Mr. MERROW. There is one question on Indochina- Mr. MERROW. Surely. Mr. VORYS. Is there any organized support or supply of mainland operations, guerrillas, and so forth? (Discussion off the record.) Mrs. CHURCH. What has the effect of these guerrilla raids been? General OLMSTED. You mean the commando-type raids on the coast? Mrs. CHURCH. Yes. (Discussion off the record.) Mr. MERROW. In Indochina I understood you to say that the French were just beginning to send military groups to build up the native forces. What is the division strength of the native forces? Do they have them separate from the French? Mr. JUDD. He also covered that. General OLMSTED. They are organized to battalion strength. Mr. FULTON. On the supply question, if that is the Achilles' heel and is the limiting factor on what the Red Communist Chinese are doing and the North Koreans, what further action could we take in interdicting that supply line? How can we cut it and where would it be easy to cut? General OLMSTED. The capability of permanent interdiction from the air has limitations, as you know. Mr. FULTON. Well, even up in Manchuria, is there any possibility of hitting these assembly points, supply depots, and a few railroads coming down through there? Is there a point above Korea where we could move in with air and knock off supply lines? General OLMSTED. Of course, there are many lucrative targets but the question is do you lose more by bombing them than by not bombing them. That is something every man has to make his own guess on. Mr. FULTON. May I give the Japanese constitutional reason for disarmament? Chapter 2, Renunciation of War, Article 9: Aspiring sincerely to an internanational peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as a means of settling international disputes. In order to accomplish the aim of the preceding paragraph, land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized. That is right after the chapter on the Emperor and before the one on the rights and duties of the people. Mr. MERROW. Together with this discussion on Northern Korea, I have been saying as a layman, of course, with no military experience, that in my opinion the policy should be to push the Communists to the Yalu. I have said on many occasions before many audiences and I have not heard much disagreement yet Mr. FULTON. In Pittsburgh, Mr. Merrow said it, and he brought down the house, I might add. Eleven hundred people in our main. ballroom at the William Penn Hotel and he just brought down the house, too. Mr. MERROW. Thank you. I think I said this in Pittsburgh, that whatever is necessary to do that should be done including the use of every weapon in our arsenal. Mr. JUDD. Would the cost of military hardware manufactured in Japan in its unused potential capacity be less than the cost of the same stuff manufactured here, plus transportation? General OLMSTED. Yes. In the type of items where labor is a major factor in the price, the quota in Japan is cheaper than the price in the United States, so you save a part of the price as well as the transportation cost. In the type of item where the mechanized portion of the production-that is the use of machine tools and a very high level of technical manufacturing skill-there you do not get much difference. Our instructions to our procurement officers are that they should not pay more than the United States price plus 10 percent which we estimate to be the average cost of transportation or delivery and they have stayed quite well within that. If they feel they should vary from that they have to come to Washington for specific permission. Mr. JUDD. In most cases where labor is a major item we would save money on the original cost and also get a second benefit of assisting the Japanese economy so we would not have to put so much other money into it? General OLMSTED. That is right. Mr. JUDD. Would that also be true with respect to the capacity which you say is potential in Formosa? General OLMSTED. If anything the differential in Formosa would be greater in favor of savings. Mr. JUDD. Now, with respect to the economy of Formosa, General Van Fleet told us about the terrific inflation there and he said we were helping cause it, in the same way you saw us help cause it in China. That is, we forced them in effect to run the printing press to provide local currency which our boys as well as their own soldiers used for whatever they bought. There was more currency but not more commodities to be bought and uncontrolled inflation inevitably resulted. When you talked about this $200 million a year, would that just be pouring in $200 million more of currency with which to buy, without having any increase in goods to be bought? To what extent does that remedy the inflation or to what extent does it aggravate it? General OLMSTED. When you stated the question you mentioned Formosa. You meant Korea? Mr. JUDD. I beg your pardon. I did mean Korea. Mr. OLMSTED. There is now in the process of being sent out there a certain economic and financial team to study that very problem. The South Korean budgetary deficiency, something in the nature of $200 million, largely arises, as you can well realize, from the fact that they have all these men under arms. All these things they can do themselves but it costs more money than they can raise in their taxes. Now if we were to underwrite the deficit, in my judgment it would be to our interest to do it because we are getting an awful lot for our investment there. The problem would be how to do that without further aggravating the inflation. That is really your question. That is something our people there have been wrestling with without much progress so they have asked for and I understand they are to receive a team of experts just to study that problem. In part, our assistance can be in the form of commodities such as the cloth which they themselves can make into uniforms, or leather which they themselves can make into shoes. In part, our assistance can take that form and to that extent resist inflation. Whether it can be totally resisted or not is a problem that is really beyond me. I just do not see it all the way through. Mr. JUDD. One reason I brought it up was in connection with our previous interchange on the questions of Mr. Zablocki about the weaknesses of the Chinese Government. It was its inability after the war to deal with inflation and the corruption that goes with inflation which weakened it and it could well break the Korean Government no matter how heroic its military resistance. Our people are perfectly aware of this danger; are they not? General OLMSTED. Yes. Mr. JUDD. You have been very generous to come before the committee. I hope the world situation will get sufficiently better so that you can stay in retirement but I shall not be surprised if you have to be called up again. Mr. ZABLOCKI. I want to particularly thank General Olmsted. ( (Whereupon, at 1:05 p. m., the subcommittee adjourned, to reconvene at the call of the chairman.) MUTUAL SECURITY ACT EXTENSION THURSDAY, MARCH 19, 1953 HOUSE OF REPRESENTATIVES, COMMITTEE ON FOREIGN AFFAIRS, SUBCOMMITTEE ON NATIONAL SECURITY, Washington, D. C. The subcommittee met in executive session at 10:20 a. m. in room G-3, United States Capitol, Hon. Lawrence H. Smith (chairman of the subcommittee) presiding. Mr. SMITH. The subcommittee will be in order. Do you have a formal statement, Mr. Nash? STATEMENT OF HON. FRANK C. NASH, ASSISTANT SECRETARY OF DEFENSE Mr. NASH. I have no prepared statement, but I will try to speak from the notes I have. Mr. SMITH. I have asked the Secretary if he would tell us something about the targets of the program last year and just how far we were off that target at the end of the year. I think that will be very helpful to us; and, from that point, we can go on into a discussion of what we are expecting for next year. Mr. NASH. I think it might be well to go back a little bit to show just what led up to the establishment of these so-called targets that were fixed at the NATO meeting in Lisbon in February 1952. There has been so much misunderstanding about those targets it is difficult to clear it all up in one short session. I was particularly disappointed yesterday to read in the newspapers an article attributed to Mr. Lovett's final report as Secretary of Defense, a newspaper article carrying a paragraph that read as follows: Lovett notes among the failures in the defense build-up the inability of this country's European partners to meet the 1952 NATO goals. Although Europe's defenses were substantially strengthened in the last 6 months of 1952, he said they did not meet the 50 divisions and 4,000 combat planes, as hoped. Now, compare that with what his report actually said. This is the text of the report: In the field of military assistance to other nations, progress in the approved programs has been steady, but in some phases not as great as planned. Although our NATO allies were unable to achieve completely all the 1952 goals established at the Lisbon meeting of the North Atlantic Council in February 1952, the defenses of Europe had been substantially strengthened during the past 6 months. The number of units available to NATO command continued to increase, and their military effectiveness was substantially improved as deliveries of modern weapons from the United States, as well as local sources, multiplied. I would say that is disappointing, because you can understand how an oral statement or a statement made in a press conference might come out a little bit garbled; but, when it is a statement in a report that merely has to be copied, it does seem as though they could reflect it a little more accurately. Mr. VORYS. Would you tell me, Mr. Nash, what is inaccurate about the newspaper account? Mr. NASH. The newspaper's statement: Lovett noted among the failures in the defense buildup the inability of this country's European partners to meet the 1952 NATO goals. Now I will show you, or try to show you in a few minutes, that is Mr.VORYS. The word "inability"? The word "failure" is borne out. Mr. NASH. The impression that statement leaves is that they fell flat on their faces. The impression left is that they did not come even near to attaining their mark. It leaves out the word that is the key in Mr. Lovett's report, the word "completely," and that is what I would like to concentrate the story on this morning. You can judge for yourselves when I am through as to whether or not I am fair in my criticism of the newspaper's account of Mr. Lovett's report. Perhaps the initial mistake was made in trying to set a goal in terms of a certain number of divisions. That is oversimplification. When the newspapers carried the release at Lisbon that the NATO countries had agreed to raise 50 divisions by the end of calendar year 1952, they gave the public no idea of what was meant by the concept of divisions. I think it might be useful to go back just a little bit and show how these goals came to be established. I said at the very end of the meeting last Friday that, concentrating as we should in looking ahead at the problems that are facing us, it is well at times, so as to keep from being too discouraged, to look over our shoulder to see how far we have come. I commented last Friday that it is only 5 years ago-5 years ago Tuesday of this week-that we started on this so-called cold-war program. It was President Truman's address to Congress, on March 17, 1948, that declared that we had come to the conclusion, with the rape of Czechoslovakia in February of that year, that the U. S. S. R. was not going to cooperate and try to make this world a world in which. people could live in peace. Now, that was followed a month later by Congress voting the initial funds for the so-called Marshall plan. That was in April of 1948. That was followed a little while later with the adoption of the Vandenberg resolution. The Vandenberg resolution came out in June 1948, and the Vandenberg resolution is really the foundation and philosophy of what the whole NATO effort involves. On the same day that the President-President Truman, that ismade his sort of declaration of the cold war, on March 17, 1948, five of the nations of Western Europe-England, France, Belgium, Holland, and Luxembourg-on their own initiative formed what was called the Western Union. That was a defense pact where those five nations joined together. |