Because of complaints registered by various American business interests, the committee was concerned at the impact which increased imports might have upon industries in the United States. It questioned Mr. Hoffman closely to learn his views on this matter. Mr. Hoffman in his testimony before the committee stated that even by 1953 when the "total amount of competitive imports that can come into the United States from Europe" might reach the figure of 14 billion dollars a year "that simply cannot have, as against an economy that produces $140,000,000,000 a year, much of an impact." He emphasized that competition from domestic producers is a far greater factor affecting United States industry than any conceivable foreign competition. In addition to making the point that competitive imports would be small in comparison to our total national income, the Administrator observed that all this concern on the part of American industry to adjust itself to changes (i. e., increased imports), is not the highest compliment that should be paid to American management, because I think American management has the ingenuity; given some time, to make the shifts it has to make. * * * The committee recognizes the very great importance of this issue of increased imports into the United States and the force of the points made by the witnesses from the executive branch. Though the total volume of competition from abroad will be small as compared to the total volume of American production, the impact of foreign competition may be considerable in particular areas of industry. It is this point that is of special concern to the committee. The whole question of our trade position as the world's greatest creditor nation and our relationships with other free nations in this field, and the implications of these questions for our economic policies requires the most careful study. 16. DISCRIMINATION AGAINST AMERICAN BUSINESS During the course of the hearings the committee examined carefully charges that certain of the participating countries have imposed restrictions upon trade which discriminate unfairly against American businessmen. One type of discrimination has arisen in connection with British restrictions imposed upon the import into British territory of oil and petroleum products by American companies abroad. American oil companies protested that such restrictions constitute unfair discriminations which seem particularly unwarranted at a time when the United States is contributing generous sums toward British recovery. The British have claimed these restrictions were necessary in order to make the maximum savings of dollars and thus to reduce their need for American aid. The American oil companies have taken the position that this objective could be achieved just as well if they were allowed to continue to sell their oil products for sterling in the British area. The subject is a most complex one, and is currently under negotiation between the United States and British Governments. The committee hopes that a solution can be found which will not involve unfair discrimination against American companies and, at the same time, will not add to the cost of aid to the United Kingdom. In order to make clear the position of the Congress and to assist the Administrator in dealing with such discriminatory practices, the committee inserted a new section in the bill (sec. 104 (b)) which ex 63556-50--4 * * presses the sense of Congress that no participating country in connection with the importation of commodities into participating countries "shall maintain or impose any import, currency, tax, license, quota, or other similar business restrictions which shall discriminate against citizens of the United States *." The committee amendment recognizes that some restrictions may be reasonably required to meet balance of payments conditions and requirements of national security. It recognizes also that there may be instances when some such measures are sanctioned under existing international agreements. The committee also heard renewed charges of alleged discrimination against American businessmen in Morocco. It considered an amendment which had been proposed specifically to deal with this matter. After careful examination of the complaints, the committee decided that such an amendment was not necessary in view of the satisfactory arrangements which ECA and the State Department have made with the French Government to deal with the Moroccan situation. Moreover, to the extent that unjustified restrictions may be imposed, in Morocco or elsewhere, the committee feels they will be covered by the amendment adopted. 17. EAST-WEST TRADE Since the inception of the Marshall plan it has been generally recognized that failure to revive the traditional east-west trade, which came to a virtual standstill during World War II, would increase western European difficulties in balancing its trade with the rest of the world. Trade with eastern Europe has not developed to its prewar volume. It is estimated that 1949 will show imports at about 32 percent and exports at about 36 percent of the 1938 total. The chief forces that are retarding east-west trade stem in large measure from political tensions and differences between east and west. Within the Soviet system Russia has exerted heavy pressure upon her satellite states to trade with her and with one another. Moreover, production in eastern Europe of commodities normally exported to the west, such as timber and grain, has not recovered to prewar levels. The committee recognizes that the efforts to revive east-west trade, which are desirable from an economic standpoint, must be carried forward with due regard to security considerations. In executive session the committee received a full report from ECA officials on this subject and is satisfied that proper action has been and is being taken to safeguard the security interests of the United States and western Europe. 18. STRATEGIC MATERIALS The ECA strategic materials program has two major objectives: the purchase of materials and the development of new sources of supply in participating countries and their dependencies. Purchases are made only of those materials required by the Federal Supply Service for the Munitions Board stock pile. ECA purchases are made entirely from its local currency funds. As of December 31, 1949, commitments totaled over $48,000,000 in local currency, principally for rubber, sisal, industrial diamonds, palm oil, graphite, and bauxite. It is estimated that $20,000,000 in local currencies will be used for purchases in fiscal 1951. For development projects, ECA advances dollars or ECA local currency to a producing company, usually against a commitment to repay in the materials produced. Estimates indicate a commitment by the end of the current fiscal year of about $20,000,000 and slightly under $20,000,000 in local currency on these projects, for the production of such materials as bauxite, lead, zinc, chrome, and manganese. For fiscal 1951, 20 million dollars and about 81⁄2 million dollars' worth of local currencies will be devoted to development enterprises. In testimony before the committee, ECA stated that the amendment added to the act last year as section 115 (i) had proved useful in stimulating some of the local currency purchases above described. However, provisions of the same section directed toward encouragement of Federal Supply Service procurement had produced less results, largely because of restrictions in authority and reductions in appropriations later placed by Congress upon FSS purchases. ECA also called the committee's attention to those provisions of section 115 (b) (9), which call for negotiating with participating countries minimum availabilities of deficiency materials and schedules of increased production for transfer in part to the United States. The inability of United States governmental agencies to make long-term purchase contracts has made these objectives impossible of accomplishment over the past year. Moreover, on the basis of experience to date, ECA is convinced that these provisions cannot be made effective without a major interference by the governments of participating countries in with private business. ECA has been reluctant to encourage such interference, and the committee endorses this position. The committee does not suggest deletion of the provisions, as they might (though it now seems unlikely) prove serviceable at some future time. 19. SURPLUS AGRICULTURAL COMMODITIES In view of the interest of the Congress in the problem of surplus agricultural commodities as expressed in the original law and the amendments approved in 1949, the committee believes that the following information may be helpful to Members of the Senate: The net effect of provisions dealing with surplus agricultural products in the present act is to require, with certain limited exceptions, that ECA funds be used for the purchase in the United States of agricultural commodities needed by the participating countries in all instances in which the Secretary of Agriculture determines that this country has an appreciable exportable surplus. During the first several months of ECA, supplies of agricultural commodities in the United States were short and were not, in many instances, sufficient to meet the requirements of the participating countries. Hence ECA authorized a relatively large volume of procurement outside the United States (offshore procurement). Early in 1949, supplies of many products available in the United States were wholly adequate to meet the requirements of the participating countries. As a consequence, offshore procurement was sharply reduced. During the 9 months ending December 31, 1948, offshore procurement represented 34 percent of all authorizations for food and agricultural commodities. Since January 1, they have constituted only 20 percent. Offshore procurement includes commodities like coffee, which is not produced at all in the United States, and of other commodities like sugar, of which the United States is a large net importer. Except for these two classes of commodities, and for the financing of an existing contract for the purchase by the United Kingdom of Canadian wheat, food and agricultural authorizations have been almost exclusively limited to the United States since January 1, 1949. The act also provides, in effect, that stocks of surplus agricultural commodities held by the Commodity Credit. Corporation shall be given first consideration in meeting the requirements of the participating countries when the Secretary of Agriculture notifies the ECA (and other Government agencies) that such stocks are available for foreign aid. Thereafter these stocks, to the maximum extent practicable, are to be utilized in meeting foreign requirements. In fact, the Secretary of Agriculture has given this notification in comparatively few cases, as it has seemed equally effective, and more consistent with the policy of encouraging private trade, to permit ECA to buy on the open market stocks of surplus agricultural commodities which would otherwise have had to be acquired by the Commodity Credit Corporation in its price-support program. Hence, during the period April 3, 1948, to February 28, 1950, only approximately $115,000,000 has been procured for the Commodity Credit Corporation stocks out of a total of $2,489,800,000 of surplus agricultural commodities authorized for procurement in the United States. Major purchases for Commodity Credit Corporation stocks have been of peanuts, flaxseed, wool, and frozen and dried eggs; and such commodities as cotton, wheat, coarse grains, and tobacco have been acquired on the open market. 20. USE OF LOCAL CURRENCY COUNTERPART FUNDS An important method of speeding European recovery under the ECA has been for each recipient country to deposit in a special account its own local currency in an amount equal to the grant aid it has received from the United States. As of December 31, 1949, the local currency counterpart funds deposits reached the equivalent of $4,850,700,000, of which 5 percent was allocated to the use of the United States for administrative expenses, strategic-material purchases, and other local currency requirements of the United States. The balance of $4,608,000,000 was available for use by the recipient countries for purposes agreed upon with the United States. Of this amount $3,202,200,000 has been approved for withdrawal for specified purposes. To date the different uses to which these funds have been assigned have included debt retirement, promotion of agriculture, development of extractive industries, increase of manufacture, improving and construction of transportation facilities, technical assistance, loans to commerce and industry, procurement of materials in deficient supply, construction of public buildings and housing facilities, special relief projects, and promotion of tourist trade. 21. WESTERN GERMANY AND COUNTERPART FUNDS During 1949, three events took place in Germany which had a heavy impact on the ECA program: (1) the establishment of the Federal Republic of Germany (the Bonn Government); (2) the replacement of military government by civil government through the establishment of the tripartite Allied High Commission; and (3) the creation of the Office of the United States High Commissioner for Geramny. During the current fiscal year ECA in addition to its own appropriation, has had available for use in Germany $397,865,639 transferred from GARIOA (appropriation for government and relief in occupied areas) to the ECA. For the fiscal year 1950-51 there will be no separate GARIOA appropriation for Germany. The total ECA costs for Germany, which are now estimated at 552.9 million dollars, will be carried in the ECA budget. This is in addition to a sum of $30,000,000 which has been requested by the Department of State in separate legislation, for administration of the High Commissioner's office. Under the terms of the ECA bilateral agreement with Germany signed on December 15, 1949, provision is made for two separate counterpart accounts. One is the usual ERP special account maintained in all ERP grant countries. The second is the GARIOA special account which is the depository of deutsche-mark amounts commensurate with the dollar cost of assistance rendered by the United States as an occupying power under past appropriations for GARIOA. The significant difference between the two accounts is that 95 percent of the ECA special fund can be used only upon agreement between the United States and the Federal Republic of Germany, whereas the GARIOA special account may be used "in the manner requested by the Government of the United States." * * * Section 105 (b) of S. 3304, contains two provisions that are extremely important to the full protection of American interests in Germany. The first provision gives the President authority to use ECA funds allocated for assistance to Germany "to meet the responsibilities of the United States in connection with the rehabilitation of occupied areas in Germany" including action essential "to prevent starvation, disease, or unrest. This means in fact that if an emergency (for example, one comparable to the blockade of Berlin), the President can divert ECA dollars to meet it. * * The second important provision of section 105 authorized the Secretary of State and the Administrator to agree upon the amounts of counterpart which the German Federal Republic will deposit in the GARIOA special account. This is the natural complementary provision to that described above. It enables this Government to use deutschemarks deposited as counterpart to meet "reorientation" expenses in Germany and any emergency such as that described above when local currency rather than dollars can be used. The United States as one of the occupying powers needs maximum latitude in dealing with situations which may arise in Germany. The President has had such latitude in the past under appropriations of funds for use by our military government, and the provisions contained in this bill will continue that authority during the period of civilian administration. The very fact that the United States would be able to move quickly and decisively to meet contingencies which |