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Difficult conditions have hindered progress, stemming from the background of hostilities in Palestine. Furthermore, large-scale projects require detailed planning, and there are inevitable delays in putting major reclamation and irrigation plans in hand.

This in brief is the situation:

As a result of hostilities, upward of 750,000 Arabs living in the British mandate of Palestine in 1948 left their homes and possessions. The vast majority of these people have received no compensation for their property, and many express the desire to be repatriated.

While 100,000 or more of these people have been able to find means of selfsupport in Arab communities, the registry rolls of the United Nations now list about 865,000 needy refugees, to whom 810,000 "rations," the equivalent of 1,600 calories daily, are being distributed.

This problem is not static, as our best evidence indicates that the refugee population is growing at the rate of 25,000 annually, as births exceed deaths. Present projects for the refugee population, which Mr. Gardiner can describe in greater detail later, and which will take some years to implement fully, hold out hopes for a living for only about 400,000 souls.

The simple fact is that the agricultural, industrial, and financial resources of the Arab nations concerned cannot cope with this problem unaided.

As you know, Israel occupied territory during the conflict considerably beyond the boundaries allotted to it by the United Nations partition plan of 1947. From the lands so occupied many thousands became refugees.

The refugee problem is the principal unresolved issue between Israel and the Arabs; outstanding issues are generally listed as compensation to the refugees, repatriation of the refugees, adjustment of boundaries, and the status of Jerusalem and the Holy Places. None of these issues can be separted from the refguee problem.

Against a background of frustration and hostility, the United Nations Relief and Works Agency has done two things: Maintained a program of relief-food, shelter, medical care and developed in the Arab countries, programs of selfsupport for the refugees.

The Department of State considers that this United Nations Agency is the correct instrument for these purposes. Through the establishment of such an organization by the General Assembly, widespread support of the program has been secured from many nations.

At the same time the direct relationship between the Agency and the principal contributing governments, through the Agency's Advisory Commission, has enabled us to keep in close contact with its operations, and to have a direct voice in its policies.

As for the general policies of the Agency, its standards for relief must be conditioned by the fact that poverty prevails among nonrefugees. There must be left incentives for those who choose to work rather than to receive a dole. This makes for hardship in a population which had achieved, during the past 30 years, higher material standards than those of its former neighbors and its present hosts. We cannot in any case right the wrongs of the Arab refugee by relief payments; but if the United Nations can help maintain adequate levels of health and nutrition we shall have some cause for satisfaction.

On the side of rehabilitation, we have witnessed slow but steady progress in attitudes among the Arab Governments enabling the development of specific plans to permit substantial numbers of the refugees to improve their lot.

The United Nations Relief and Works Agency for Palestine Refugees has conducted its operations in a framework of humanitarian and economic considerations, and has attempted to avoid any direct connection with outstanding political issues. Within these limits, and without prejudice to final solutions of political issues, it has negotiated agreements to benefit the refugees by substituting employment for relief.

The General Assembly of the United Nations, with Arab support, voted in 1952 a 3-year program estimated to cost $250 million, divided as to $50 million for relief and $20 million for projects. Funds to start this program have been available since late in 1951.

The Agency has earmarked funds for the irrigation of the Jordan Valley. A project is now under close study by the United States engineers attached to the Government of Jordan. Intensive irrigation of the valley might provide for 200,000 people not now living there. This is a bold and imaginative proposal.

In Jordan, whose resources of water and arable land are limited, it is the main hope. Technical problems both of water utilization and of land settlement lie

ahead. More than ony other nation, Jordan has been the sufferer of the Palestine hostilities. Jordan nevertheless represents a stabilizing influence in the Near East and needs and welcomes outside aid.

The Egyptian Government has made a proposal for aiding refugees now concentrated in Gaza, through developments in the Sinai Peninsula. Preliminary engineering advice is favorable to such a proposal, involving use of water from the Nile.

In Syria, work is underway on land reclamation, carried out by refugees on lands made available by the Government. Proposals for rehabilitation of the urban refugees are under study.

The record of the UNRWA has until recently consisted chiefly of prospects. It is now possible to report that projects are the subject of continuing collaboration and concrete planning between UNRWA and governments. This marks a great step forward.

You may recall that 3 years ago when the problem was first studied by Mr. Gordon Clapp on behalf of the Palestine Conciliation Commission, it was impossible for him to find responsible Arabs willing to discuss more than a program of work relief. We now are in the phase of economic development from which refugees and host countries can secure permanent benefits.

It is unreasonable to expect Arab countries to accept refugees as workers unless means are found to improve conditions of their own citizens at the same time. The refugees cannot be the sole beneficiaries of new opportunities, nor can they hope to elbow settled people aside. Here lies the case for general economic development of the host countries, which deserves to be considered on its own merits as well as in the context of providing opportunities for the refugees. From the conclusion of hostilities in Palestine, until today, little tangible progress has been made in such development in Syria, Jordan, Lebanon, and Egypt. The interest and plans of these countries hold out hope for the future, but they will need help from the banks and from our own Government as well as from the UNRWA, if their plans are to mature.

It is clearly not in our national interest to accept responsibility for the welfare of the refugees, for either a long or a short period of time. It seems equally clear that to abandon this program of relief and rehabilitation now would have serious repercussions on our national interests.

Such action would involve profound unsettlement in the Near East, prejudicial to the well-being of all our friends there. It is equally clear that the goals of the present program cannot be achieved by its present terminal date of June 30, 1954. It is our view that the date for termination of the program should be extended for a further 2 years, until June 30, 1956: that we should endeavor to maintain the target of $200 million for work projects, and as circumstances dictate continue relief expenditures for at least a further 2 years. This will necessitate an increase of the relief fund originally projected at $50 million.

The success of other programs included in current MSA legislation for the area will have a great effect on the progress of this Agency, as would a settlement of other issues in the Near East.

Mr. GARDINER. Mr. Chairman, I believe it is our duty at this point to put forward the case for this particular area of the world. I realize that you have many burdens and problems. I would point out, sir, that this request for funds has been most carefully screened by the administration; that it represents the considered judgment of the executive branch of what is needed to help put out fires in this very critical part of the world; that it bears a very small relationship to the total sum requested in this bill before you.

I think that there is a sense of proportion to be observed here though I fully realize, sir, that $170 million is a very great deal of money and that you will consider it most carefully.

I think that it should be considered in the context of the importance of the Middle East to the United States.

(Discussion off the record.)

Mr. GARDINER. Now, we were instructed by the Secretary and by Mr. Stassen regarding this program-they have taken a very great

interest in it, and I would like to make it perfectly clear that the messages which we have had from the Secretary and Mr. Stassen from the Near East on their recent trip, give us no reason at all to retreat or retract in any way from the presentation which we have made in this statement

The Secretary when he testified spoke in part as follows:

We believe that the area can best be treated as a whole and that it is not realistic to think of the building of defense within the area against possible Soviet aggression as long as the area is torn by conflict.

And he also said that

We hope that with the discretion which would be allowed us if this legislation is passed in the form proposed, to initiate a program for the entire area which would include among other things the prospect of peace between Israel and the Arab states and that that would provide a foundation upon which a more dependable defense structure could be erected than under present conditions.

Now this program is obviously closely allied to the program of military aid about which Mr. Jernegan spoke. He has furnished part of the political background. Therefore, I will not repeat that.

I would point out that what is new from the legislative point of view is the proposal that we should consider the Near East as a whole and not single out in the legislation by name an individual state for special treatment.

You will recall that previous sections of the law had labeled aid to be rendered to Israel on such terms and conditions as the President directed, whereas aid to the neighbors of Israel either had to be related to the resettlement of the Arab refugees or to the regulations of the technical cooperation program, which were, as has been pointed out, in many senses restrictive regulation. We think it is in the interests of the United States to be able to treat these neighboring countries on a like basis and that the friends, the special friends of Israel have a real interest also in seeing that this bill is supported or in supporting this bill because I do not think it is in Israel's interest to be singled out for special treatment. In the long run Israel is going to have to survive as a part of the Near East. Special treatment of Israel, special reference to Israel in legislation creates special resistances. It is a political minus and not a political plus.

Mr. JAVITS. I think there is a very sharp difference in two things that you said: Special treatment and special reference. I am inclined to agree with the latter and not with the former, for this reason: The basis upon which the committee acted, as I recall it, was an equal refugee situation. The Israel problem, its continuing problem is one of refugees just as the Arab refugee problem persists, and I think when we did what we did with respect to the Israel provision we were looking at it in that light. I believe Dr. Judd sponsored that amendment in terms of refugee assistance, equally refugee assistance to resettle the Palestine-Arab and Israeli refugees.

However, as against the special mention of a country and the problem, this is a fact. It was specially mentioned. Therefore, I have always felt that I would like to see the area treated as a unit. I have said publicly on many occasions that Israel has to live in the Near East and as the Near East prospers and gets somewhere, Israel will get somewhere.

I am rather hopeful and I think many Americans feel the same way, that we can very greatly help the Near East toward economic and

social development. I would like to ask if it is the aim of the common fund to integrate the area insofar as possible economically, I think that is sound. It may be interesting for you to know if I may be permitted to refer to it, Mr. Chairman, when I was last in Israel which is now 2 years ago, I was invited to make a speech over the Israeli radio, the national radio, which caused quite a good deal of comment in which I urged that all possible Israeli projects have an open end valve at the end so they could eventually be connected with Arab projects. It may have been called to the State Department's attention. I said just about what you are saying now. I like the idea of economic integration and I have always preached the idea that economics may be a bridge to Arab-Israel peace quicker than diplomatic negotiation. I do trust, however, that the fund will not be used as a means of pressure in political terms but rather will be used to help the area as an economic unit with the feeling that the political benefits will then come, even though they may seem to be indirect. In other words, I do not like to see a fellow going down there with a satchel full of money and saying, "Look. If you sign here, you get some money; if you don't, you may starve." Do you see what I mean?

Mr. GARDINER. I understand. I would continue my statement with the observation that while I stand by every word that I said when I spoke before, that I think when you come to allot funds you will have to use a different basic criteria in Israel than you would in the Arab States. You cannot use funds as a weapon of political pressure. You cannot use starvation as a political weapon.

On the other hand, it might well be that there would be certain projects which were feasible if considered on an area basis from which you otherwise would choose to withdraw and there might be conflicting projects in a closely packed neighborhood which you would wish not to see financed if actions on both sides of the border were clearly uneconomic. If we were paying a bill on both sides, it could be a smaller bill if people got together and worked out their resources on a unitary basis.

I would like now, if I may, sir, to address my remarks to the distinction between the requirements of the Arab States and Israel. I agree with Mr. Javits that there are very different types of need.

We have filed with the committee classified documents which we would like to remain classified as long as possible, indicating the basis for the request for $140 million.

(Discussion off the record.)

Mr. GARDINER. Now, that proposal is on file with the staff, and I believe it has been submitted to the members. In approaching that calculation, we have done what we have done in prior years, we have endeavored to make as good a calculation as possible of the prospective expenditures and revenues of Israel on foreign exchange account for the ensuing fiscal year.

(Discussion off the record.)

Mr. GARDINER. What may be discouraging to you in this forecast is the fact that comparatively little progress appears to be in sight, insofar as the export trade of Israel is concerned, and there I think we ought to be very frank and clear with each other.

You will note there is an estimate of $60 million for exports of commodities from Israel during fiscal year 1954, which compares

with $45 million for fiscal 1953. That by no means tell the whole story.

In order to achieve an export surplus of $60 million-I beg your pardon-commodity exports of $60 million-it is necessary for Israel to import approximately $36 million worth of materials to fabricate. That by no means tells the whole story.

Mr. JAVITS. Could we get some document on that?

Mr. GARDINER. I am sorry; I thought you had them.

Mr. WESTPHAL. F-2 is a digest and does not include the figures from which he is speaking.

Mr. JAVITS. As long as we know we have not got it, we will listen closely.

Mr. GARDINER. The facts are, to enable Israel to achieve an export total of $60 million, you have not only to import $36 million in materials to fabricate, but you also have in the account, which does not appear directly, other expenses of the export industry, such as fuel and capital expenditures, which reduce the actual benefit of those exports, even more. Now, I have been asked for, by committees, a prophecy as to when Israel may become a viable state. We have had very careful studies made by economists who have looked closely into the Israeli problem with that point in mind. I think a fair answer still is, "I do not know."

On the other hand, we have some reason to feel that if what one means by a viable state is a state that can support itself with assistance from its sources of private income abroad, rather than United States grants, there is a prospect, if Israel continues to put her house in order, of viability within 5 or 6 years' time-viability in terms of no more requirement for United States grant. That, I think, is the most hopeful forecast that I could put conscientiously on the Israeli picture, the economic side of the Israeli picture. They would have considerable gains if there were no Arab boycott. They would save some money on fuel and benefit from more tourist trade and other elements in the local economy. It would result in a pickup of income if there was no longer this border tension or border strife.

I am afraid that you are going to have to be faced with consideration of Israel's needs for several more years.

I would think that until the economy of Israel has become more predominantly agricultural-and the Israelis are well aware of this problem-until they have people tilling the fields as intensively as the Arabs used to till those fields, they are going to be very badly off economically.

They will tell you of great possibilities of development in the mineral field. They hope to strike supplies of oil. They may find such development, they may find oil, but until that day comes, I think that the path for Israel is increasing agricultural production as they bring into utility once more a good many hundreds of thousands of acres formerly cultivated by the Arabs, many of which are now still unused. Mr. SMITH. Why do we not get at first problems first, Mr. Gardiner, in this area? The first and basic problem that confronts the world is the refugee problem. Yet we talk all around it. We just do not want to come to grips with it.

Mr. GARDINER. I would come directly to it, but we have a complex problem, sir, and I think unless we take one item at a time, I just

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