1948-2-26 Relatório Committee on Foreign Relations

8/19/2019 1948-2-26 Relatório Committee on Foreign Relations

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EUROPEAN RECOVERY PROGRAM

FEBRUARY 6 legislative day, FEBRUARY 2 , 1948. 0rdered to beprinted with an illustration

{REPORT

No. 935

Calendar No 978

SENATE

U NI TE D S TATE S

GOVERNMENT PRINTING OFFICE

WASHINGTON : 1948

OF THE

REPORT

ON

A BILL TO PROMOTE THE GENERAL WELFAREITATIONAL INTEREST AND FOREIGN POLICYOF T HE U NI TE D STATES THROUGH NECESSARY

ECONOMIC AND FINANCIAL ASSISTANCE TOFOREIGN C OU NT RI ES W H IC H UNDERTAKE TO

COOPERATE WITH EACH OTHER IN THE ESTAB-

LISHMENT AN D MAINTENANCE OF ECONOMIC

CONDITIONS ESSENTIAL TO A PEACEFUL AN DP RO SP ER OU S W OR LD

OMMITTEE ON FOREIGN RELATIONS

7 48

80TH CONGRESS} ssion


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Areas UndlUISian Control

rrnm ;:: Countri s the l j M nh 1I PI n t. :'l.:'••l :. : t - : ~ ~ . . . . 8 :

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n

tHE ~ P L I T : . I NE U ~ O P E : 7 < ,

BEtWEEN EAST,AND \V,EST

r o m Ne w York i m e s


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•

CONTENTS ge

Main purpose of th e bill 1In t roduc t ion ____________ 2Part I Background developments:

Events leading up to th e present situation_ __ 22 The committee hearings_ __ 33. Wh y Europe is in need a t this time__________________________ 44. European progress toward recovery ___ 55. European recovery targets__________________________________ 66. Measures ta ke n by the participating countries to strengthen theireconomies_______________________________________________ 87. United S tat e s assistance t o E uro pe since the war_______________ 88. The participating countries____ ___________ __ __ __ ___ __ _ _ 13

P ar t II The adminis t ra t ion of the program:9. The Economic Cooperation Administration____________________ 13

10. The Administrator _________________________________________ 1411. Relations of the Administrator to the Secretary of State__________ 1512. Relations of the E co no mi c C oo pe ra ti on Administration with

other agencies_ ___ __ ____ __ __ ____ 1613. Special ECA missions abroad_________________________________ 1714. United States special representa t ive abroad_ __ 1815. T he P ub li c Advisory Board_ _ 18

16.T he j oi nt

congressionalcommittee___________________________

Part I I I Requirements of the program an d availabilities of commodities:17. Ho w the requirements were screened_ ___________ __ ____ __ __ 2018. Requirements of the part icipating countries___________________ 2119. The balance of payments situation___________________________ 2720. Availability of commodi ti es_________________________________ 2821. Availability of petroleum_ ___________________ __ __ 3022. Availability of iron an d steeL_______________________________ 3123. T he i mp ac t of th e recovery program upon the domestic economy _ 32

Part IV. Special problems in connection with th e program:24. Method of procurement_____________________________________ 3325. Procurement of commodities outside the United States__________ 3426. Strategic materials and stock piling__________________________ 3527. Shipping an d t he recovery program_ __ 36

28. Use of local currency deposits _______________________________ 3729. Th e role of western Germany in th e program_ _________________ 3830. Dismantling of plants in Germany ____ __ __ ______________ 3931. European at t i tude toward the European recovery program______ 4032. Th e role of eastern Europe and east west trading ______________ 4033. Attitude of th e Soviet Union toward th e program______________ 4134. The role of t he U ni te d Nations______________________________ 42

Part V. Undertakings of th e participating countries:35. Obligations of participating countries multilateral pledges______ 36. Obligations of participating countries bilateral agreements_ _ 4437. Termination of ass is tance___________________________________ 4538. Toward a union of the European states_______________________ 45·

Part VI Financia l aspects of the program:

39. Total foreign ai d contemplated______________________________ 4540. The purpose is recovery an d no t relieL --_____________________ 4641. Nature of assistance: Grants or loans_________________________ 4842. Comparison of estimates of requirements______________________ 4943. Reduction of authorization to 5,300,000,000- - _________ __ _____ 5044. Application of portion of 1948 surplus to 1949 expenditures_ __ __ 5045. Advance of 1,000,000,000 by th e Reconst ruct ion Finance Cor

poration________________________________________________ 50


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CONTENTS

Par t VI Financial aspects of th e program Cont inued Page46 The European recovery program and Military Establishment____ 5047 Financing from other sources________________________________ 5148 The role of th e International B ank __ __ __ ___ __ __ __ __ __ ___ __ __ _ 5 249 Role of private enterprise___________________________________ 535 Privhte voluntary American relief to foreign countries_ 5351 The us e of foreign owned United States assets_________________ 5452 T he e xt en t of private gold h oa rd in g_ __ __ __ __ __ __ __ __ __ __ ___ __ 5 553 Duration of the program ________________________ 55

Par t VII Recommendations of th e committee:5 • Conclusion 56


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1

[To accompany 2202J


REPORT

No. 935

alendarNo 9

{ENATE0TH CONGRESS }

~ ssion,

The Committee on Foreign Relations having had under considera-tion a bill S. 2202 to promote th e general welfare, national i n t e r e s ~and foreign pol ic y of the Uni ted S ta te s through necessary economICand financial ass is tance to foreign countries, unanimously rep ort thebill fav orab ly to the Senate without amendment and recommendthat i t do pass.

REPORT

Mr. VA NDENBERG from the Committee on Foreign Relations, sub.mi t ted the following

F E B R U A RY 27 legislative day, FEBRUARY 2 , 1948. 0rdered to be printedwith an illustration

M N P U R P O S E OF THE B I L L

This bill provides fo r the participation of the United States in a~ u r o p e nrecovery program for approximately a 4 year period. t is major step in the development and promotion of a peaceful andprosperous w orld w hich is the principal object ive of United Statesforeign policy. The authorization for th e first year is 5.3 billion dol-lars, billion of which may be advanced by th e ReconstructionFinance Corpora tion pending congressional act ion on appropr ia tions.The assistance contemplated which will involve both loans and grantswill not be confined to relief commodities; t he p rogram is designed tohelp European nations to help themselves to recovery in such a wayas to become independent of outside assistance. ne w agency theEconomic Cooperation Administration headed by an Administratorwill be established t o admin is te r t he p ro gra m a t home and abroad.The bill conta ins ample safeguards and conditions in order to insurethat t he money appropriated will be properly administered and wIselyspent and that the domestic economy of the United States will not beimpaired. Assistance extended by the United States will be con-t i ~ g e n tupon the c o n ~ i n u ? u scoopera tion of the part ic ipa ting coun-trIes. Except fo r lIquIdatIon purposes th e program will terminate ODJune 30, 1952.


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1 . EVE TS LEADING UP TO THE PRESE T SITUATION

PA RT BACKGROUND DEVELOPMEXTS

INTRODUCTIO

The American people, victorious in ba ttle look out upon a worlddisrupted by war and shaken by its aftermath. Our efforts to winback to peace have included unswerving support of the nited ations,as well as generous assistance to foreign countries in need of aid. Thedecision which must now be made is whether we hall continue th eeffort to achieve our goal: The establ ishment of a stable world withfree political institutions and the rule of law. Ev nts of t he ne xt fewyears may w l d cide the issue. World stability an d Europeanstability are inseparable; free insti tutions and o-enuine independencecannot perish in Europe and be secure in tlle re t of the world. Wemust therefore shape our course upon the ha i o ~ our cleternlinationwhether the countries of Europe can pre I ve their lib rties andindependence if they do not ach ieve econonlic recovery.

Th e committee is convinced they cannot. In the light of this conviction, it has given earne t consideration to the form and scope of aprogram of Ameri an a si tanre ba ed upon and flowing from aEuropean recovery program of self-help and mutunl aid.

Sixteen European countries have come forward with such a prosramdesigned to achieve genuine recovery within appro::-..ilnntely 4 years.

This report analyzes in som detail the on ·Iu. on of the ommitteebased upon its study and offers the recommendation of the commit tee with respect to the Economic Cooperation Act of 1948.


During the summer of 1947, when UNRRA e X:pired Europe hadnot achieved a condition of economic and polit ical taLil ity. otonly did the e ~ t r e m ecold of last winter curtail Europ n n rops, butthey were even mol sever ly affected by th e severe drought of th esummer just pas d. foreover, the international monetary sys temwas thrown out of balance by the rapidly ri ing co t of imports andthe su pen ion of the convertibility of the pound tcrling. Thesedevelopments made it particularly difficult for the countries of Europeto secure need d supplies.

In order to alleviate imm diate suff ring and to pave th e v y forlater long-range action, on ov mber 17, 1947, Pr e iclent Trumancalled Congr. s into special se ion to deal with the rise inprices and) the crisi in w s te rn E ur op e.Congres met his reque t in December and provi It d fund for interimaid to France Italy and Austria until April 1, 194 , when it wasexpected that the long-range program would b i operation.

The pres I t legi lation was anticipated by two addr ss s, on by

Under Se r tary of Stat D an Ache on, on

lay 8 1947, th s condby retaryof tate Georg C. Mar hall, on Jun 5 1947, in \ hichboth indicated that th e United tatos stood ready to con idol howfar sh mig-ht b abl to h Ip Europe help h r If on the road to recovery. On J ul 11, 1947, 16 we tern Eur I an nation. on their \ n initiativ. 1 0 pond d to th suo-gestion, an d II I t in Paris to prepare~ r e p r ~ tting for th the ir n ed and t l ~ i rwillingne. to cooperate a JOInt recov ry program. le l1l\vllll, nitod tates agencies,


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3 WHY EUROPE IS IN NEED AT THIS TIME

Economic nationalism political tenslons and uncertainty war de

vastation the prolonged interruption of international trade the lossof foreign income and dollar funds internal financial di equilibriumshortage of supplies from southeast Asia tIlt wartime movement ofpeoples to certain areas of western Europ and a lO-per nt increaseof population have all contributed to economic br ak-down in Europe.Germany a focal point in the Europ an eeon my is paralyzed.Inflation is rampant Subversive elements ar hampering recoveryan d engineering social chaos.

Fullowing th e 00nclusion of th e public hearings the committee metin executive session for an additional week to continue it s consideration of the European recovery program taking as a basis for discuseionth e draft proposal submitted by t he Depar tmen t of t v ~ t e On thebasis of information obtained during the hearings th e committee proceeded to rewrite the bill essentially altering i t many importantparticulars. On February 7 the committee concluded its delibera:tions and voted unanimously to report the bill favorably to th e Senate.

As in the case of the Foreign Aid Act the committee was greatlyimpressed with the thorough documentation which was availableduring its examination of th e European recovery program. I t isprobable that no legislative proposal coming before the Congress hasever been accompanied by such thoroughly prepared documentarymaterials. In addition to th e extensive documents submitted by theDepartment of State the reports of the Paris Conference of the CEECcountries the Nourse Krug and Harriman reports the handbook onthe European recovery program prepared by the staffs of the SenateForeign Relations Committee and the House Foreign Affairs Committee the special report of the Brookings Institution and thenumerous reports of the House Select Committee on Foreign Aidwere all available. Added to these repor ts was a great deal of materialwhich ha d been produced in the course of congressional experioncewith foreign-aid matters prior to 1948 such as i s u s s i o n ~relatingto UNRRA interim aid etc.

Particular reference should be made at this point to the reportsubmitted by the Brookings Institution. Early in i ts considerationof the European recovery program it became apparent to thecommittee that the task of providing for a satisfactory administrativeorganization for such an important program would be extremelydifficult. Accordingly the Chairman of the Foreign Relations Committee invited the Brookings Institution to analyze the variousproposals which ha d been advanced and to submit its findings andrecommendations. On January 22 this report was completed. I tserved as a basis of discussion for the members of the committee and

helped them arrive at a satisfactory solution.Th committee was likewise impressed by the fact that very fewopposition witnesses appeared to testify against the bill. Representatives of labor and management alike warmly endorsed its objectives.All witnesses were heard who asked to be heard. A complete list ofthe witnesses who testified before the committee is attached as.Appendix II of this report.

EUROPEAN R ~ C O V E R YP R O G R ~


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6 EUROPEAN R EC O VE RY TA RG E T

The committee appreciates that goal find tarO ets which seemoptimistic to many American xpert ar not tlH Sfillle as achievements; but it is worth while to record what th CEEC countries and.

However for 1947 as a whole national income in the participatingcountries as a group had reached 91 percent of the 1938 level. O\vingto th e increase in population per capita national income was only 86percent of th e 1938 level. These over-all measures conceal of courseWide variations between countries and between different branches ofth e economy within each country. In eight countries industrialproduction in 1947 exceeded 1938 levels and the average for allcountries except Germany was approaching th e 1938 level. Coalproduction had recovered well in most countries; the United Kingdom nearly achieved it s target of 200 000 000 tons and has been ableto resume coal exports of about 200 000 tons a week; French outputslightly exceeded prewar; th e smaller western European producerswere almost back to 1938 levels; coal production in western Germanyhowever was less than two-thirds of 1938 output

The Continent s 1947 production of steel is estimated at slightlyover 35 000 000 tons or 63 percent of it s prewar output The averagewas brought down by western Germany for production in t he othe rpart icipating countries was equal on th e average to 1938. TheUnited Kingdom reached its target of 14 000 000 tons and Francereached 93 percent of it s 1938 production. In the case of BelgiumLuxemburg 1947 production surpassed 1938.

Output of hydroelectric power in 1947 exceeded 1938 by nearly 4percent. France has been particularly successful in increasing thisimportant source of energy.

In most countries agricultural production was severely affected bythe weather in 1947 and averaged hardly more than four-fifths of 1938output This was especially serious because food consumption ha ddropped from a prewar average of about 2 900 calories to less than2 500 calories and the poor crops in 1947 meant that even the currentlevel of food intake would be difficult to maintain. Great efforts havebeen an d are being made by th e participating countries to reduce theirneed for imported food. British farmers are now producing abouthalf of th e country s food requirements as compared to a third beforethe war. Th e French Government has incr ased it s bread-grainacreage goal for 1948 from 84 percent to 95 p rcent of prewar and isalso expanding product ion in French orth Africa. The UnitedKingdom and France are initiating programs for production of groundnuts in their overseas dependencies in order to reduce their need forimported fats and oils. All countries are taking measures to increaseth e use of farm machinery and of fertiliz r in order to raise outputwhile economizing on labor.

Although progress toward recovery has slowed down the momentumhas not been lost. Despi te real difficultie t efforts of the p oplesof western Europe give support to the conclusion that their economywill respond to a recovery program over a period of several years and

that the basic objectives of the produ tion program appear to be attainable the will to cooperate and to produce is vigorous.



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western Germany hope to achieve by the end of 1951. This programdoes not necessarily mean a recreating of all prewar conditions, someof which were admittedly undesirable.

The CEEC countries have se t themselves the following aims to beachieved by the end of 1951:

l Restoration of prewar bread-grain production and of an intensive livestock economy.

2 Increase of coal production to 584,000,000 tons yearly, anincrease of 30,000,000 tons above the 1938 level.

3 Expansion of electricity output by nearly 70,000,000,000kilowatt-hours and an increase of generating capacity by 25,000,000kilowatts, which is two-thirds above prewar.

4 Development of oil-refining capacity to times prewar. 5 Increase in crude steel production to 55,000,000 tons yearly,

or 20 percent above prewar. 6 Expansion of inland transport to carry 25 percent more than

prewar. 7 Rehabilitation and restoration of the merchant fleets of the

participating countries. 8 Supply from European production of most of the capital equip

ment needed for these expansions.The committee feels that the early months after the initiation of the

program provide the most opportune time for putting vigorous meas

ures into effect. Such nationaland

cooperative actionmust be

undertaken now, when levels of employment are high in almost all partsof the world. Certain of the production goals should be revised toenable greater concentration on the achievement of the food and coaltargets and on the production for export goals. Full use must be madeof existing capacity; bottlenecks must be eliminated. Schemes forthe proper training of manpower can contribute greatly to the requiredresult. There must be organizational skill and initiative. Theresources of dependent territories must be better developed.

The estimates of this pro:.sram presuppose a considerable reductionin the rate of capital development as compared with the CEEC state

ments. Essentiality must be measured in terms of the scarcity of thegoods and of the urgency of the need for these goods before additionalcapacity is constructed. The rigor of certain estimates may be gagedto the fact that they assume exports to the Western Hemisphere infiscal 1949 to be approximately as large in physical terms as those tothe same area in 1938, even though the German contribution will beonly a third as large and Austria and Italy will be below prewar performance.

So that our own vision is not clouded, and in fairness to t he participating countries, it is entirely appropriate that the committeequote from the CEEC report at this point:

is no t only a problem of Europe a nd t he American Continent; it a problemof th e balance of th e whole world economy..

Further, while stating that in the initial p e r i ~ dthe c o n t r i u t i o ~tothis world problem which Europe can make by Its own exertions ofprime import


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7. UNITED S TAT E S A SS IS TA N CE TO E UR OPE SINCE TH E WAR

Since the end of the Second World War th e United States hasextended assistance to Europr in th e form of 1 repayable loans andcredits, and (2) relief supplies and grant s not requiring specific repayment. Most American assistance belongs to the first category.

The committee ha s observed with satisfaction that since the ParisConference last summer the participating countries have takenimmediate steps to strengthen their economies an d to cooperate withone another. The following examples may be cited:

1. The Financial Committee of th e CEEC C0nference recommended the adoption of a proposal for setting off debits againstcredits in inter-European payments as a means of stimulatingintra-European trade. The operation of a multilateral clearingarrangement ,vas entrusted to the Bank for International Settlement. On January 19, 1048, the first inter-European clearingu nde r the new system was announced.

2. The Study Committee of Customs Unions, establi- he I atthe CEEC conference, is examining the possibility of establishinga common customs union among all th e countri representedand appointed a tariff committee which is attempting to completethe preparation of a specimen common tariff.

3 In addition to the project for a generftl European cus tomunion, there are several projects of more limite·l scope: a Denmark Iceland, Norway an d Sweden; b France and Italy; cGreece an d Turkey. The Benelux customs Ulli e Lltered intoeffect January 1 1948.

4. Since the Paris Conference the CEEC countries have intensified their efforts to attain budgetary balance, reduce inf lationary pressures in general, and restore confidence in theircurrency. This is strikingly illustrated by the vigorous and ~ o u r g e o u sactions taken by F ra nc e a nd Italy in recent months.

5. A conference on manpower met in ROine and developedmeasures to utilize more effectively surplus n lanpower in suchcountr ies as Italy to facilitate the mOVClnent of labor acrossi n t r n t i o n ~ lboundaries, an d to improve occupat.ional quali£cations and training.

6 Five of the sixteen countries, not yet being members of th oUnited Nations are not melllbers of th e Econornic Commissionfor Europe but they have been invited to the con mittees of theCommission. I t is planned to reestablish the prewar system forexchunging freight cars and to facilitate highwuy truck truffic.

In spite of these gains, it seems clear to th e comlllittee that thewestern European np.,tions require an organization with wider powersand greater responsibilities than the Paris Conference. Such an 01 gani7,ntion might well have the responsibHity for screening rerluiremenLs an d integrating production and investlnent progran s and shouldbe in a position to mrke positive proposals to i ts mmnber governmentsfor raising the productive efficiency of the western European economy.T he v as t potenLi< litirs of th e dependent territories should be lllobilizedbehind an y prograln of European aid.

EUROPEAN RECOVERY P h G ~ A ~

6. MEASURES TAKEN BY T H E PARTICIPATLTG COUNTRIES TOSTRENGTHEN T H E I R EC O TO:\IIES

8


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redits nd loans.-Interest-bearing credits and loans include (1) theloan t o th e Uni ted Kingdom of 3,750,000,000, authorized.by Congress

in July 1946; (2) two Export- Import Bank reconstructIon l o a ~ stoFrance, one of 550,000,000 in September 1945, the second of 050,000,000 in June 1946; (3) sale of U ni te d States surplus propertyabroad an d surplus merchant vessels on long-term credit, to Franceat a credit of 300,000,000, and to Italy at a credit of 160,000,000for purchase of surplus property in Europe, and 42,000 000 to eachfor the purchase of merchant vessels; (4) lend-lease settiements andpipe-line credits. In the period from July 1, 1945, to June 30, 1947,the Uni ted States Government authorized repayable loans and creditsto the Paris Conference countries of 7,353,000,000 in all.

r nts nd r e l i ~ f . G r a n t sand relief include 1 UNRRA, toward

which the United States contributed 2,700,000,000; (2) United Statesforeign-relief program, including an authorization of 332,000,000 inJuly 1947, and a donation of 15,000,000 to the International Children s Emergency Fund; (3) interim aid to Austria, France, andItaly, in the amount of 522,000,000, enacted in December 1947; 4 Greek-TJ-lrkish aid, to the am ou nt of 400,000,000; (5) relief ofoccupied areas; (6) lend-lease aid not repayable. In the period fromJuly 1, 1945, to June 30, 1947, the United States Government authorized assistance under the programs listed above of some 1,943 000 000allocable to certain of the Paris Conference countries. A fu;the; 767,000,000 allocable to German relief, and 481,000,000 not allocable

to specific countries in E ur op e but intended almost ent irely for theParis Conference c o u p t r i ~ syere. authorized, making a total of 3,191,000,000, to whICh Intenm aId should be added, making thetotal as of December 31, 1947, 3,788,000,000.

Thus loans, credits, grants , and relief to th e Paris Conferencecountries and Germany authorized in the period July 1 1945 toDecember 31,1947, totaled a little over 11 ,000 ,000 ,000 . ,. ~ h ~ s efigures do not take i n ~ o~ c c o u n tr ~ m i t t a n c e sfrom privateIndIVIduals and voluntary agencIes In th e Umted Sta te s which in theyear 1946 ran slightly more than half a billion dollars a sum which i tis estimated was equaled in 1947.

A break-down of United States loans, credits, grants and reliefcontributions for the two fiscal years July 1, 1945, to J u ~ e30, 947is as follows:

EUROPEAN RECOVERY PROGRAM 9


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T L E A V S. Government loans property credits and grants Amo unt available utilized andand country

[Millions of dollars]

Amount available July 1 1945-June 3 1947

Amount utilizedJune 3

Loanspropecred

Totaloans an d Grants and

prope rty other reliefcredits

Total

ountry

Total


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u , · ;

T L E B. Un i t ed States overnment loans an d property credi ts Amount available utilizedby ty pe a nd c ou nt ry


E\por t - Expo111 1 pl)rt

PropertyImpo

Total I BallK Total Bnnkand othcr credits a nd o t

loa IlS loan

337

3071

10 30

196

-1 2184163

73

76134

1 149

151,698

55223

25610 6

4,000 3

Amount uti1i7ed:-\0,10

10491

70796

202

783013

l1 1

:j97

5

2630 10

242

79131

Hi

25o206

= 2 7 ~ 1 = 7 3 9I 5 2 ? ~I 6 752 I 4I 1,84fi I ~ 4 4I 4

Amount a -f1ilnhlr, Jllly 1 1945.TUll r ; 0 1947

9,128 I 42fi= = 7 ~ H 7 75 n

---------------------1 7,388 5,544

11 1149 ] 0

~ O ~ O

1 9n7 I 200 ~ :.? I:m 130~ 8 3 205HO 50

41 284,4:l5 I 3,78,1

-------------------1 546 149

73 n100 8137 790 40

-----------------, 242 :41 41

473 394229 9815 25 7n 70

332 128() 6

Oountry

Tota l _

~ u r o p e _

Paris Conference countries _

Austria - - IBelgium an d Luxcmburg - - - - - - - - - - - - - - - - - - ---- - - - - - - -- - --

~ f ~ a r i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~Netherlands----------------- _ - - - - - - - - - - - - - - - - - - - - -

~ ~ ~ ~ ; r = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = ==Jnited lCLngdoIn__________________ - - - - - - - - - - - - - - - - - - - Countries not a t Paris Conference _

C ~ e c h o s l o v a k i a- - - - __ - - - - - - - - IFmland-- - - - -- -- - - - - - - - -- -

{ ; ~ ~ ~ i r y i t ~ ~ ~ ~ ~ ~ ~ ~

Europe unallocable-------------- - I

~ } [ i ~ ~ ~ i t = i ~ ~ ~ i ~ : ~ : ~ : ~ : ~ ~ < ~ ~ ~ ~ : ~ : ~~ n i ~ R ~ ~ ~ ~ ~ ~ u ~ ; t r i c s = = = = = = = = = = = = = = = = = = = = =1Jnallocable ~


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T A B L E C V S Government grants under other re luf Amount available utilized and unutilized


28

1,484

08

---- 52

~ ~ ~

2,310

1,641

G73

U ~ Occu-an d pation

post- pro-U N R R A gram

_______ ~ ~334

__________ 391 4

10 21 3

324

5,266

3,150

1,414

1,529

174537349 :301

20722

1,099391

45

35405

Total

Amount utilized July 1,

1,365

570

43G

Other

420

1 151

420

Lendlease

2,014

1,219

285

771 61

________ 6754 _

________ ________ ________ 2________ 8

02

9G9

16813

304 203

2 G42

1,973

U ~ Occu-an d pation

post- pro-U N R R A gram

104 79 139 59 71 60 61 13 16 2 21 3

321 303 274 271359 206 30 561 325 20G

1 19 20 11 1 11 1 12 2 2

__________ 1009 325 334 0

227 IRO 74__________ 5 17

334 644 121__________ 591 _

1 144 .10 28 655

1 31 2 _324 79 2

Amount available July 1 1945-June30,1947

7,174

4, 183

1 943

1846121

624595

20112

100334

1 759

1747 i7349IG8301

43122

1,0095911456Q3

35405

Total

Country

TotaJ _

1=Curope _

Paris Conference countries _

Austria _Belgium an d Luxemburg _France _Greece _Italy _~ e t e r l n d s _~ o r \ a y

~ e e n _Switzerland _Turkey--- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -United Kingdom _

Countries no t at Paris Conference _

Czecboslovakia _GE rmany _

Poland _U. S. R. R _l { u ~ o s l a v i a -

Europe unallocable _

Latin-American countries _Cbina _JapaIL _J orea _Pbilippines _All other countrIes _Unallocable _


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7 2 4 8 4 8 3

A. THE ECONOMIC COOPERATION ADMINISTRATION

The committee agreed that the complex nature of th e recoveryprogram and the magni tude of the task to be performed called forthe creation of a new and separate operating agency Many of theactivities contemplated partake of the character of a business enter-prise But th e administration of such a program with it s wide

UROPEAN RE OVERY PROGR M

8. THE PARTICIPATING COUNTRIES

The 16 countries which attended t he Paris Conference an d signedthe CEEC report are as follows: Austria Belgium Denmark FranceGreece Iceland Ireland Italy Luxemburg the Netherlands NorwayPortugal Sweden Switzerland Turkey and the United KingdomA number of other s ta tes were invited but did no t attend: FinlandPoland Hungary Rumania Bulgaria Yugoslavia Czechoslovakiaand Russia

In view of the cooperative nature of th e recovery program th ecommittee believed the door should be left open for those othercountries if they choose to enter To this end in addition to th eCEEC signatories and western Germany the act envisages th e possi-

bility of an y o ther count ry wholly or partly in Europe includingTrieste and areas under interna tional adminis trat ion and controlbecoming a participating country. Such countries must howeveradhere to a joint program for European recovery Under th e termsof the act the words participating country include its dependentareas

Some criticism has been voiced because certain states like Portugaland Switzerland which are in sound economic condit ion are l is tedamong the participating countries The fact that a state is a par-ticipating country does not necessarily mean that it will receiveassistance from t he Uni ted S tat es . The committee stressed the fact

that some of the CEEC countries will not require any direct assistancefrom our Government and that they should be looked upon as co-operators in the program rathe r t ha n recipients of our aid Theircontribution to European recovery will be considerable When it isremembered how closely t he part ic ipat ing countries are boundtogether by ties of trade and commerce it is evident why they mustall be brought into t he program and why th ey m us t all work togetheras a team if the goal of European recovery is to be realized

Of all the sovereign states of Europe Spain was the only one whichwas no t extended an invitation to attend t he Par is conference Froman economic point of view Spain might be able to make a contribu-

tion to such a program On t he ot her hand due to the nature of theFranco regime an d due to th e resolutions adopted at various inter-national conferences th e CEEC countries at the Paris conference didnot believe it appropriate or consistent with the spirit of such resolu-tions to invite Spain to part icipate at that time Whether she even-tually takes part in the program will depend upon her own willing-ness to assume the obligations involved th e willingness of th e partici-pating countries to admit her an d the abili ty of Spain to conclude asatisfactory bilateral agreement with the United States.

PA RT II T H E ADM:INISTRATION OF THE PROGRAM


19/78

10 THE ADMINISTRATOR

Closely related to the form of the new agency is t he n atu re of theadministrative direction or supervision provided for it The choicefacing the committee lay between direction by a single administratoror by a board or commission

Fear has been expressed in some quarters that th appointment ofa single administrator might result in the conc ntration of too muchpower in the hands of one individual The committee felt stronglyhowever that in a program of such magnitude where speed of decision

ramifications abroad is much more than a business venture I tinvolves our relations with foreign nations and is in many of itsaspects inextricably bound up with United States foreign policies atthe highest level

The problem before the committee therefore was to devise anadministrative arrangement which would insure the smooth and effec-tive operation of the business aspects of the enterprise without at thesame time impinging upon the essential authority of the Secretary ofState in the conduct of foreign relations

The committee completely agreed with the Secretary of State thatit would be unwise to place the agency in the Department of StateSuch a move would impose upon the Secretary responsibility forduties of an operational nature no t within the normal range of theDepartment s activities and migbt as a result impair the execution ofits policy functions Under the circumstances a new and separateageney seemed to be a wise alternative

I t is also apparent that the form of the new agency must be such asto insure sufficient fiexibility of structure and operations For thisreason some people have argued that a part of the program at leastmight be entrusted to a new organization with corporate structurecomparable in some degree to the Reconstruction Finance Corpora-tion I t is argued that such an organization could be given in itscharter considerable flexibility free from the normal governmentalregulations relating to procurement personnel and auditing Inaddition it could be authorized to enter into contracts set tle claimsand in general resort to ordinary business practices in a programthat is essentially of a business character

I t should be pointed out however that all of these advantagesclaimed for the corporate form can be obtained for the noncorporateform by making provision in the ac t for necessary exemptions withrespect to procurement personnel and auditing Moreover in viewof the importance of the program and its impact upon other agenciesof the Government the committee decided that there would be a realadvantage in creating a new agency as an integral part of the executivebranch on a plane with the Cabinet departments

As a result of these considerations the act provides for a new andseparate agency with a noncorporate form Con iderable leeway hasbeen given the agency with respect to the hiring and p aym en t ofpersonnel accounting procedures and other related matters Andevery effort has been made to insure smooth working relationshipsbetween the new agency and the existing departments and agenciesof the Government

EUROPEAN RECOVERY PROGRAM4


20/78

RE LAT ION S O F THE ADMINISTRATOR TO THE SECRETARY OF

STATE

As has been pointed out above the main problem facing the com-mittee with respect the adminis tra tive aspects of the recovery pro-gram was to devise a formula which would permit the Adminis tratorto carry out his operating functions in an effective manner withoutimpinging upon or impairing the au thority of the Secretary of Statein the conduct of foreign relations. Obviously the Secretary of Stateis vitally concerned with all operations under the program that ma y

affect the foreign relations and policies of the United States. Butexperience during the war years when interagency quarrels hamperedthe war effort clearly demonstrateJ tha:t it is ~ p o s s i l eto r ~ waclean line between operations and foreign pohcy. The commItteebelieves that the formula of cooperation outlined in the bill will result n the kind of concerted action between the Administrator and theSecretary of State that will strengthen rather than weaken the conduct our foreig n relations.

and centralization of responsibility are essential a single administratorwould prove far more satisfactory than a board or commission.

The committee likewise agreed that the head of such an agency ifhe is to perform his duties in an effective manner must have a statusthat will place him upon a plane of equality with the heads of otherdepar tments and agencies of the Government with whom he mustcooperate in developing his program. From time to time there maybe unreconciled differences between these agencies. In order thatsuch differences may be satisfactorily resolved it is particularlyessential that the Administrator of th e new agency be given a positionthat would entitle him to have the same direct access to the Presidentas the heads of the 1 Cabinet departments.

The bill covers these general principles in some detail. I t vests the-responsibilities and powers assigned the Economic CooperationAdministration in a single Administrator who is to be appointedby the President with the advice and consent of the Senate. TheAdministrator will be responsible to the President will perform hisfunctions under the control of the President and will have a status inthe executive branch comparable to that of the head of an executivedepartment.

In general the Administrator will provide the central administrativedirection for the program. Among other things he will review therequirements for participating countries formulate programs ofUnited States assistance provide for th e execution of such programsand terminate assistance according to the terms of the bill. TheAdministrator s functions will be examined in detail in other sectionsof this report.

Because of the nature of the program the committee throughoutits deliberations emphasized the fact that th e Administrator wouldhave to be given considerable authority to enable him to perform hisfunctions effectively. Accordingly the selection of the Administratorw have to be made with the greatest of care. He must be an ableadministrator a dynamic leader and cooperative in his approachto other agencies.

UROPEAN RECOVERY PROGRAM


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12 . RELATIONS OF TH E ECONOMIC COOPERATION ADMINISTRATION WITH

O TH ER A GE NC IE S

The committee agreed that th e Administrator would not find itnecessary to create a large agency in order to perform his functionsunder th e act but should utilize th e existing facilities of departments

and agencies of th e Government already engaged in such activities.Thus in developing th e financial aspects of the program the Administrator will act in consultation with th e National Advisory Council.Similarly with respect to th e appraisal of European requirements th eavailability of commodities procurement and o tber rel at ed mat te rsth e Administrator will lean heavily upon t he Depar tmen ts of Agri- u l t u ~ eTreasury Commerce Interior Army Labor and otheragenCIes.

To insure the necessary ~ o o p r t i o nwithout unduly imposing uponexisting agencies the bill authorizes the Administrator to utilize th efacilities and services of any depar tmen t or agency of the Govern

ment as th e President shall direct or with th e consent of the head ofsuch agency. Since ultimate responsibility for the program centersin th e President it is not anticipated that any difficulti s will ariseon this score.

In th e extension of loans to th e participating countries the Admin-istrator will utilize th e facilities of th e Export-Import Bank. Fundswill be allocated for such purposes and the bank will make andadminister the credit as directed and on terms specified by the

Under the terms of the bill th e Secretary of State is authorized inconsultation with the Administrator to conclude the basic agreementswith th e participating countries in furtherance of th e purposes of thisact. On his part the Administrator is charged with responsibilityfor the central administrative direction of the program including th eformulation and execution of assistance programs methods of financ-ing procurement storage and delivery of commodities etc.

In order to avoid possible misunderstandings th e bill provides thatt he Admin is tr ator and th e Secretary of State shall keep each otherfully and current ly informed on matters including prospective actionarising within the scope of their respective duties which are pertinentto the duties of the other. Whenever th e Secretary of State believesthat any action proposed action or failure to act on the part of theAdministrator is inconsistent with our foreign policy he shall consultwith the Administrator. If th e differences are not adjusted by suchconsultation the matter will be referred to the President for finaldecision.

This procedure is somewhat comparable to th e formula adopted byth e Congress in th e Atomic Energy Act of 1946. In case of differencesth e Secretary of State has a temporary ve to over the actions of theAdministrator with th e President acting as th e referee. I t is unlikelythat few if any such differences will ever reach th e President s desk.

With respect to personnel th e position of the Administrator is clear.He will possess the authori ty t o r ec ru it and to appoint personnel for

service both at home and abroad and such personnel will be respon-sible to hi m for th e performance of their duties. If th e Administratorso desires he may recommend the appointment of personnel servingabroad to any class in the Foreign Service Reserve or staff.

EUROPEAN RE OVERY PROGR M


22/78


23/78

15 TH E PUBLIC A DV IS ORY B OA RD

Because of the broad range of probl ms involved in the recov ryprogram the committee believed it highly desirable to create a publicadvisory board to advise with the Administrator with re p ct to basicpolicy matters Two direct benefits will flow from such an arrangem nt In the first place an advisory board mad up of minent itizens with vari d exp riences and repres nting various int rests will beable to contribute many valuable sugg st ions and critici ms for theuse of th Administrator. H will undoubtedly wi h to lean h avilyupon their counsel. In th s cond pIa i f th dn1ini trator worksclosely with an advisory body consi ting of pre entati s of laborbu iness agricultur and other int t d group public confid nc inth e nterpri will b greatl augmented.

As pro id d in th bill th Publi dvi or oun l will b bi-par ti san and will consist of not mol than 12 In mber appoint d bythe Presid nt an d confirm d by th n t As the name indicatesit is to function in an advisory capacity only. The act provid s that

This report has already emphasized the fact that th e success of therecovery program w depend in large mea ure upon the effectivecooperation of the participating countries. uch cooperation willdevelop to a very great extent through the act iv ity of the continuingorganization which th e CEEC states have agreed to se t up. Thecommittee agreed that i t was imperat ive for t he Uni ted States to beadequately represented at such an organization.

In fact this will be the chief responsibility of the United Statesspecial representative i n Europe provided for in section 8 of th e bill.In addition he will probably serve as a roving ambassador discharging such additional responsibilities with respect to th e recovery pro

gram as may be as igned hi m with th e approval of the President. Thecommittee believed it would be unwise to define the duties of thespecial representative in any detail at the pre ent time. In generalhowever th e committee agreed that he might perform extremelyvaluable services in coordinat ing the activities of the chiefs of thespecial missions in the part icipat ing countries and handling matterswhich require joint negotiations with two or more states and cannottherefore be handled in the normal way.

While th e exact relationship between the special representativeand the Secretary of State the Administrator the chiefs of th especial missions and the chiefs of the diplomatic missions can only

be worked out in practice th e bill provides that he must keep allthese individuals informed of his activities. Moreover he is toconsult with the chiefs of the special missions who must give himwhatever cooperation he may require for the performance of hisduties un de r th e act.

Clearly the special representative like the Administrator will be akey figure in the European recovery program. On his knowledgeskill perseverance an d diplomacy much of th e succe s of this jointenterprise will depend. Every effort should be made to find an individual who possesses the many qualifications necessary for thisdifficult undertaking.


14 UNITED S TAT ES S PE CIA L REPRESE TATIVE ABROAD


24/78

16 TH E JOINT C O NG R ES S IO N AL C O MM IT T EE

i t shall meet at least once a month and at other times upon the callof the Administrator or the request of three or more of the Board

members. The committee sincerely believes th e Board will prove avaluable asset to th e Administrator without constituting a burdenupon his time.

The Administrator is also authorized to appoint such other ad-visory committees as he may consider necessary to carry out thepurposes of the act. I t is very probable as th e recovery programprogresses that the Administrator will find special advisory groups inindustry labor agriculture commerce and other specialized fieldsof considerable assistance to him.

The European recovery program will be a gigantic enterprise. will involve th e cooperation and the resources of the United StatesIts outcome will determine to a very large extent whether peace andprosperity will prevail in th e western world. Its successful executionwill be of continuing interes t to the executive branch the Congressand the people of the United States for the next 4 years.

For these reasons the committee believed i t would be highly desir-able to establish a congressional committee to be known as the JointCommittee on Foreign Economic Cooperation. This joint committeewill be bipartisan in character and will be made up of seven Membersof the Senate and seven Members of the House. Its chairman andvice chairman will be appointed by the President of the Senate andthe Speaker of the House act ing jointly.

I t will be the task of the joint committee to make a continuousstudy of United States foreign aid programs and to review the progressachieved in the execution and administration of such programs. I twill also upon request aid the standing comnlittees of the Congresshaving legislative jurisdiction over the various aspects of foreigneconomic assistance. Finally i t will report to the Congress fromtime to time making such recommendations as i t may deem desirable.

After careful consideration of the issues involved the committeeagreed t ha t i t would be most inadvisable to bestow legislative author-ity upon the joint committee. The recovery program will have manyfacets both international and domestic. I t will be rela ted to foreignpolicy shipping problems export controls farm production stockpiling foreign trade and financial policy to mention only a few.To g ra nt t he joint committee legislative authority would compel it toinvade the proper jurisdiction of many of the standing committees ofthe Congress.

The committee felt strongly however that the joint committee willserve as a useful mechanism to bridge the gap between th e executive

and legislative branches and thus help bring about that teamworkwithin our own Government which is essential if the program is tosucceed. I t is believed that the joint committee can playa very help-ful role both in keeping the Congress informed and in advancinghealthy criticisms and l:elpful suggestions. f?r the use of the Admin-istrator. The bill prOVIdes that the AdmInIstrator at the request ofthe joint committee shall consult with the committee from time totime with respect to his activities.

UROPEAN RE OVERY PR OG R M


25/78

17 . HOW THE REQUIREMENTS WERE SCREE ED

PA RT III. R E Q U I R E M E N T S OF THE PROGRAM AN D AVAILABILITIESOF COMMODITIES

Your committee considered with care the way in which the re-quirements of the participating countries were originally preparedby the Committee on European Economic Cooperation CEEC andthe method by which they were screened by the executive branch.

Basic commodities an d productive equipment which are essentialto the reactivation of the European economy were subjected to carefulstudy by committees composed of technical experts drawn from theparticipating countries. The CEEC established technical committees

covering the fields of food and agriculture fuel and power iron andsteel transport timber and manpower. These technical committeescollected exhaustive information from each of the participatingcountries and prepared technical reports based on an expert examina-tion an d evaluation of the materials bearing on their subject. Eachof these technical reports outlines the nature of the commodityproblem establishes anticipated levels of production timates andjustifies the amount of requirements needed to achieve the obj ectivesof the program and indicates the net amount of import requirementswhich the participating countries taken together will need from theres t of the world.

In addition to the technical committees mentioned above the CEECalso formed a balance of payments committee to t ransla te the ne timport requirements of the participating countries into financialterms and a committee of financial experts to examine ways andmeans of removing financial obstacles to intra-European trade.

Th e general report of the CEEC together with the detailed reportsof the technical committees were transmitted to the United StatesGovernment on September 22 1947.

Th e executive branch made a close analysis of the principal com-modity requirements of the participating co Untries. The commoditiesand services selected for this detailed scrut iny were generally thosewhich the CEEC regarded as the basic s entials for recovery and alsothose which involved difficult supply problem.

In these selected areas the executive branch first xaminrd thedata presented in the CEEC reports to d t rmine that, apart fromsupply considerations the program was not based on unwarrant dassumptions regarding levels of consumption or rat s of new invest-m nt activity. Judgments based on exp r t knowledge and xp riencew re required in each step of this proc Th criteria adopted forthis stage of the scre ning proc ss however are a ily explain d.A requirem nt figure was regarded as unju tifi d until it could bedemonstrated that the country concern d n d d a conlmodity for itseconomic recovery or that it could not eli p e \ Tith that ommoelityon any reasonable and practical standard of on umption consi. t ntwith the obj ctive of European economic cov ry. For xampl onthis basis the stated n e 1 for c rtain t pc of heavy aOTiculturalmachinery were di rrgarded beau it is b v d that Europ anfarms are not large enough to permit th m to be utilizl:d ffectivelyin promoting economic recov ry.

EUROPEAN RECOVERY PROGR M


26/78


27/78

Includes imports of oil and petroleum products by participating countries from th e United States andfrom American companies operating in the Caribbean ~ i l ~ s t and other areas outside the UnitedStates. is expected that the proportion of these imports coming from the United States will be 20 to 30percent in volume during the period Apr. I 1948 through June 30 1949

stimated quantities of selected imports of the participating countrietf from theUnited States and other Western emisphere countries Apr 1 1948 to June D

1949

The principal requirements of the participating countries andwestern Germany for the 4 years 1948 51 from the United States asindicated in the CEEC report fall into four major categories: Foodand fertilizer 26.5 percent; coal an d petroleum 14.2 percent; ironand steel 5.9 percent; timber 2 percent; and equipment 16.2 percent.This amounts to 64.8 percent of the total. The balance of the importrequirements consists of a wide variety of specialty products manyof which are produced in quantity only in the United States.

The committee appreciates the fact that the executive branch hashad to make reductions and substitutions in the estimates of netimport requirements given in the CEEC report by determining theurgency of n ed of particular commodities the size of the importrequirements remaining af t r supplies from indigenous productionare inCleased to practical limits and are properly utilized and byjudging the extent to which the United S ta tes can pru dent ly andwisely undertake to meet those import requirem nts.

The reductions and substitutions made by the executive branchin the CEEC estimates are illustrated by the following tables:

Total

Fromother

WesternHemisphere

9 165 17 3604 055 5 260

388 5701 468 1 7H2 408 2 588 ~ 1 431

122 30971 633

95 1553 156261 619275 27565 6542 298

296 987132 21422 158

43 250 82 29 274

6 599 8 9091 475 1 475

431 1 366 2 069 78 20 48 17 95

FromUnitedStates

Unit


Commodity

22

Bread grains______ Thousands of metric tons__ ___ 8 195Coarse grains do___________ ___ _ 1 205Fats and oils do___________________________ 1 2Oilcake and meaL do___________________________ 246Sugar do___________________________ 180~ t do___________________________ 30Pulses do___________________________ 187Dairy products do___________________________ 562~ g g s do___________________________ 60Dried fruits do_____ 153Fresh fruits -- do_____ _ ___ 358Coffee do _Cocoa do _Tobacco do___________________________ 256Cotton do___________________________ 691Nitrogen fertilizer do_ ___ ___ 2Agricultural machinery ~ i l l i o n sof dollars_______________ 136CoaL ______________ Thousands of metric tons_ ____ 43 250Coal mining machinery ~ i l l i o n sof dollars_______________ 82Petroleum 1_ _ Thousands of metric tons_ ______ 29 2UTimber Thousands of cu ic feet board

measure______ 2 310Iron ore Thousands of mc .c tons _Crude and semifinished steeL do_____________ 935Finished steeL do___________________________ 2 069Trucks_ ____ Thousands of units______________ 67Freight cars do_____________ _ 20Steel equipment. ~ i l l i o n sof dollars_______________ 48Timber equipment. do 17~ l e t r i lequipment. do_____ 95


28/78

omparison of selected food an d agricultural import requirements for 1948-4-9 1 asestimated by EE an d by the executive branch dependent overseas terri tories arenot included)

Comparison of certain selected l:mport requirements from the United States for comparable If month periods as estima ted by EE an d by the executive branch de-pendent oversea territories are no t included)

I CEEC estimated requirements for food an d agricultural commodities were based on crop years , July 1to June 30 of th e following year. Th e first year of estimated requirements under th e European re coveryprogram was assumed by CEEC to relate to th e crop year 1947 48. Ftequirements are larger in 1947 48 than n 1948 49 an d following years. Th e CEEC assumed that full satisfaction of it s 1947 48 requirements wouldresult in much lower requirements in 1948 49 an d later years. However, CEEC requirements for 1947 48

were in fact no t met, an d therefore th e CEEC would probably want to revise it s requirement estimatesupward for 1948 49. In th e table given above, th e CEEC requirements relate to 1948 49 rather than to1947 48. Since th e 1948 49 CEEC requirements are lower than those for 1947 48 t he e xt en t to which th eexecutive branch estimates of requirements differ from those of th e CEEC is understated.

10082

1336100

618362

1007489

14460108

40103

Executivebranch

estimateas percentof CEEOestimate

14 2705 7002 4642 7503 0561 933

249 46209493140435530

2 8127632

1 °60

ExecutivebranchEEC

Estimated total importrequirements

Unit

EUROPEAN RECO ERY PROGRAM

Commodity

Bread grains Thousand metric tons___ 17 988Coarse grains do___________________ 9 349F at s a nd oils do___________________ 2 968Oilcake an d meaL do___________________ .,417Sugar do___________________ 3 053Meat including horse meat do___________________ 2 603Cheese do___________________ 279Processed milk - - _do__ _ 240Eggs do___________________ 346Dried fruit an d nuts do___________________ .55Ftice do___________________ 352Coffee green) - do____ _ _ Pulses do _Fresh fruits do______ 2 811Cocoa do___________________ 338Tobacco do___________________ 247Nitrogen fertilizer do__ ______ 297Agricultural machinery Million dollars__________ 66

Import requirementsExecutiverom United States

branchCommodity Unit estimate

CEEC, Executive as percentcalendar branch, of CEEOyear 1948 fiscal year estimate1949

Petroleum from dollar sources)I __________ Thousand metric tons 23 766 19,542 82Timber __________________________________ Million board feeL ______ 789 7 9 100Crude an d semifinished s t eeL ___________ Thousand metric tons 2 040 748 37Pig iron _________________________________ _____ do ___________________ 182 35 19Scrap or pig-iron equivalent ____________ _____ do ___________________ 1,399 °inished steel, other than sheets an d ti n _____ do ___________________ 449 1,150 256

plate. 2Timber equipment 3 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Million dollars __________ 10.1 9.8 97Electrical equipmenL ____________________ _____ do ___________________ 150 95 63Freight cars ______________________________ Thousand units _________ 47 20 .3Steel plant an d equipment. ______________ Million dollars __________ 100 48 48

I Total imports from dollar sources, largely outside the continental United States.2 Executive branch estimates of finished-steel requirements of th e participating countries from th e United

State take acc0UDt of th e anticipated deficits in pig i ron , c rude an d semifinished steel, an d scrap requirements of th e participating cc>untries. To th e extent tha t availahilities in the U nited tates permit, th eexecut i, e branch has estimated tbat fini be d steel mig.bt offset n p ar t t he deficits in pig iron, scrap, an dcrude an d semi finished steel. Taking these selected Iron an d steel products on a ton-fnr-ton basis, th eexecutive branch estimated that 4 p rcent of CEEC requirements of 4 070 000 000 metric toas of ir0n an dsteel might he met.

a To al timber cquipment requirements 19t , as estimat.ed by the CEEC, ar e 16.4 million dollars, ofwhich 6.3 million dollars were for dependent areas of th e Umted Kingdom an d France. In order to raiseproductivity in th e timber-pro1lucing colonial areas, th e exe.cutive brancb estimated that 7.1 million dollarsof t imber equipment might b e m ad e available from t he U m te d States to these dependent areas i n t be fiscalyear 1948 49.


29/78

119.128.81.42.08.8

78.060.039.016.64.0

794.9

9. 1

21. 7

21. 8

6.0

40 .0

17.0

85.957.4

.2

~5.0

3 025.3

226. 786.21.62.08.

116.60.04 . 117.095.0

4, 228. 211 12. 7 4 3 i 3 1 15 .3 6,2G9.1

27.0 :. ;J5.5 591. 5319.4 319.4

12 959.1 4 940.2 1 15 .3 6 860.6

Possible sources and distribution offinancing

1rotal ourCt simports other than UnitedOwn re- United Statessources States fundsfunds

1 600.3 138.8 336. 7 1 124.8552.3 6 .6 66.6 417.1378.4 29.2 76.2 273.0190. 7 17.4 33.3 140.0295.8 35. 1 33.4 227.3393.1 14.5 33.3 345.3275.2 275.285.3 6. 7 78.634.3 2.8 31. 547.8 3. 1

44. 7

156.6 34. 1 38.3 84. 2168.0 23. 5 144.5

n millions of dollarsl


European Recovery Program C o m m ~ t t e e R e c a p i t u l a t i o ntable: I llus trat ive com-position of imp or ts of commodities an d services from Western Hemisphere an dpossible sources and distribution of financing, pr 1 1948 June 30, 1949 at July 1 1947 prices

4

Subtotal_________________________________________ 4 177.8 373.8 017.8 3 1 6.21robacco________________________________________________ 293.4 57.3 236.1Cotton_________________________________________________ 790.0 214.4 ~ 533.5~ i t r o g e n 42.8 5.2 37.6Phosphates 3.1 .5 2.6Potash _Agricultural machinery --------____________________ 158.7 12.6 12. 9 133.2Coal___________________________________________________ 39.3 13.5 375.8~ n n machinery_____________________________________ 81.9 1.0 2.9 7 .0Petroleum products____________________________________ 651. 9 330.1 321. 81rimber________________________________________________ 333.4 185 7 16.0 131.7Iron and steel:Finished _

Crude and semifinished _Pig rron _Scrap iron _Iron ore _

1rrucks _Freight cars _Steel quipment _1rimber equipment- _Electrical equipment _Other imports _

Import

Total commodity imports _ et freight-. _Other dollar p ~ y m n t s _

1rotal _

The program as recommended by the executive branch and acceptedby the committee is ba ed upon detailed commodity and countrystudies.

The committee recognizes that it is difficult to be precise either asto the cost and composition of the import requirements or as to thelevel of dollar earnings achieved by exports and other dollar fundswhich the participating countries may be able to obtain from sourcesother than new United Sta tes Treasury funds. The following estimates for th e 15-month period April 1, 1948 to June 30 1949 however were presented by the executive branch and it is the committee sjudgment that these est imates have generally wi thstood criticalexamination.

lBreadgrains _ Joarse grains _Fats and oils _Oilcake _

4Sugart _Darry products _Eggs _ried fruit _Itice _Coffee _Otherfoods _


30/78

7,2'12

200

200

7,642

822

6,820

6,80()


The participating countries and western Germany, according tocolumn 1 in the preceding table, will require imports from the WesternHemisphere amounting to 12,959,000,000. The executive branch estimates that these countries as a group will export about 1,940,000,000of goods and services to the Western Hemisphere in the first period of15 months. This estimate is indicated in column 2. The difference'between column 1 and column 2, amounting to 8,019,000,000, indicatesthe approximate net deficit which the participating countries andwestern Germany will probably incur on current account with the'the Western Hemisphere. I t should be emphasized at this point that,the indicated net deficit of the participating countries with the'Western Hemisphere is based on the assumption that these countrieswill engage in a vigorous domestic productive effort and will cooperatefully in measures of self-help and of mutual assistance, and will thusreduce their requirements from the Western Hemisphere to a minimumconsistent with a true recovery program.

In addition to dollar earnings obtained through exports, the participating countries will also be expected to obtain funds from suchsources as the International Bank and credits advanced by WesternHemisphere countries other than the United States. The amount ofthese funds, expressed in terms of July 1, 1947, prices, are indicatedin column 3. The difference between net imports (column 1) an d export proceeds plus borrowings from sources other than net United

States Treasury funds (column 2 plus column 3) appears in column 4.About 6,860,000,000, in terms of July 1, 1947, prices, will be neededto meet the uncovered import deficit of the participating countries an dwestern Germany with the Western Hemisphere in the 15-monthperiod.

This estimate of the uncovered deficit with the Western Hemisphereamounting to 6,860,000,000 is reconciled with the executivebranch's request for an authorization of 6,800:000,000 in the followingtabulation:Goods to be purchased in estern Hemisphere with new United States ll ons

funds (a t J uly 1, 1947, prices), column 4 of recapitulation 6,860Adjustment :Add adju tment for price increa es 1 /182

D d ' h 2 100uc t sanngs on s Ippmg _38

Adjusted cost of commodities and shipping flervices to be purchased in '{estern Hemisphere with new Uni ted Sta tes funds . _

Authority to obligate funds for procurement of items to be delivered insubsequent years - - - - - - - ... - - - - _ - - _

Uncovered deficit of bizonal Germany with nonpar ti cipa ting countriesoutside th e We tern Hemisphere _

Total being reque. te d for European recovery program an d by

Department of Army for Germany (GARIOAL _Deduct appropriations being reque. te d b y D ep ar tm en t of Army for pre-vention of disea e an d unrest in Germany (GAR 10 A) -- _

Total requirement for first 15 months, European recovery pr?graI?-Authorization reque. ' teo for European recovery program (precedmg lme

in rounded amountL .. This figure is equivalent to, the ~ ~ u s t m n tfor higher prices of 565,000,000. .

J These are possible savings lf addltlOnal temporary transfers of bulk-cargo carners are made.


31/78

Including ne t dollar payments for freight and other invisibles., Including drawings of 72 000 000 by Portugal on its gold and foreign-exchange resources.3 1 his column includes funds bein requested by the Dcpartmrnt of the Army for prevrntion of dis ase

an d unrest in (}ermany. A reconciliation with the 6.800 000 000 being requested for t he European re-covery program is made elsewhere.

T B L E I Recapitulation of tables showing illustrative composition of importsof commodities and services f rom Western Hemisphere and posstble sourcesand distribution of financing Apr 1, 194-8, to June 30 94 9

[At July 1,1947, pricesj

The preceding tables have indicated th e magnitude of th e im po rtrequirements and possible sources of finances upon which th e participating countries as a group might be able to draw. Each of th e participating countries, however, has it s particular import requirementsfrom the Western Hemisphere, it s possible sources of funds to financethose import requirements, and, finally, many of th e countries havethe particular problem of a net import deficit which requires a solution. The following table high lights these problems on a country-by>country basis:

Ne wUnitedStates

funds 3

Sourcesother than

new UnitedStatesfunds

Possible sources of financing

Dollarearnings 2

Mils of Mils of Mils ofdols dols dols

233 39 12 182853 334 196 323237 45 28 164

1,931 369 128 1,434262 67 9 186

23 10 13192 40 152

1 160 183 108 8691 136 7 160 705

253 163 56 34144 144 499 42:3 43 33535 53.5 69 69

4,311 2 133 418 1 760

1 014 100 91493 13 8014 3 11

12,959 4,941 1.158 6 860

1rotal im·ports 1


1rotal _

Austria _Belgium·Luxem burg _I enmark _Finance. _

(}reece. _Iceland _Ireland. _ taly _Netherlands _Norway _Portugal _Sweden . _Switzerland _·1 urkey _tJDited lCingdom _(}ermany:Bizone _

French zone _Saar _

I t must be emphasized, however, that the country-by-countrydistributions are very tentative and are not binding upon th e Administrator. The amounts in column (4), which indicate th e possiblecountry distribution of new United States funds, do not necessarilyrepresent t he amoun t which each participating country would receivenor th e tenns on which such sums would be advanced by th e Adnlinis

trator.I t should be emphasized that th estimates given above are ba cdon the assumption that certain of th participating countrio , notablyPortugal and Switzerland an d possibly Turkey, will not require anyfinancial assistance from the United States, ithor in the fonn ofloans or of grants. Their participation in the pr gram i based ontheir ability to assist i n fur ther ing th e recovery objective and th eadvantages to them of general European economic recovery and


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19 . TH E BALANCE-OF-PAYMENTS SITUATION

no t on the basis of anticipated financial assistance from the UnitedStates.

8,527

200

8 727-1 285

-8 527

Total\VestemHemi·sphere

-3,351

OtherWesternHemisphere

-5,176

2 265 1 758 4,013

-4 734 -3 066 -7 800-293 -145 -438+263 13 +276

-4,764 -3 198 -7 962-412 -153 -565

UnitedStates

n millions of dollars]


13 Total deficit, Western Hemisphere : · ------------ -.----------14 Uncovered deficit, bizonal Germany, with nonpartlCipatmg

countries outside Western Hemisphere ------------ ------------

15 Total to be financed. . -- - -. ---.- ---- -.-;- - -- - -- - ----- --- .-----------16 To be met by sources other than new U. S. Treasury financmg . - - -- - - -- - - - - - - - -- - - -- - -

Summary of balance of payments deficit of the participat1 ng coun r1 es with the WesternHemisphere for the period Apr 1, 1948 June 30, 1949, an d proposed sources offinancing

Mils. ofdols. Mils ofdols. Mils ofdols1 Selected iDrrports________________________________________________ 4 239 3,346 7 5852 Other iDrrports___________________________________________________ 2 750 1 478 4,228

3 Total iDrrports_____________________________________________ 6 989 4 824 11 813

4 Selected exports_________________________________________________ 295 303 5985 Other exports___________________________________________________ 1 960 1 455 3,4156 Total exports _

7 Merchandise balance --8 Freight (net) -- -Q Other invisibles (net) - -- - -------------

= = = = = = = = = = = =

10 Balance (July 1 1947 prices), break-down available bycountries -- -11 Adjustment for higher prices _

All above figures based on July 1,1947, prices, as was CEEC.This adjustment allows for a n2·pprcent rise in United States

and 5 percent in other Western Hpmisphrre pxport. pri ces ::nda 5-percent rise in European export prices. The nse pncesmay well be greater than this allowance covers.12 Adjusted balance _

= = = = = = = = = = = =

The s tandard of living and the rate of economic development inEurope depend in the final analysis upon European production andresources. In th e first period t he amount of proposed outside assistance represents less than 5 or 6 percent of th e estimated national income of the participating countries.

The shortage of dollars is basically the shortage of world production and t ra de to get dollars. For example, the European countriescannot, without frustrating recovery, produce enough goods an dservices to satisfy indigenous requirements and to export at a levelequivalent to their total Western Hemisphere requirements amounting the next 15 months to 12,959,000,000.

The committee accepts th e general reasoning of the program-thatif the import requirements of the European countries are no less thanthe amount indicated above, and that if the assumed volume ofexports is achieved, these countries will still be subjected to verysevere strains even under the most favorable developments.

Without wishing to prejudge the figure of 822,000,000 beingrequested separately for Germany by th e Department of the Army,the following summary, including at the time of the committee'saction the adjustment for price increases, appears to be realistic:


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20 . AVAILABILITY OF COMMODITIES

Summary of balance nf payments deficit of the participating countn es with the WesternHemisphere for the period Apr 1, 1948 June 30 1.949 an d proposed sources ojfinancing Continued ,

n millions of dollars]

The CEEC countries did not indicate that the assistance of th eUnited States would be essential in meeting the deficits of th e participating countries with nonparticipating countries outside the Western Hemisphere. But it is appropriate for t he Uni ted S ta te s Government, as an occupying authority to take respon ibility for a part ofth e deficit which bizonal Germany will incur with nonparticipatingcountries outside th e Western Hemisphere. As indicated in line 14of th e above table, about 200,000,000 will be required for this purpose the

period April1

1948, toJune

30, 1949.


Other TotalUnited Wp tern WesternStates Hemi- Hemi-

sphere sphere

Mils ojdols Mils ojdols Mils.ofdol .17. Total new financing by U. S. Treasury ____________________ ------------ ------------ 7,44218. Appropriations being requested by Army for prevention of dis-

ease an d unrest in Germany ___________________________________ ------------ ------------ 82 2]9 . Subtotal __________________________________________________ ------------ ------------ 6,62020 Add: Funds required for obligation prior to June 30, 1949 to

cover contracts for shipments in subsequent period ____________ ------------ ------------ 2002 Total requirement for first 15 months ERP _______________

------------------------ 6.820Rounded to _____________________________________________

------------ ------------ 6,800

28

The committee observed that the proposed program is based upona realist ic assessment of availabil ities in this country and the rest ofth e world. The reductions made in the CEEC estimates by theexecutive branch arise in part from lower estimates as to the availability and probable future supplies of such commodities as grain,fats and oils, steel scrap, petroleum, and freight cars.

Food The Secretary of Agriculture testified that the am ount offood required under th e program could be provided after fulfillingour own domestic requirements an d w itho ut upsetting the existingdomestic channels of trade. In general, the total food requirementsof th e participating countries for the first IS month period are wellabove the probable total availabilities. Food shipmen ts from theUni ted S ta tes ar e expected to be appreciably smaller than for thepast 2 years. Even so, it may be necessary to delay for a few yearsou r start in adjusting to more desirable wheat acreages.

a Bread grains: Low availabilities of bread grains will mostseriously affect food consumption in th e participating countries.Western Europe was a prewar food deficit area and will continue tobe so even under the most favorable conditions. Food consumptiontargets as planned by the CEEC countri s will not be achieved by1952 unless there is a series of very favorable crop conditions in manyareas of the world. If conservation m asur s and crop prospects arefavorable in the United States, th e program contemplates shipm ntfrom the United Stat s to participating countri sand th ir dependentoverseas terri tories of 89,000,000 bushels of bread grains betweenApril 1 an d June 30, 1948 and 218,000,000 bushels during the fiscal


34/78

year 1948-49. During the 15-month period, exports of bread grainsfrom nonparticipating c o u n t r i ~ sother than the ~ i t e ~States c?nstitute 61 percent of the total Imports of the partIcIpating countrIes. The volume of exports from t he o ther Americas and eastern Europewill be of decisive importance.

b Coarse grains: Western European nations cannot restore theirlivestock as rapidly as would be desirable from their viewpointbecause they will no t be able to import enough feed grains. Exportsfrom the United States of coarse grains in fiscal 1948-49 would beabout 45,000,000 bushels. Most, if not all, of these grains shouldbe used for food purposes. There should be no difficulty on the partof the United States in meeting this requirement.

c Fats and oils: United States exports of fats and oils to Europeunder the proposed program would be more than offset by importsinto the United States. This country normally exports edible fatsand imports inedibles.

d Meat: No export of th e types of meat consumed in the Uni tedStates are planned during the first 15 months of this program. A small amount of horse meat will be shipped.

Fertilizer The need for fertilizers to increase indigenous supplies of food remains acute and the world demand is greater than at an ytime in history. Nitrogen consumption in the United States hasmore than doubled in the last decade. Nitrogen fertilizer allocationrecommendations are under the Int ernati onal Emergency Food·Council. I t is unlikely that more than th e current rate of 70,000tons annually, including shipments by the United States Army, couldbe exported from the United States to the participating countries.The present rate of exports from t he United S ta tes represents about8 percent of our total yearly commercial supply of nitrogen an d 4 percent of our phosphate rock. Th e supply available for United Sta tesfarmers would be maintained at about the present levels.

Agricultural machinery Farm machinery is badly needed inwestern Europe to increase production. The EE request wouldhave taken about one-third of the estimated 19 16 production of the

United States. NOlmally, Europe hast aken about

5 percent ofour

production. The proposed 136,000,000 program for the 15-monthperiod would double that percentage but increased production inthis country should provide for this program and also maintain thesupply at a slightly higher rate than currently to the Americanfarmer and take care of our other regular customers abroad. Everyeffort must be made to see that the exact amounts an d kinds ofmachinery furnished will be fitted to the needs of these countriesand used to the best ad van tage.

Ooal The United States resources are adequate to provide thequantity of western European coal import requirements, although

this program will call.f


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21 . AVAILABILITY OF PETROLEUM

In o rd er to pro tect the petroleum reserv s of the U nit d Sta t e , thecommittee provided in th e bill that the procurement of petrol urn andpetroleum products shall t o the maximum ext n t practicabl b madefrom petroleum sourc s outside the United States. The original EECrequests for 26,493,000 metric tons f rom do ll ar sources in th fir t 2

months has been reduced

percent by the x cutive branch becau eof the critical shortages of oil, transportation, and refining fa ilities.This duction should not appreciably retn,rd co er y in Europe,altho ugh su b t an ti al adjus tmen ts will be required in prognun ofemergency util ization.

Very little, if any, fuel oil will be exported from the nitcd tates.A sizable proportion of United Sta tes ~ p o r twill COll i of pecialtyproduct , uch as lubricants, which can be obtained in volume onlyfrom the United States. In percent of United tates production,shipments to participating countries will account fo r 1.8 perc n t ofUnited ta t s crude oil output in 1948 or about p rcent of their

import requirements. Our xports of petrol urn will b more thanoffset by imports. Tot I Europ an quir ill nt of p trol unl areto be m t largely from th other ;Yes t rn H mi ph ar a upplying50 per ent of the quir m nts in 194 and from the l\1idcll East supplying 3 .6 p rc n t in 194 and an in a ingly larg proportionthereaft r . is timated tha t th e Unit d ta t ~ · p o r t sto CEECcountries will decline from the 1938 Ie cl of 77,000,000 barr Is to35,000,000 bar re ls i n 1948.

ment is relatively small in dollar amount, but involves many itemsof specialized character available only f rom the nited t a t e .

Timber The volume of timber req ue te d from this country appearsto be moderate and within the limits of what we can supply, especiallyby exporting types not in m aj or d em an d i n this country.

reight cars . -The CEEC est imated requi rements for 1948 are47,000 cars. This reques t did not appear to be fully justified, and inview of the large internal needs in the United tates, provision wasmade for exports from the United States of only 20,000 cars in 1948-49.This estimate of requirements conforms with the judgment of theHarriman committee on this subj ect.

Tobacco The western European countries have t radi tional ly beenour largest tobacco export market. The shortage of dollar exchange,however, h as p re ve nt ed the participating count ri es f rom importingthe full amount of their requirements for American tobacco. As aresult of the sudden curtai lment of exports, a reserve of tobacco hasaccumulated in the United States. Tobacco imports to the participating countries provide an outlet for exce con umer purchasingpower a nd th er eb y c on tr ib ut e to the alleviation of inflationary pressures in the domestic economy. Furthermore, in many westernEuropean countries sales of tobacco provid a n i mp or ta nt source ofrevenue to the Go vernm en t. Tobacco ranks as a readily availableincentive, good for purposes of encouraging labor to work increasedhours and on stepped-up product ion schedules.

Petroleum iron and steel Owing to the special problems regardingthe r equi rement s and availability of petroleum and iron and steel,these commodit ies are considered a t some l en gt h in s ep ar at e sectionsof this report.



36/78

22 AVAILABILITY OF IRON AN D STEEL

Your committee gave considerable attention to the possible impactof current political uncertainties in the Middle East on the security

and reliability of that area as a source of supply for Europe. Thisand other factors led the committee to underline th e danger thatwestern Europe which ha s little petroleum wealth of its own maybe overexpanding from the viewpoint of it s own welfare the petro-leum-consuming equipment where the use of alternate fuels or othersources of power are practicable. For example th e CEEC reportcontemplated some substitution of petroleum-burning equipment forcoal-burning equipment and an over-3ll petroleum consumption level 1951 double that in 1938. The estimates of the executive branchassumed that these substitutions contemplated by the CEEC wouldnot be possible. Coal remains th e basic source of energy in western

Europe and in 1951 will account for about 80 percent of total energyproduction.

The estimates of the executive branch on iron and steel import requirements of th e participating countries recognize that an adequatesupply of steel is a prime necessity for a thriving European economy.Steel requirements for European recovery exceed prewar consumptionlevels since a substantial backlog of war damage and deferred mainte-nance of plant and machinery must be made up as rapidly as practical.Furthermore increased output and expor t of metal products are es

sential to the achievement of equilibrium in the European balance ofpayments. Taking selected iron and steel products on a ton-for-tonbasis the executive branch estimates that 48 percent of th e CEECrequirements of iron and steel might be met.

Current steel output of th e participating countries together withwestern Germany is about 70 percent of the 1938 level. The CEECfinished steel production target is set at 30 000 000 tons in 1948 orabout 9 000 000 tons above the c ur re nt rate United States studiesof European steel production possibilities indicate that shortages ofsteel-making materials part icularly imported scrap m igh t p rev en tCEEC targets from being reached in 1948. The finished steel an d

metal fabricating industries of th e United Kingdom and Italy will beprincipally affected by the unavailability of imported scrap pig ironand crude an d semifinished steel.

In order to alleviate and partially offset the unfavorable effects ofprospective deficits in steel-making materials including semifinishedsteel the executive branch estimated that finished steel might beexported in quantities larger than those indicated for finished steelby th e CEEC report This course of possible action was recommended after a thorough exploration of suggested alternatives.

One suggest ion was that the participating countries might fur therreduce the ir p rogramed exports of finished steel. Some reduction in

programed exports of finished steel by the participating countries willundoubtedly occur according to the executive branch estimates.Further reductions would gravely endanger th e long-run position ofthe participating countries which together were the major p rewarexporters of s t ~ lto the res

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1948-2-26 Relatório Committee on Foreign Relations

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