Set forth below is a brief comment on some of the more important items in the program.

(1) Food. At present the production of food in Korea is sufficient to meet domestic needs and to provide a surplus for export. Given the increase in production that has taken place during the past year it will not be necessary to make provision for any food in the 1951 program.

(2) Fertilizer.-A large proportion of the aid contemplated will be devoted to meeting Korea's fertilizer import requirements. It is essential to expand the agricultural production of Korea so that the standard of living of the people can be maintained and food exports increased. In fact the export of rice is the principal means by which Korea earns foreign exchange. It is hoped that it will be possible, with the help of additional fertilizer, to export some 425,000 metric tons of rice in fiscal 1952, thus easing Korea's balance of payments problem.

(3) Petroleum products. The funds requested for petroleum products in 1951 represent a reduction of about 45 percent from last year. The Korean Government will finance all gasoline purchases out of foreign exchange earnings, leaving kerosene, oils, lubricants, and grease in the aid program.

(4) Raw materials. The amount allocated to raw materials has been reduced by about $15,000,000 over the 1950 figure. Included in the program will be a wide variety of construction materials, chemicals, and other raw materials for processing, such as raw cotton, manila fiber, crude rubber, iron and steel products and nonferrous metals. Major emphasis has been placed upon raw materials rather than processed materials, so as to assure maximum utilization of Korean production facilities.

(5) Industrial equipment. This category of aid consists of mining equipment and repair and replacement parts, electrical repair and replacement parts, and iron and steel products such as steel rail, pipe, and boiler tubes. This equipment will contribute to the repair, and, in some cases, the expansion of existing facilities.

(6) Recovery projects. The amount for recovery projects remains about the same as that available in fiscal 1950. This part of the program seems essential in order to rebuild Korea's badly depleted physical plant and bring about her economic recovery by 1953. The program contemplates the construction of bridges, transportation and and irrigation facilities, flood-control projects, electric power facilities, cement and fertilizer production facilities, fishing and coal-carrying vessels, mining equipment and industrial machinery. In addition, provision has been made for supplies for deferred maintenance and replacement of worn-out facilities.

The following chart indicates the objectives of recovery projects:

7. Technical assistance. Nearly $3,000,000 is recommended for technical assistance work. Since the Japanese traditionally controlled the majority of positions involving technical and administrative responsibility, Korea is woefully short of technicians and administrators. Measurable progress has been made during the past few years in increasing the level of Korean technical skills as is evidenced by increased over-all production, better quality of output, and improved efficiency. The help of American experts will continue to be vital in promoting real economic recovery.

8. Use of American ships. In addition to the assistance outlined above the Administrator is authorized to continue the loan of a limited number of American merchant vessels to the Korean Government.

31. A BRIEF REPORT ON PROGRESS

The committee is encouraged by the substantial progress that has been made in Korea during the past year. This has been done in the face of difficulties perhaps more trying than those confronted by any state in the European recovery program. The country remains divided into two parts with Russia dominating the situation north of the thirty-eighth parallel; South Korea has a new and untried government; it confronts a refugee problem of serious dimensions; it is under constant threat from the north and must maintain a large internal police force.

In spite of these handicaps industrial production during 1949 was 50 percent above 1948. Coal production increased 34 percent during the same period, and electric power generation was up 35 percent. Korean agriculture, too, is gradually approaching prewar production figures. With good rice crops in the fall of 1948 and the largest summer rice crop since the liberation in 1949, South Korea's crop production has been raised from a famine level to exportable surpluses. Over-all exports have increased by 51 percent.

Currently South Korea's foreign trade deficit is running slightly more than $100,000,000 per year. ECA officials estimate that if the present program is carried on for two more years the deficit in the balance of payments will have been reduced to approximately $15,000,000 or, if conditions are favorable, eliminated altogether.

32. PREVIOUS AID TO KOREA

American aid to Korea began in the fall of 1945 when our troops entered that country. The program was continued by the Department of the Army until January 1, 1949, when the ECA took over. The Army program was essentially one of relief and rehabilitation with a diminishing emphasis placed on relief each successive year. The ECA program continues this trend away from pure relief, designed only to prevent disease and unrest, to a full-fledged policy of rehabilitation, reconstruction, and development calculated to produce a maximum of economic self-sufficiency in Korea.

Allocations of funds for assistance to Korea have been estimated

It should be emphasized that these figures by no means represent the total United States investment in South Korean independence and democracy, for they cover only civilian supplies and do not include military supplies and services furnished the Koreans; nor do they include the cost of occupation or administration. Thus, for example, we have supplied Korea with some $40,000,000 worth of surplus property, which is not included in list above. When all our expenditures involved in the occupation and in assistance rendered Korea are aggregated, the total would probably be well over a billion dollars.

In addition to economic and military aid the United States has given

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strong political support to the South Korean Government. brought the cause of Korea before the United Nations; we supported her fight for independence; we led in according her recognition; we supported her membership in the United Nations; and we sent an Ambassador to Seoul.

33. CONCLUDING COMMENT ON KOREAN PROGRAM

As the committee pointed out in its report on Korean aid last July, no course of action which the United States may pursue sue in South Korea is guaranteed to be successful. But the committee was impressed with the care and precision with which the program has been formulated, and it believes that the objectives set forth above can be achieved barring unforeseen circumstances. It recommends, therefore, the speedy approval of the Korean aid program so that we may continue to help South Korea reach its goal of economic independence by the end of 1952.

PART III. THE CHINA AID PROGRAM

Title III of the bill provides that funds which have heretofore been appropriated, but not expended, for economic assistance to China shall continue to be available until June 30, 1951, for carrying out the objectives of the China Aid Act of 1948, in any place in China and in the general area of China which the President deems not under Communist control.

That act, title IV of the Foreign Assistance Act of 1948 (Public Law 472, 80th Cong.), authorized the appropriation of $338,000,000 for economic assistance to China. Actually only $275,000,000 (Public Law 793, 80th Cong.) was appropriated for that purpose. This amount was to have been available until April 3, 1949. It was not spent, however, and the amount unexpended on that date was reappropriated by section 12 of the Economic Cooperation Act of 1949 (Public Law 47, 81st Cong.). As of February 15, 1950, when this appropriation was to expire, it was estimated that approximately

$104,000,000 of the amount appropriated in 1948 was still unobligated. On February 14, of this year, the President signed the Far Eastern Economic Assistance Act of 1950 (Public Law 447, 81st Cong., see S. Rept. No. 1251, 81st Cong., 2d sess.). Section 2 of that act continued the availability of these same funds until June 30, 1950. The present title will further extend the availability of the funds to June 30, 1951. It is estimated the amount will be about $94,000,000 as of June 30, 1950. 50,

The committee believes that conditions in China are so fluid that it would be inadvisable at this time to do more than continue the availability of these funds for another year. This title gives the President considerable latitude not only with respect to the area where such funds may be expended, but also with respect to the terms and conditions under which such aid shall be made available.

As noted above, the funds will be available for economic assistance in any place in China and in the general area of China so long as the aid goes to areas which the President deems are not under Communist control.

The committee, in order to be sure that aid is not withdrawn prematurely from those areas of China where the Nationalist Government is still resisting the Communists, has specified that as long as the President deems it practicable not less than $50,000,000 shall be available for assistance in areas in China, including Formosa and Hainan. The committee desires to emphasize that if it becomes impracticable to expend these funds in China they are to be available for expenditure in the general area of China.

PART IV. PALESTINE REFUGEE AID

Title IV of the bill includes the provisions of Senate Joint Resolution 153 which the Committee on Foreign Relations favorably reported to the Senate on February 14, 1950. Senate Report No. 1275 describes this resolution in some detail.

The committee felt it would be advisable to include the Palestine refugee legislation within the scope of this bill. The incorporation of these various economic assistance programs in one measure will not only facilitate congressional consideration of this important problem, but will also conserve the time of the Senate.

APPENDIX

CHANGES IN EXISTING LAW

In compliance with subsection 4 of rule XXIX of the Standing Rules of the Senate, changes in existing law (Public Law 472, 80th Cong., and Public Law 47, 81st Cong.) made by the bill, as reported are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, existing law in which no change is proposed, is shown in roman):

SEC. 111. (a) The Administrator may, from time to time, furnish assistance to any participating country by providing for the performance of any of the functions set forth in paragraphs (1) through (5) of this subsection when he deems it to be in furtherance of the purposes of this title, and upon the terms and conditions set forth in this title and such additional terms and conditions consistent with the provisions of this title as he may determine to be necessary and proper.

(1) Procurement from any source, including Government stocks on the same basis as procurement by Government agencies under Public Law 375