The CHAIRMAN. Is it the Department's policy to follow through and agree, or are you saying the policy does not agree with General Crow? Secretary LAIRD. That is correct.

PROGRAM DESIGNED FOR FOREIGN SALES

The CHAIRMAN. And you do not intend to go forward with a program specifically designed for foreign sales and not for your own service, out of your own

Secretary LAIRD. As Secretary of Defense, I have approved a memo which allows the Air Force to use $2 million for engineering studies on the F-5-21, plus other engineering studies on the stripped-down F-4 and the new F-104. These studies are limited to that particular area, and they are going forward because there may be a time, as we move forward with the Vietnamization program when we confront a requirement for short-range aircraft for Vietnam which is currently funded in the Department of Defense budget, but I want to make it very clear that we have not approved the establishment of a production line which would cost us $64 million. This is the only approval.

The CHAIRMAN. And you think it is proper to fund that out of your Defense Department and not foreign aid.

Secretary LAIRD. The question here, Mr. Chairman, is that, as you know, the cost of Vietnamizing the war and military assistance to the forces in Vietnam are presently carried in the Defense Department appropriation bill; and the services must fund these particular programs in their service budgets. This is somewhat different from other programs. We discussed that earlier in the hearing, Mr. Chairman. The CHAIRMAN. Yes, but this story leaves the impression, Mr. Secretary, that that was intended simply to build these planes to be competitive in sales not just to Vietnam where the war is going on, but to Latin America or anywhere. You remember the competition with Peru as to who was going to sell them planes? That is what the story is about. Secretary LAIRD. I think that story is based upon discussions that went on in the House Armed Services Committee.

The CHAIRMAN. That is right, that is what I think it was.

Secretary LAIRD. I want to make it very clear that the story is probably an accurate report of what went on at the House Armed Services Committee. However, the approval which I am talking about is somewhat different from what was anticipated in the discussions before the House Armed Services Committee.

COMMITTEE'S CONCERN ABOUT SALES AUTHORIZATIONS

The CHAIRMAN. Let me read you one paragraph, if the Senator will allow me, just to clear this up. This is from General Crow's statement before the committee on page 522 of the hearings. This was March 11 and 12. It says:

The proposal was made to the Air Force, basically to improve the capability of the United States to compete more successfully in the world markets. The aircraft that we are discussing has been extremely successful in the past, but in its present configuration, we feel its competitive position is slipping. The improved version should enhance the possibility of sales worldwide.

This is quite a different concept from your saying supplying them to the Vietnamese.

32-308-69-9

This is important, I think, in view of the great interest this committee has taken in the past about the sales program. And, as you know, last year one of the most controversial and closely contested decisions was about the authorization for sales, especially financed through the Export-Import Bank. I think in the Senate, at least, the decision was for the United States not to continue to be the world's greatest arms merchant, and we were trying to reverse that trend. This is part of it, I think, and that is why I think the question which the Senator from Rhode Island has brought up is a very important one and will also be brought up again when we come to the sales agreement.

Thank you very much.

Secretary LAIRD. I agree that it is an important question, Mr. Chairman; and I want to make it very clear that we certainly would like to have a new aircraft for MAP and for Southeast Asian countries to replace the old aircraft that presently are available, but we just cannot afford it now. There is a problem, however, of replacing the F-86 and the F-84 aircraft. This is something that does concern me, and I am sure it concerns others.

The British and the Germans are possibly going forward with a new aircraft. They have had some difficulties with it because the Dutch withdrew from the consortium that had been established. I want to make it absolutely clear that the general's testimony reflected his individual views and did not represent the Department of Defense's position, and that the matter has been straightened out.

The CHAIRMAN. Thank you.

(The news article referred to follows:)

[From the New York Times, Apr. 10, 1969]

SENATE TO STUDY AIRCRAFT SUBSIDY-AID TO NORTHROP TO PRODUCE FIGHTER PLANE FOR FOREIGN LANDS FACES SCRUTINY

(By John W. Finney)

WASHINGTON, April 9.-The increasingly numerous and vocal band of Senate critics of the Pentagon are aiming at a new target-a proposal to give an aerospace manufacturer a $62-million subsidy to produce supersonic fighter planes for foreign countries.

The first installment on the proposed subsidy to the Northrop Corporation was included by the House Armed Services Committee in a supplementary military procurement authorization bill approved by the House last month.

In the past, the bill in all likelihood would have sailed through the Senate Armed Services Committee and the Senate with no difficulty or objections.

But now, with a new skeptical attitude toward the military budget pervading the Senate, the legislation is running into critical examination by Senators even before it is considered by the committee.

The potential opposition to the subsidy is building up among the same Senators who have been opposing deployment of an anti-ballistic-missile system. As one leader in these forces put it:

"This is our next ABM. This is the next item that will come under scrutiny." Just where the idea for the subsidy originated-from the Air Force, the company or the House Armed Services Committee-is not clear from the legislative record.

From the transcript of a closed meeting of the House committee on March 12, however, it was apparent that the principal sponsor of the subsidy was Representative L. Mendel Rivers of South Carolina, the committee chairman.

A committee staff aide said that the committee had drafted the proposal "at its own initiative." A Northrop spokesman said that company officials had discussed the program with committee and staff members "but in response to requests from the staff for information."

At Mr. River's initiative, and without the formal endorsement of the Defense Department, the committee unanimously approved the amendment adding $14million for the Air Force to a $62-million bill that had been submitted by the Pentagon to purchase helicopter parts for the Army.

THE FIRST INSTALLMENT

In the course of explaining his amendment, Mr. Rivers made clear that the $14-million was but the first installment on a $62-million program for the Air Force.

Under the plan approved by the committee, the Air Force would give the money to Northrop so that the company could retool its production line at Hawthorne, Calif., to produce an improved version of the F-5 Freedom Fighter for foreign sales.

The F-5 is a relatively inexpensive supersonic fighter that was particularly designed for foreign countries. Some 725 of the planes have been sold or given to such countries as Iran, South Korea, Greece, the Philippines, Nationalist China, Turkey, Norway, Ethiopia, Morocco, Thailand, South Vietnam and Libya. The new version is estimated to cost $1.3-million a plane.

The justification offered by the committee for subsidizing production of an airplane not being ordered by the Air Force was that an improved version of the F-5 was necessary if the United States was to compete against such countries as France in foreign sales.

The argument was supported at the hearing by Lieut. Gen. Doward L. Crow, director of budget in the Air Force. Noting that the plane had been "extremely successful," the general told the committee, "In its present configuration we feel its competitive position is slipping. The improved version should enhance the possibility of sales worldwide."

While the program was not proposed by the Defense Department, General Crow fully supported the idea once it was broached by Mr. Rivers.

Mr. Rivers and his staff aides projected a market of anywhere from 400 to 1,000 for the new F-5 model at various countries to place the subsonic fighters they received from the United States. In addition to increasing the military potential of these countries; the United States would benefit from the inflow of dollars, Mr. Rivers and his aides said.

QUESTIONED BY REPUBLICAN

This line of argument finally prompted Representative Durward G. Hall, a conservative Republican from Missouri, to ask :

"If it is such a good deal, why doesn't the maker themselves fund this retooling for $62-million, especially if we are going to recover it?"

"It just doesn't happen in the industry," Mr. Rivers replied. "Nobody does." Elaborating on this point in the House debate, Representative Leslie C. Arends of Illinois, the Republican whip, said that Government controls over foreign military sales "preclude contractor investment risk to develop these markets.” The bill was approved by the House, 341 to 21, on March 27 after a short, routine debate.

The only objections were raised by Representative Jonathan B. Bingham, Democrat of the Bronx, who argued that the proposal was really a form of military assistance that should be considered as part of the over-all foreign aid program, and by Representative William F. Ryan, Democrat of Manhattan, who protested that "the subsidy to Northrop" was "yet another example of the tragic imbalance in our spending priorities."

STRONGER FIGHT SEEN

Considerably more opposition is expected in the Senate, where the F-5 issue may provide a test of whether the opposition to the antimissiles system can translate its skeptical review of military programs to other items in the military budget.

One important new political ingredient has been added to this skepticism by an experience that Senator Edward M. Kennedy, Democrat of Massachusetts, had yesterday in speaking before the Economic Club of Detroit.

The Senator was impressed by the fact that he got the most enthusiastic response with a suggestion that there should be closer Congressional scrutiny over military spending.

This reaction, according to associates, reinforced the Senator's view that, as part of its "scrutiny," the Senate should examine such items as the proposed subsidy to Northrop.

The CHAIRMAN. Senator Pell.

Senator PELL. Thank you, Mr. Chairman.

DISPOSITION OF SURPLUS TANKS

A couple of years ago the committee was told that as many as 7,000 or 8,000 tanks, M-47s and M-48s, would be surplus in Europe by 1971. Could you supply-I realize you could not do that right here but could you provide our committee with a country-by-country list of where these tanks are, what agreements we have already made for their further disposition and a statement of our overall policy concerning the disposition of these tanks and other weapons. Can you submit that for the record?

Secretary LAIRD. I think that is correct, Senator. I will supply the details for the record, but your estimate is about correct.

Senator PELL. Thank you.

(The following material was later supplied :)

It is unlikely that all of these tanks will become surplus by 1971 although [deleted] are known to be planning the reduction of their M-47 tank inventories. Under US agreements with these countries none of these tanks or other USfurnished weapons may be transferred or sold without US approval. This policy applies to items furnished under the grant aid program as well as items sold under the US foreign military sales program:

a. These countries are obligated by bilateral agreements to offer to return any grant aid material which become excess to their needs. Depending on its condition and repairability at the time of release, the US redistributes this materiel to satisfy other authorized requirements or sells it at disposal sale after demilitarization. The sole exception to this policy applies in the case of the FRG (Germany) which purchased the residual rights to US-furnished grant aid equipment for $75 million in 1962. Under the provisions of that sale, the FRG is not required to declare excesses to the US and may transfer these excesses to other NATO countries without US approval but not elsewhere. The FRG is offering its excess materiel, however, for repurchase by the US before undertaking any other disposition.

b. Sales agreements with these countries under the US foreign military sales program stipulate specifically that none of the items may be transferred by the purchasing country unless US consent has first been obtained.

NOTE: The classified portions of this document are in the committee files.

VISIT OF SOVIET SHIPS TO CUBA

Senator PELL. What is your view with regard to what the real purpose of the voyage of the Soviet ships to Cuba?

Secretary LAIRD. Well, I believe that it is a trip made by the Soviet navy to reaffirm the Soviets' interest and presence in Cuba. As you know, this is one of the areas where they provide major support. Their support of Cuba runs about a million dollars a day, and this is the first major visit by the Soviet fleet to Cuban ports. I think that this is the significance of the visit. We assume that the visit will take place on or about the 20th of July.

Senator PELL. Would it not be correct to say that the Soviet Union has extended probably more aid of an economic nature to Cuba than has any other nation?

Secretary LAIRD. I can give you the comparison between the various countries, but

Senator PELL. Maybe you can just give us the countries that have given more aid to Cuba.

Secretary LAIRD. If there are any, I will supply those for the record. Senator PELL. Thank you.

Secretary LAIRD. It is certainly one of the top three countries as far as Soviet aid is concerned.

Senator PELL. Right.

(The following material was later supplied :)

ECONOMIC AID TO CUBA (CUMULATIVE THROUGH 1968)

Communist (U.S. dollars)

[Deleted]...

Free world! (U.S. dollars)

[Deleted

1 Free world credits are private transactions between banks, manufacturers and export firms of the donor countries and the Government of Cuba. However, approximately [deleted] of the (deleted] are guaranteed by NATO country governments. The major contributors are France (NATO), the United Kingdom (NATÓ), and Spain.

Note: Deleted classified information is in the committee files.

U.S. SHIPS IN THE BLACK SEA

Senator PELL. Speaking as a Senator from New England, I think the fewer Soviet commercial fisheries near us the better. But this is an example of what is sauce for the goose is sauce for the gander. I have been struck by the visits of our ships to the Black Sea which is probably as much of a Soviet body of water, if not more so, than the Caribbean is an American body of water, and I was wondering if you felt there was any relationship between the visits of our ships-I believe there are 28 Navy ships that have visited the Black Sea in the last 11 years on a total of 15 separate visits-is there any relationship between that and their trip to Cuba?

Secretary LAIRD. I might think so if it were a smaller flotilla; but, as you know, we have not sent that many ships into the Black Sea at any one time. This is a fairly sizable task force. I will supply for the record the ships that were

Senator PELL. It is in the press.

Secretary LAIRD. We have never had that many ships calling in the Black Sea. We had two destroyers in the Black Sea not too long ago, but we have not had a major call in the Black Sea that would compare with this call of the Soviet fleet.