a vital part of the competitive theory of free enterprise. Such provisions would seem to strike directly against the emergence of potential competition where, as it always does, such competition poses a threat to existing industry. The Government's present ownership on a huge scale of the most modern producing plants and of vast surpluses of movable goods can become a powerful instrument either to protect and extend existing monopoly or to restore and maintain competition. Everything depends on the direction which in the instrument is applied. If it is desired to decentralize control of industry, to give consumers the benefits of the substantial efficiency inhering in their proximity to nearby sources of supply, if it is desired to discourage the unnecessary cross hauling of goods that arises when distant producers come into local markets at identical delivered prices and to reduce the price level made necessary by such waste, a most powerful leverage could be exerted in that direction in either or both of two ways: 1. By requiring the purchasers or lessees of any producing plant now owned by the Government to agree upon conditions that would insure its fullest possible operation and in that connection to agree that the output of the plant shall be sold at f. o. b. plant prices with the purchasers thereof being allowed to provide for their own transportation, or, if the product is sold on a delivered-price basis, that due allowance shall be made to all customers for differences in cost of delivery to different destinations. This latter would be merely what the Robinson-Patman Act presumably contemplates. To permit Government plants transferred to private ownership systematically to refuse such allowance would encourage them to synchronize their prices with those of their competitors and to so match delivered. prices that purchasers would be unable to find any price advantage in dealing with any one of them. 2. By imposing a similar requirement upon the purchasers of movable goods for resale, such requirement to be applicable at whatever point of actual shipment such purchasers might select for naming the price to their customers. The advantages of such requirement would be the same or similar to those stated under No. 1. Some of the bills would provide for interim loans and removal and storage of surplus material at Government expense. Such forms of relief could also be directed either in aid of the restoration and maintenance of free competitive enterprise or in the opposite direction. If employed for the former purpose or in aid of such specific proposals as No. 1 and No. 2 above, such governmental aid might spell the difference between success and defeat of the private interesis, whether large or small, that attempted to operate in accordance therewith. If small business as such is to be given concrete governmental aid of a financial character or otherwise, and if the ultimate purpose of such aid is to maintain the competitive system of free enterprise, then such aid might logically be granted on conditions that would directly serve that ultimate purpose. Here again, however, there seems to be no way in which small business may be thus assisted without making it a serious potential competitor of the established large concerns. And yet unless such potentiality is promoted and unless in some way it becomes an actuality, the ultimate aim of such Government aid is not accomplished. A break-down of movable surplus property into small units in order to widen the scope of the market, multiply the potential number of prospective or actual bidders and thus create a larger number of small purchasers, would seem worthy of consideration in this connection. Such a break-down would also facilitate the reemployment of men returning from military service. We assure you of our desire to be helpful in any way you might suggest toward attaining the generally accepted objective of restoring, maintaining, or promoting the competitive system of free enterprise by means of a wise disposition of surplus Government property. We assume that the consumer, taxpayer and business itself have a common interest in the choice of means which will best serve that end. By direction of the Commission. Sincerely yours, R. E. FREER, Chairman. P. S. The Bureau of the Budget has advised by letter of July 12, 1944, that there would be no objection to the submission of this report to the War Contracts Subcommittee, Senate Committee on Military Affairs. RECONSTRUCTION FINANCE CORPORATION, Hon. JAMES E. MURRAY, Chairman, War Contracts Subcommittee, Committee on Military Affairs, Washington, D. C. MY DEAR SENATOR MURRAY: Your letter of August 4, 1944, addressed to the Honorable Jesse H. Jones, requesting a report as to (1) the substitute version of S. 2045, and (2) the draft of a bill included in the July 21, 1944, report of the Surplus Property Subcommittee of the Special Committee on Small Business, has been referred to me for reply. I would not recommend enactment of S. 2045, the principal feature of which is to impound durable property until 5 years after termination of the present war. While speedy industrial reconversion is essential in order to avoid widespread unemployment and other attendant evils, I cannot believe that the immediate sale of consumable items will retard the process of reconversion. To hold such goods from the market at this time certainly would result in industry later facing a market unnecessarily depressed by commodities which could have been previously absorbed. At a time when there is the greatest demand for these goods, when purchasing power is greater than ever before, and when the national debt is larger than at any other period, there would appear to be no valid argument against now proceeding with the disposition of surplus Government property in order to realize the highest obtainable return for it consistent with the maintenance and encouragement of a healthy, competitive economy. The draft of the bill included in the July 21, 1944, report of the Surplus Property Subcommittee of the Special Committee on Small Business contains certain desirable features. The Surplus War Property Administrator, Mr. W. L. Clayton, has discussed at great length certain other provisions of that bill in his testimony at a joint hearing before the Special Committees on Post-war Economic Policy and Planning on June 16, 1944, and more recently before the House Committee on Expenditures in the Executive Departments. I concur in Mr. Clayton's objections to those provisions and agree with him that the bill which he has proposed is more desirable than any bill which has been introduced on this important subject. Sincerely yours, CHARLES B. HENDERSON, Chairman of the Board. DEPARTMENT OF STATE, August 14, 1944. United States Senate. The Honorable JAMES E. MURRAY, MY DEAR SENATOR MURRAY: I am writing with further reference to the two legislative proposals on the disposition of surplus war property which you enclosed with your letter to the Department dated August 4, 1944. The first bill is a substitute version of S. 2045 introduced by Senator Edwin C. Johnson. As was pointed out in the Department's letter to you of June 1, 1944, the primary concern of the Department is in the problem of foreign disposal of surplus property, both property located abroad and property exported from this country and our interest in domestic disposal policies is in their relation to our foreign trade. Section 11 (a) of the bill provides, in effect, that, with certain exceptions, durable property is to be frozen for 5 years after the end of the war and not disposed of at all and section 11 (e) specifically freezes scrap and obsolete material. The definition of durable property contained in section 2 (d) includes unmanufactured wool and cotton. It is probable that there will be a substantial need for such supplies in foreign countries, especially in those areas which have been devastated by the war. While a partial exception for export is found in section 8 (a), the exception allows the acquisition of property for export only by certain Government agencies. We feel that an opportunity should be given to private trade to participate in exporting from this country those goods which foreign markets will need and which can be supplied out of surpluses. The limitation of export trade in surpluses to Government agencies is inconsistent with the traditional policies of this Government and with the development of an expanding world trade. Accordingly, we would suggest the change of section 8 (a) to permit private trade the chance to export surpluses and a change of the freeze provisions in section 11. Section 8 (b) of S. 2045 provides in substance that surplus property exported from this country may not be brought back into this country. We doubt the desirability of such a provision. If the policy is followed in foreign disposal of disposing of property where there is a real local need for the property for use or consumption and if the property is disposed of for the greatest net realization to this Government, it is to be doubted whether there will be any danger that the property will be returned to this country. So many foreign countries will have been through a long period of severe shortages that they will be likely to retain and use any surplus property which comes into their possession or, if there is any need to reexport, there will be so many areas of greater need than the United States that it seems unlikely that property would be returned here. If this country takes the lead in enacting legislation which discriminates against surplus property, it may well be that other countries would do likewise and thereby establish trade barriers which might in the long run be of great detriment to our foreign trade. In addition, there is the possibility that certain types of equipment may be sold abroad and need rehabilitation or repair. An example of this might be aircraft suitable for commercial use. It would seem unfortunate to make it impossible for such rehabilitation and repair to be done in this country. The sweeping nature of the prohibition contained in section 8 (b) would require the establishment of an elaborate system of import controls in order to make certain that not a single shipment of surplus property return to the United States. Sections 11 (a) and (b) deal with the disposal of surplus aircraft. The whole problem of disposal of surplus aircraft, both here and abroad, has been carefully considered by a committee appointed by Mr. Clayton, the Surplus War Property Administrator, and policy recommendations have been made which tie in with the current consideration which is being given to the complex problem of post-war aviation. A representative of this Department participated in the work of that committee. It is assumed that Mr. Clayton is prepared to communicate the results of that committee's action to you and therefore we are refraining from commenting on sections 11 (a) and (b) of the bill. Section 11 (c) of the bill prohibits the disposal of any vessel, except as specifically authorized by an act of Congress. We believe that the problem of disposing of surplus vessels is again one of great complexity and should be approached in terms of our long-range maritime, commercial, and military policies. An Interdepartmental Committee, upon which this Department is represented, is working on the formulation of recommendations with regard to our maritime and commercial policy and views of that Committee will undoubtedly be available to you. Accordingly, it would not seem useful for us to discuss section 11 (c) of the bill independently. Section 11 (e), which has been referred to above, provides that obsolete and scrap material shall be frozen into a stock pile, to be disposed of as Congress may provide. This Department is very much concerned with the problem of national stock piles. It believes that the composition of stock piles should be determined with reference to needs and not in terms of the quantity of material classified as obsolete or scrap, and that the question of stock-piling scrap and obsolete material should be treated as a part of the broader problem of stock-pile policy. As was pointed out in the Department's letter to you of June 1, 1944, occasions may arise when it will be desirable to be able to dispose of surplus property abroad on credit terms and it is again suggested that consideration might be given to this problem. The second bill upon which you request comment is contained in the July 21, 1944, Report of the Surplus Property Subcommittee of the Special Committee on Small Business. It is our view that a bill of this type, which defines the objectives to be sought in disposing of surplus property and the general policies to be followed, leaving a flexibility of operation in the Administrator, is the most feasible type of legislation insofar as the interests of this Department are concerned. It is virtually impossible to foresee the various circumstances and conditions which will affect the disposal of surplus property abroad. Section 1 (h) of this bill refers to "programed exports" of surpluses and section 8 (a) (4) gives a priority in acquiring surpluses for export to a Government agency. As stated above in commenting on S. 2045, this Department would be very reluctant to see established the practice of having exports of surpluses handled exclusively by a Government agency rather than through normal private trade channels. A priority to a Government agency to enable the carrying out of Government exports during the war period, such as Lend-Lease, or a priority to acquire surpluses to enable this Government to carry out its participation in the United Nations Relief and Rehabilitation Administration, is, of course, unobjectionable. While this bill covers surplus property located abroad, as well as surpluses in this country, there are certain provisions which would seem not to be applicable to property located abroad, for example, the priority given to the Smaller War Plants Corporation in section 8 (a) (3) and the provisions of section 10 (f) relating to notification of proposed sales to that Corporation. It is doubtful whether such priority and notice would be applicable in the case of property located abroad. Yet, it would apparently be required by the bill. It might be desirable to include the provision contained in Senator Johnson's bill authorizing the Administrator to exempt from some or all of the provisions of the bill the disposition of property located outside of the continental United States or in Alaska. The comments made above with regard to the desirability of considering sales on credit are applicable to this bill. I appreciate the opportunity which you have given us of examining these proposed bills and wish to assure you of our desire to be of all possible help in your consideration of this difficult problem. The Department has been informed by the Bureau of the Budget that there would be no objection to the submission of this report, with the understanding that no commitment should be made at this time as to the relationship to the program of the President of any provision of this or any other bills in the surplus war property field now before the Congress. Sincerely yours, CORDELL HULL. UNITED STATES MARITIME COMMISSION, Hon. JAMES E. MURRAY, Chairman, War Contracts Subcommittee, United States Senate, Washington, D. C. DEAR SENATOR MURRAY: This will acknowledge your letter of August 4, 1944, relative to the substitute version of S. 2045, and the draft bill in the July 21, 1944, report of the Surplus Property Subcommittee of the Special Committee on Small Business. I am enclosing herewith a statement which I prepared in connection with the surplus property bill, H. R. 5125, which discusses very briefly some of the special problems with respect to the disposition of |