(The chart referred to is as follows:) China (Formosa)—Program costs by major field of activity 1 Totals agree with controller/W's records. Distribution by activity fields is an estimate based on mission reports. Mr. FITZGERALD. The amount still to be shipped against funds already appropriated amount to $100,525,000. These data start from June 5, 1950, when Congress passed legislation authorizing activities in the general area of China. In that respect, these tables differ from the other ones that go back to April 3, 1948. Mr. VORYS. If you pick out activities in the general area of China, there has been a China aid bill in effect since April 3, 1948. Mr. FITZGERALD. That is not included. I can give you the data for China under the original China aid bill. I do not have it for distribution. Mr. VORYS. It is only what got to Formosa, you see. The stuff that was spent on the mainland is gone. Mr. JUDD. Little was spent on the mainland. We appropriated $275 million, and there was still almost $100 million unexpended at the end of 2 years. Mr. VORYS. This must take care of everything else on Formosa. Mr. FULTON. My No. 8 question on what happened after it got there would determine whether what stopped at Formosa or got to the mainland. Mrs. KELLY. How much actually got to the mainland? Mr. JUDD. Stuff delivered on Formosa did not help on the mainland. Stuff that got there 6 months after the battle did not help win the battle, even though it is reported as billions of dollars in a figure. Mr. FITZGERALD. In the original program, Mr. Chairman, the deliveries to China, including Formosa, amounted to $168,100,000. Now, that is not on your tables. Mr. JUDD. From when to when? Mr. FITZGERALD. That was from April 3, 1948, until about June of 1949, when the Chinese-was it 1949 or 1950, that the Chinese Communists gradually moved south? It was 1949. We did not deliver anything to any port in China after the Communists took it over. And, in the last few months, the only things we were delivering to the mainland of China were supplies that were fed into the rationing systems that we had in the five cities there. This $168 million represents the value of all the commodities delivered to China, including Formosa, from the beginning of the program, April 3, 1948, until we phased out in the early part of June 1950. Mr. JUDD. You do no have a breakdown of how much went to the mainland and how much went to Formosa? Mr. FITZGERALD. Of that, $21 million went to Formosa, and the rest went to the mainland. That would be $147 million shipped to the mainland. Mr. JUDD. The biggest item was food, was it not? Mr. FITZGERALD. Cotton was the largest single item, but food shipments were almost as great. Mrs. KELLY. No military equipment was in this $147 million? The illustrative program proposed for fiscal year 1954 is included in this blue book under the title "Formosa." The total illustrative program recommended for fiscal year 1954 is $70 million, compared to a total program in the current fiscal year 1953, of $97.5 million. The 97.5, however, includes common-use items of $30.5 million, which are not included in the proposed economic program for 1954. Apart from common-use items, therefore, the 1954 program is almost identical with the program in fiscal year 1953. The projects and commodities which it is contemplated that the funds will be used for in fiscal year 1954 are shown, as compared to the actual programs in fiscal year 1953. Our project program is forecast at $30.4 million in fiscal '54, as compared to $29.3 million in fiscal year 1953. The programing for the maintenance of essential supply in fiscal year 1954, is $39.6 million, as compared to $37.7 million exclusive of common-use items in the current fiscal year. Mr. JUDD. We ought to have in the record a definition of what is included under "Common-use items." Mr. FITZGERALD. They include commodities intended to support the military forces which are similar to or identical with commodities used in the civilian economy, such as petroleum products, certain kinds of clothing, material which can be used either for civilian or military purposes. (Discussion off the record.) Mr. FULTON. Would you comment on the program of removing the people who are remaining in Burma, the Chinese troops who are there? Mr. FITZGERALD. I would prefer to refer that question to the State Department, if I may, sir. We know it exists, but we have nothing in here for that. Mr. FULTON. There are no funds in here for that? Mr. FITZGERALD. That is right, and we have had no requests from any other agency to finance it at the moment, sir. STATEMENT OF SAMUEL T. PARELMAN, SPECIAL ASSISTANT TO THE ASSISTANT SECRETARY OF STATE FOR FAR EASTERN AFFAIRS Mr. PARELMAN. As you know, there are talks going on now in Bangkok, the four-country talks among the Burmese, the Chinese Nationalists, Thailand, and the United States, to effect that transfer. That is in process right now. Mrs. BOLTON. The transfer of the Chinese? Mr. FULTON. Will there be any call for funds in this program? Mr. PARELMAN. There has been no indication that there would be any call upon us for funds for that purpose. Mr. JUDD. There has been debate recently about the whole question of counterpart. Some of these teams have come back from Europe and recommended the abandonment of the counterpart scheme. I notice in this summary of conditions in Formosa, you say, "Despite high military costs, inflation has been controlled due largely to counterpart support of the budget." Would you care, with respect to Formosa, or even generally, to make a statement as to your view as an economist and expert in this field, of this whole mechanism of counterpart that we have had heretofore in the economic aid program? Mr. FITZGERALD. With respect to Formosa particularly, sir, the difference between total revenues and total expenditures of the National and Provincial Governments has for the last 3 years been made up partly from the counterpart of the aid that has been furnished to Formosa. In the calendar year 1952, the deficit in their budgets before counterpart assistance was 376 million Taiwanese dollars. The counterpart assistance made available to cover that deficit in the budget amounted to 279 million Taiwanese dollars, so there was still a slight deficit in the budget after counterpart assistance, but it was substantially balanced. Now, in addition to the use of counterpart to that extent, to contribute to balancing the budget, counterpart in the amount of $423 million Taiwanese dollars was also used in Formosa to supplement the Taiwanese budget. The biggest single supplement 195 million Taiwanese dollars was in direct military support of activities, airfields, roads, or whatever were needed in direct support of the military operations in Formosa. The actual expenditures from the National and Provincial budgets in Formosa in calendar year 1952 for defense purposes amounted to about $1,325 million Taiwanese dollars, of which $1,211 million were from funds appropriated and collected by the Taiwanese Government, and $114 million were from counterpart funds. The total-and I think this, sir, is the important considerationexpenditures from the National and Provincial budgets in calendar year 1952 in Formosa amounted to $2,338 million Taiwanese dollars, of which 57 percent were spent for defense, for military purposes. Only $1,013 million Taiwanese dollars were spent for all nonmilitary purposes in China. In the same year, the counterpart made available for all purposes in China amounted to $702 million Taiwanese dollars. It seems to me clear that without the availability of that counterpart, whether it was used as a part of the budget, whether it was used directly for aircraft construction or other military expenses, or whether it was used as local expenses for rural reconstruction, it all underlays and helps support in Formosa this very large total expenditure for the military purposes in Formosa, and without that counterpart of the dollar aid, the defense expenditures in Formosa would have had to be very substantially less because it is obvious that little could have been cut out of the "nonmilitary" expenditures of the Chinese Government. Mr. JUDD. Then the use of this counterpart is very important. Mr. FITZGERALD. It is vital to the effective moving forward of the Chinese economy and of the military effort and program in Formosa. Mr. JUDD. And you said their budget was $2,475 million and that their deficit out of that was $249 million? Mr. FITZGERALD. The total expenditures include those in the budget, and those paid directly from counterpart which did not go through the budget. The combination of those two was 2,761 million Taiwanese dollars. Mr. JUDD. The deficit? Mr. FITZGERALD. The deficit in the budget proper before counterpart was $376 million. This of course does not take into account the extra budgetary expenditures of $423 million financed through counterpart. Mr. JUDD. $376 million out of $2.4 billion-they did not do too badly considering there are only 8 million or 9 million people supporting 550,000 military. Mr. FITZGERALD. That is correct, sir. On the budget itself, let me make it clear that the total revenue collected by the Chinese Government amounted to just under 2 billion Taiwanese dollars, and I think this deficit has to be related to their own collections, so their deficit before counterpart credit amounted to about 19 percent of their revenue. Mr. Wood. It should be noted that this counterpart is generated by imports of goods financed by the funds made available, and those imports in and of themselves add to the supply of goods in the economy and therefore are a very important element further combating inflation. Mr. JUDD. I was surprised by some of the reports of these Stassen groups coming back, advocating abolition of counterpart. Mr. WOOD. They did not do so in the Far East, as I understand it. That was applicable to their recommendations in other areas of the world. Mr. VORYS. Could I ask a question at this point? I notice where you have been reading page 32 of your book, this green book, which refers to the high cost of maintaining an existing troop strength of [deletion-secret] men. The evaluation team refers to maintaining [deletion-secret] troops. The military refers to [deletion-secret] troops, and if the reduction is made that the Joint Chiefs have recommended, it would be less than [deletion-secret]. What is the explanation of that? Mr. WOOD. I think, Mr. Vorys, they were referring to the total of Army, Navy, and Air Force, and talking in round numbers in most cases. Mr. JUDD. That runs up to [deletion-secret]. Mr. WOOD. That runs to nearly [deletion-secret] you see. General Stewart, does that include the divisions that are not being supported by us? I presume it does. General STEWART. The [deletion-secret] does; yes, sir. Mr. WOOD. It includes the [deletion-secret] rather than the [deletion-secret]? General STEWART. [Deletion-secret] in the Army units, supported by MDAP. Mr. JUDD. As against that [deletion-secret] figure? General STEWART. Yes. (Discussion off the record.) Mr. WOOD. The higher figure is proper, if you are talking about the impact on the Formosan economy of the number of troops involved. Mr. VORYS. No. They either have [deletion-secret] or something, in their military forces. They either have them or they have not, or if they have a kind of an unemployment arrangement there they choose to call an army-it has not been explained yet. There may be some good explanation for it, but it has not appeared. I mean, the load of [deletion-secret] on an economy is not the same load as the load of [deletion-secret]. Let us find out which it is. Mr. FULTON. If you would add these figures on active-duty strength from December 1952, it would amount to [deletion-secret] persons. General STEWART. [Deletion-secret] is the total on active duty. That is for the three services. Mr. VORYS. In an economy where you have about 7 million people, the difference of whether you are carrying 100,000 more or less is a big difference, I would think. Mr. WOOD. May I suggest, Mr. Vorys, if General Stewart cannot account for that now that we put into the record, and make available through the staff, the justification of these apparent differences. Mr. VORYS. They are not apparent differences. They are gigantic discrepancies for which there is no explanation. Mr. Wood. Let me correct that to say the real differences which have appeared here. Mr. JUDD. Why not say the obvious differences? Mr. WOOD. I would like to reconcile it through an insertion in the record, if we might. (The information requested is not included in the printed record as the material is classified secret.) Mr. FULTON. To bring up one other point, we should know what the difference between active duty strength as of December 1952, is, and what the strength proposed by the Joint Chiefs of Staff force basis is under the program. (Discussion off the record.) Mr. JUDD. That is the JCS force? General STEWART. That is right. Mr. JUDD. Those divisions we are supporting have 12,000 men and those we are not supporting have 14,000. (Discussion off the record.) Mr. FULTON. As you can see, this has a complete bearing on whether the figures are accurate. Mr. JUDD. It has a bearing on the credibility of the whole pres entation. |