current economic defense program. I shall find this exchange of views with the members of the committee most helpful. One aspect of the economic defense program in which there has been a great deal of interest in recent weeks, and which I previously discussed with the committee, is the problem of shipping to Communist China. THE NATURE OF SHIPPING TO COMMUNIST CHINA First of all, I think we might try to make some appraisal of the importance of oceanborne traffic to the Communist Chinese. The things that are imported into China come by two principal routes: One is a land route, the Trans-Siberian Railroad, and its connecting rail links; and the other is the sea lanes which lead to China's southern and eastern coasts. Roughly speaking, the land routes are probably twice as important to the Chinese as the sealanes; yet the latter remain quite important. We do know that the Trans-Siberian Railroad can be used to transport almost any strategic goods to China were the sea routes to be blocked. One way of measuring the importance of oceanborne traffic to and from China is to talk in terms of number of ships and ship tonnage. Beginning more or less simultaneously with the Communist attack on South Korea, there began a steady increase in the number of ships involved in trade with Communist China. Ships of many countries were involved. This increase continued until the Chinese Communist intervention in the Korean war late in 1950. Thereafter, a decline set in which continued until the end of 1951. On the average, the number of vessels arriving in Red Chinese ports declined from about 50 per month in January 1951 to about 30 per month in December; in terms of the total monthly cargo-carrying capacity of these vessels this decline represented a drop from 300,000 to 150,000 deadweight tons. In the first half of 1952, however, the number of arrivals rose to an average of about 40 per month, with a monthly carrying capacity of 250,000 tons, and remained at this level through 1952. Meanwhile, beginning in September of 1951, ships flying the flags of the Soviet bloc began to participate in the China trade in greater numbers. Although they had accounted for only 10 percent of all ship arrivals early in 1951, by June of 1952 Soviet bloc vessels accounted for almost a third. Moreover, Soviet bloc vessels in most instances moved to Red China almost fully loaded, unlike the free world ships. As a result, between January and June 1952, Soviet bloc vessels with a combined cargo-carrying capacity of 400,000 tons for that period made about 50 voyages to the China mainland, bringing in some 200,000 tons of goods. During the same period, free world ships with a capacity for 1 million tons made about 200 voyages to Communist China, carrying in about 250,000 tons of goods. Of the free world vessels, those of British ownership or registry, have accounted for about 60 percent of the total arrivals of such vessels and a somewhat smaller percentage of cargo capacity. There have usually been from 25 to 30 British ocean-going vessels per month arriving in Communist China. Greek, Danish, and Norwegian flag vessels rank next in importance, each accounting at present for about 5 to 7 percent of the free world voyages to Communist China. Since the beginning of 1952, Pakistan and Finnish vessels have become more prominent in the trade. The Pakistan vessels carry raw cotton to Communist China, while the Finnish vessels are usually chartered to Polish interests for carriage of goods from Gdynia. Between them they account at present for another 8 percent of the free world's voyages to Communist China. Recently, Dutch, Danish, and Norwegian shipping firms have restored regularly-scheduled service to Communist Chinese ports. There is another, and perhaps a more precise way of looking at the China seaborne trade than ships and ships' tonnage, however; this is to take a look at the nature and tonnage of the cargoes themselves that have come in by sea. Our data on this subject are far from complete, but there are a few things we do know or can safely assume. To begin with, we may presume that the ships bound for China which originate in Gdynia or the Soviet Far East are carrying some cargo which has strategic value for the Communist Chinese. This means that in 1952, for example, in the estimated 70 calls made by ships originating in the European Soviet bloc, cargoes were discharged which probably consisted partly or wholly of strategic goods. We know also that Ceylon shipped 5 shiploads of rubber by Polish vessels to the Communist Chinese in 1952 and proposes to continue to ship rubber at the rate of 50,000 tons a year over the next 5 years. When we consider the shipping which originates out of other areas of the world, however, the picture is quite different. In the first place, we know that the ships that move from Japan to the China coast usually move in ballast in order to pick up a cargo of Chinese soybeans, ground nuts, vegetable oils, iron ore, or grains-rice, corn. When cargoes for the China mainland originate in Japan, they are carefully screened by the Japanese to exclude anything which might be of strategic value to the Communists; the Japanese control over strategic goods is very strict, and more closely approximates the controls of the United States and Canada than any other major industrial country. It does not go so far as to exclude all the things that civilians might use in their everyday living. We know also that the shipments bound from Pakistan are usually cotton and those from India are usually jute gunny sacks, for which these countries get corn or rice in return. Finally, we can be fairly confident that when shipments come from the rest of the free world, they have usually been screened by the exporting country, in accordance with United Nations' resolution of May 18, 1951, to exclude the things which the particular countries consider "strategic." Everybody in the free world embargoes arms, ammunition and implements of war. Some countries go a great deal further and embargo long lists of all other things as well, but others do not. In summary, the picture is this: The bulk of Communist China's imports from the free world now come from a handful of countries and are concentrated in a few commodities: raw cotton from Pakistan and Egypt; fertilizer and dyestuff from Western Europe; crude rubber from Ceylon: medical supplies through Hong Kong; and jute gunny bags from India. China's exports to the free world remain much as they have always been coarse grains, oilseeds and nuts, vegetable oils, soybeans and soybean oil, fruits and vegetables and other foodstuffs primarily for Hong Kong and Malaya, dried eggs, grains, and some coal and iron ore. THE PRESENT LEVEL OF CONTROLS OVER COMMUNIST CHINESE TRADE It may be helpful to review the existing controls over trade with Communist China. The United States, of course, has a total trade and shipping embargo against Communist China and North Korea. The United States prohibits its vessels from calling at Communist Chinese ports and from carrying anywhere in the world cargo destined from Communist China. Under Foreign Assets Control regulations administered by the Treasury Department, United States oil companies, in effect, may not bunker any vessel en route to Communist China unless the companies are sure the vessel is not carrying cargo on the United States positive list of controlled exports, and unless they apply for and receive a Treasury license on that basis. There are other steps taken by various countries, however, with which you may be less familiar. Panama prohibits calls at Communist China and North Korean ports by vessels of Panamanian registry. The Honduran and Costa Rican Republics have similar decrees in effect. In the last few days, the United Kingdom has announced that, effective March 31, vessels registered in the United Kingdom and the British colonial territories, including Hong Kong, will not be permitted to make a voyage to Communist China or North Korea without a validated license. Vessel-owners will have to apply in London, Singapore, or Hong Kong for a license for each and every voyage to Communist China and North Korea. To receive a license, owners will have to certify that the vessel will not carry to China any goods included on the United Kingdom list of prohibited cargoes. The maximum penalty for violating the license will be Government requisition of the vessel. Further, no ships of any flag carrying to Communist China or North Korea cargoes which the United Kingdom considers strategic will be furnished bunkers in British ports. Just yesterday the French Government announced that it would institute a similar system of controls. These are most welcome extensions of the country's system of controls. I want to mention the special problem of ships flying the Greek flag and of ships operated by Greek nationals under other flags. Greek nationals have been flying the flags of half a dozen nations in the China trade. To some extent this group has been immune from the reach of any government. They do not live in Greece; they are not tied to any flag; they move readily from country to country. They can use fronts of dummies so readily that effective control of the group needs cooperation of all the governments of the free world. The measures I have already described have been tending to pin this group down somewhat. The coup de grace to the group was delivered on March 23, 1953, when the Government of Greece gave notice that, by a decision of the Council of Ministers, the Government had forbidden all merchant ships under the Greek flag to call at Communist Chinese or North Korean ports. This step, when added to the restrictions already in force, rendered Greek shipping harmless as far as the Communist Chinese trade is concerned. In addition to these controls on the ships themselves, we are also working to improve the concept of "strategic goods" as countries apply it to the China trade. A good deal of that work is being done through an informal committee in western Europe to which the principal industrial countries of the world belong. Some of it is being done bilaterally, in talks with individual countries around the world. As we presently stand, the major producing countries now embargo outright to Communist |