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THE MUTUAL SECURITY ACT OF 1956 REPORT OF THE COMMITTEE ON FOREIGN RELATIONS ON H. R. 11356

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CIA-RDP59-00224A000100370005-0
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June 19, 1956
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REPORT
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Approved For Release : CIA-RDP%-P&jq80 jQQg70005-0 84TH CONGRESSI 2d Session J {REPORT No. 2278 THE MUTUAL SECURITY ACT OF 1956 REPORT COMMITTEE ON FOREIGN RELATIONS H. R. 11356 JUNE 19, 1956.-Ordered to be printed UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1956 Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 COMMITTEE! ON FOREIGN RELATIONS WALTER F. GEORGE, Georgia, Chairman THEODORE FRANCIS GREEN, Rhode Island ALEXANDER WILEY, Wisconsin J. W. FULBRIGIIT, Arkansas H. ALEXANDER SMITH, New Jersey JOHN J. SPARKMAN, Alabama BOURKE B. HICKENLOOPER, Iowa HUBERT H. HUMPHREY, Minnesota WILLIAM LANGER, North Dakota MIKE MANSFIELD, Montana WILLIAM F. KNOWLAND, California WAYNE MORSE, Oregon GEORGE D. AIKEN, Vermont RUSSELL B. LONG, Louisiana HOMER E. CAPEHART, Indiana CARL MARCY, Chief of Staff C. C. (}'DAY, Clerk Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 CONTENTS Page --------- -------------------------------- ose of the bill ur Main 1 1 - - p p . ------------------------------------------- What the bill does 2 3 ---- . Committee action ----------------------------------- ---- 3 5 . --- ---------------------------------- Statement of policy (sec. 2)--- 4 6 - . Military assistance (sec. 3)----------------------------- =--.------ 5 8 . Defense support (sec. 4) --------------------------------- ------ 6 13 . Assistance to Yugoslavia (sec. 5).-----------------_--------=------ 7 15 . Development assistance (sec. 6)------------- -------------------- 8 1.8 . Bilateral programs of technical cooperation (secs. 7 (a) and 7 (c)) _ - ., 9 20 . United Nations technical assistance (sec. 7 (b) (1)) ----------------- 10 24 . anization of American States technical assistance (sec. 7 (b) (2))-- Or 11 25 g . 8 (a))------------------------------ ---------- ecial funds (sec S 12 25 . p . lus agricultural commodities (sec. 8 (b))-__--_____-___-------- Sur 13 26 p . Joint control areas (sec. 8 (c)) ----------------------------------- 14 26 . ees and escapees (sec. 8 (d)) -------------------------------- Refu 15 27 g . United Nations Children's Fund (sec. 8 (e)) ----------------------- 16 28 . Palestine refugees in the Near East (sec. 8 (f)).--------------------- 17 29 ' . Ocean freight charges (sec. 8 (g)) -------------------------------- 18 30 . Administrative expenses (sec. 8 (h) and (i)) ----------------------- 19 30 . ITax,and commercial treaties (sec. 8 (j)) --------------------------- 20 31 . Investment guaranties (see. 8 (k))--------------- ----------------- 21 32 . and Agriculture Organization (see. 8 (1)) ------- ------- ---- FOod 22 34 , . t' ;-ions (sees 9 10 and 11 (a) new subsets. 23. General admimstr L ive prow ? , ) 34 544 (c), (d), (e), and (f))----------------------------------- ----------------------- -- - 544 ( ) b _40 __ g set. 24. Informational media guaranty (sec. 11 (a), new su 25. Use of Public Law 480 foreign currency (sec. 11 (a), new subset. 544 (I'))----------------------------------------------------- 43 44 Pricing of military equipment (sec. 11 (b))_______________________- 26. 27. Obligations and expenditures (sec. 11 (c)-------------------------- 45 53 28. Foreign research reactor projects (see.12)----------- ________ _____ 54 29. International food and raw materials reserve (sec. 12 (d)) ----------- I 55 -- 30. Transfer of funds for educational exchange (sec. 13) ------------ ; 31. Technical definitions (sec. 11 (b) (2))----------------------------- 32. Cotton textile imports-------------------------------------`---- 56 57 Changes in existing law--------------------------------------------- III Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 Calendar No.2296 84TH CONGRESS .Od Ses8ion MUTUAL SECURITY ACT OF 1956 JUNE 19, 1956--Ordered to be printed REPORT No. 2273 Mr. GEORGE, from the Committee on Foreign Relations, submitted the following REPORT [To accompany H. R. 11356] The Committee on Foreign Relations, having had under considera- tion H. R.11356,rto amend further the Mutual Security Act of 1954, as amended, and for other purposes, reports the same favorably with an amendment in the value of a substitute and recommends that it do pass. 1. MAIN PURPOSE OF THE BILL The main purpose of the bill is to continue for another year the military, economic, and other types of assistance which together com- prise the mutual security program. For this purpose, a total authori- zation of not to exceed $4,270,075,000 is provided. The table below shows the amounts authorized by program as compared to the admin- istration requested and to the bill as passed by the House. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 Administra- tion request 2vlilitary assistance ---- ------------------------- --------- Shafn --------------- ---------------------------- Other European countries --------- - __ Replacement purchaser for U. S. forces______________ :Dofer.se support: Europe------- -------------- Near East and Africa------------------------------- Asia- --------------------------------------------- Latin America-------------------------------------- Development assistance: Near East ar.d Africa __-__------------------------- A.sia-------- ---------------------------------------- Latin America-------------------------------------- Subtotal ------------------------------------------ Technical cooperation: Bilateral----------------------------------- -------- Multilateral: UN--------------------------------- -------- OAS-------------------------------------------- $2,925,000,000 2, 925, 000, 000 78, 700, 000 170, 000.000 882, 000, 882,000,000 1,130, 700, 000 63, 000,000 80, 000,000 27, 000, 000 170, 000, 000 15,500,000 1,500,000 157, 500, 000 100.000, 000 12, 200.000 2,300,000 7,000,000 10, 000, 000 1,400,000 14,000,000 1,175,000 35, 250,000 100 000,000 5,95D,000 Other programs: l pedal fund------------------------------ --------- doint control areas---------------------------------- 17. N. Refugee Fund -------------------------------- Escapees-------------------------------------------- 1J. N. Children's Fund----------------------------- Ocean freight: (1) Voluntary agencies__________________________ (2) Surplus agricultural commodities _-.____-___ Control Act expenses -_-____------------------------ Administrative expenses -------------- -. ------- special auth:rrization, Middle East and Africa-__-_ Foreign reactor projects -------------- --------------- Total---- ----------------------------- --- ----------- Re eel of unappropriated authorization, t Il e ue . : President's Fund for Asian Economic Development-_ Net total----------------------------------------- i Not separately identified. $1, 925, 000.000 (48, 000, 000) (402,000, 000) (`) 63, 700, 000 170. 000, 000 882, 000, 000 37, 000, 000 1, 152, 700, 000 } 243, 000, 000 Senate Foreign Relations Committee $925,000,000 1.600)000 000 2, 525, 000.000 78, 700, 000 170, 000, 000 892, 000, 000 37, 000, 000 1,167, 700, 000 ( 63,000,000 80,000, 000 -- 143, 000, 000 243, 000, 000 140, 500, 000 140, 500, 000 15,500,000 15,500,000 1,500,000 1:' , 500, 000 157, 501), 000 157, 500, 000 100, 000,000 100, 000, 000 12200. 000 12,200,000 :!300,000 2,300,000 7,000,000 7, 000.000 10,000,000 10,000,000 1,400.000 3,000,000 14,000,000 ---------- 1,175, 175,000 1,175, 000 35, 250, 000 35, 250,000 ----------- 100,000.000 5,950, 000 A950.000 3, 667.475, 000 4, 270,0..15i 000 -100,000,000 ---- Nor.--The House bill also authorizes an increase from $2 million to $3 million in the ceiling on annual United States contributions to the Food and Agriculture Organization. The Senate committee bill likewise authorizes the increase, with a proviso that United States contributions cannot exceed 31.5 percent of total contributions. The House bill authorizes appropriations "of such. sums as may be necessary" for State Department administrative expenses in con- nection with the act. The Senate committee bill authorizes not to exceed $7 million a year for this purpose. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 3 2. WHAT THE BILL DOES Besides the appropriations which are authorized by this bill, a number of changes are -made in the existing basic law. The more, important of these changes are : 1. The authority for military assistance is divided between funds which are intended for aid to foreign countries directly and funds which can be used only for the replacement of equipment of the United States Armed Forces which has been supplied to foreign countries. 2. Development assistance is required to be placed on a 75 percent loan basis with specified exceptions. This type of aid to Latin America is shifted to the defense support chapter of the bill and may therefore continue to be placed on a grant basis. 3. Authority to issue investment and informational media guaran- ties is extended from June 30, 1957, to June 30, 1967. The limitation on the' total amount of investment guaranties which may be issued is increased from $200 million to $500 million. The two types of guar- anty programs are separated for purposes of financing and accounting. 4. The ceiling on United States contributions to the Food and Agri- culture Organization is increased from $2 million !ft year to $3 million a year, so long as it does not exceed 31.5 percent of the Organization's total budget. 5. Basic statutory authority is provided for certain routine expenditures which have heretofore been authorized from year to year in annual appropriations bills. 6. The uses of foreign currencies accruing under title I of Public Law 480 (Agricultural Trade Development and Assistance Act) are broadened to include (up to $5 million a year) the translation,. publi- cation, and distribution of books and,periodicals abroad. The bill also requires that at least 5 percent of these Public Law 480 funds be used for the exchange of persons program. 7. A limitation of $200 million is placed on unobligated and unre- served balances which can be carried over after June, 30, 1956. This is in addition to unobligated balances in the President's Fund for Asian Economic Development and in the account for the relief, rehabilita- tion, and resettlement of Palestine refugees. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 4 THE MITT-UAL SECURITY ACT OF 1956 These and other provisions of the bill are explained in more detail in the sections which follow. Distribution of fiscal year 1957 mutual security authorisation., by region, country, title, and function [In thousands of dollars] Region and country y Total, all programs___________ __________._ Europe, total _____________ Belgium-Luxembourg Denmar[ Franco ---------------- German, 7 Italy ---- Netherlands __________ Norway. ------------ Portugal------------------- Spain ------------ Yugoslavia ----------------------- Joint control areas ---------------- 3n al rregiexpenses Western Europe technical ex- change__------------ Undistributed by country --------- East and Africa, total Egypt- ---------------- - xg -- Ethiopia -_____________ Greece __--------------- ?------ xx Iran - --------------- - X X Iraq----------------- Israel----------------------------- Jordan__.._------------------------ Lebanon--------- ------- ---------- ---------- Liberia--------------- ---------?- ---- Libya .--?------------ Turkey-- -- ---- X X Overseas territories--_ ------------ ----- ---- Regional and undistributed - -- X X Specilthiti f a auorzaonor the Middle: East and Africa-___ ica-------- Asia, Asia countries, subtotal ubtotal___- Afghanistan______ Ceylen___________ India------------- NepaL---_------ Pakistan Regional and undi. Stributed Far East countries, subtotal _.____ Cambodia Indonesia__________ Japan Korea Laos ---------? Taiwan____________ Thailsnd_________. Vietnam Far East regional and undis - tributed_________ Latin America, total _______ Argentina------------- Bolivia------------ - ---------- Brazil------------------ Chile Colombia------------ Costa Rica Cuba ____ _ - ___________ Dominican Republic-- _ Military Defense Develop- Techni- Other an;ist- support ment as- cal coop- pro- Total once sistance oration grams. 2,520,000 1,167.700 143,000 157.500 276,875 4,270,075 78,700 1 x --------- ----------- - -------- x xx - XX x x ------ --------- ----- x x --------- Xx X X X 45,000 xx 30,000 x --------- - --- iii 000 1,200 2 1.400 2 500 170,000 63,0 34,100 100,000 --------- ---------- - 3,800 3 000 _ xx XX - . --------? XX - - -------'- 2 - xx 2,000 _ xx 2,700 __________ XX ---------- 2,1D0 ----------- xx 1,800 0 ----------- 1 xx 00 2, xx - -------- X ---------- ---------- 1.200 - X 0,000 ----- ---- 882,000 8 3,250 ----------- -_------_- ____ 90,000 4,000 _ 3,000 - 5, 000 1, 000 - 6, 000 70, 000 10, 000 - 0, 000 1,000 1 000 ____._--- 2 .000 XX XX 9000 XX XX XX _ __ 792,000 4000 - XX . ----?--- 4,000 - xX - - , - XX 300,000 ---------- 5,500 ----------- xx xx - 1,500 ----------- X X%Y 25,000 5,900 ?--__-..__ X X:X 88,000 3,400 __-___?-- X Xf{ 30.000 - 4,400 ---------- X XX XX - 5 - X!Y x ---- -- 37,000 ------ - 33.850 -------- -- --- --- --- - ----- ---- Kit - 3,195 .i ---------- -------- 4,739 . .-------- xx - 2,521 ---- xY - 1,536 ---- - ------ - -------- --------- 1,020 __________ - ------- 690 ._ Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A0001003370005-0 THE MUTUAL SECURITY ACT OF 1956 Distribution of fiscal year 1957 mutual security authorization, by region, country, title, and function-Continued [In thousands of dollars] Military Defense Develop- Techni- Other Region and country assist- support ment as- cal coop- pro- Total ante sistance eration grams Latin America-Continued Ecuador------------------------- XX ---------- ---------- 1,993 ---------- XX El Salvador----------------------- ---- ---- --------- ---------- 1,005 ---------- 1,005 Guatemala________________________ XX XX ---------- 1,730 ---------- XX Haiti------ - - ---------- XX Honduras------------------------ XX - 185 1 ---------- XX 1 185 Mexico-------------------------- Nicaragua------ -- XX , 919 ---------- ---------- , XX Panama ------------------------- ---------- ---------- ---------- 1,195 ---------- 1, 195 Paraguay------------------------- ---------- ---------- ---------- 1,684 ---------- 1.684 Peru------------------------------ XX ---------- ---------- 2,996 ---- XX XX Uruguay-------------------------- XX - ---- XX Venezuela---------------------- --------- ------- -- ---------- 225 ---- - 225 Overseas territories_______________ _____ ____ __________ __________ 812 ---------- 812 Regional and undistributed------- u XX XX 458 ---------- XX Organization of American States (OAS)----- ------------------- ---------- -- ------- ---------- 1,500 ---- 1500 Nonreglonal programs, total__________ __________ _____ _____ __________ 26, 300 75 ___ United Nations expanded pro - gramoftechnicalassistance_____ __________ __________ __________ 15,500 __-_ 15,500 Special Presidentialfund_________ __________ _________ _ ________ __________ 00 00 100,000 2 300 United Nations refugeefund______ Escapee program---------------- _____ ____ --------- __________ ---------- __________ ---------- _________ --------- 000 , 7,000 United Nations Children's Fund_ __________ __________ __________ __________ 000 10, 000 Ocean freight, voluntary relief shipments--------------------- ---------- ---------- ---------- ---------- 000 3,000 Control Act expense------------- ---------- ---------- ---------- ---------- 175 1,175 Administrative expenses, sec. 411, Mutual Security Act___________ __________ __________ __________ __________ 35,250 35,250 Foreign reactor projects----------- ---------- ---------- ---------- ---------- 5,950 0 Interregional expenses ------------ __________ __________ __________ 10,800 _--- 1 950 NOTE.-Columns may not add because of rounding. XX denotes that assistance is contemplated but figures have been deleted for classification purposes. The President's message on mutual security (H. Doc. 358) was laid before the Senate on March 19, 1956, and referred to the Com- mittee on Foreign Relations. Between April 13 and May 31, the committee held 17 days of hearings on the proposed legislation. Eight of the hearings, and part of a ninth, were held in public session. The remainder took place in executive session but the rec- ords of these sessions were edited to delete security information and have been made public. In all, the committee heard 72 witnesses. Among these were Sec- retaary of State John Foster Dulles; Secretary of Defense Charles E. Wilson; Adm. Arthur W. Radford, Chairman of the Joint Chiefs of Staff ; Director of the International Cooperation Administration (ICA) John B. Hollister; Assistant Secretary of Defense Gordon Gray; Adm. Lewis L. Strauss, Chairman of the Atomic Energy Com- mission; Gen. Alfred M. Gruenther, Supreme Allied Commander, urope; Gen. Lyman L. Lemnitzer, commander, Far East Command; 1m. Felix B. Stump, commander in chief, Pacific; Joseph Campbell, -lptroller General of the United States; John Sherman Cooper, id States Ambassador to India and Nepal; and Senator Paul H. 'as. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 6 THE MUTUAL SECURITY ACT OF 1956 From outside the Government, the committee heard every citizen who requested an opportunity to appear. These private witnesses in- cluded former Senator Millard E. Tydings, former United States Am- bassador to Canada James H. R. Cromwell, and representatives of the American Federation of Labor-Congress of Industrial Organiza tions, the United Automobile Workers Coal Exporters Association of the United States, Inc., National Federation of Independent Busi- ness, Cooperative League of the United States of America, American Farm Bureau Federation, American Superphosphate Institute, Amer- ican. Council of Voluntary Agencies, National Congress of Parents and Teachers, Citizens Committee for UNICEF, National Economic Council, World Development Corporation, National Farmers Union, Council for Social Action of the Congregational Christian Churches, ffomen's International League for Peace and Freedom, American Association of University Women, National Institute of Social Wel- fare, Americans for Democratic Action, American Veterans Coin- mittee, Morocco Post of the American Legion and the American Businessmen's Club of Morocco, and Friends Committee on National Legislation? The committee considered H. R. 11356 section by section in execu- tive session on June 13, 14, 15, 16, and 18, on which date by a vote of 13 to 2, it ordered the bill reported favorably with an amendment, in the nature of a substitute. Section 2 of the bill restates the policy now embodied in section 549 of the Mutual Security Act of 1954, as amended, and adds two new subsections expanding on this policy. Taken as a whole, this policy statement says four things : 1. Nations which have been assisted in their recovery by previous United States aid programs should share to a greater extent the burden of providing aid to countries still needing assistance. 2. Aid furnished under the act should be administered so as to assist in the attainment of self-government or independence. 3. International communism and the nations it controls endanger the peace of the world and the security of the United States. So long as this danger continues, the United States will help free nations and peoples maintain their freedom. 4. Assistance for newly independent states in Africa should be furnished in the same manner as assistance to other independent states. Thus, the variety of programs authorized by this bill rest upon two foundations of national policy. Some of these programs are designed to protect the United States from the menace of international com- munism. Others go beyond a simple, negative policy of anticommu- nism and seek positively to promote the growth of independence and self-government in a responsible society of free nations. The bill,0(' specifically recognizes the emergence of former colonial or seniii, colonial areas into independent states by expressing the sensel the Congress that henceforth aid which is furnished to those sta' should be furnished to them in the same manner as to other pendent states-that is, not through the former governing And in all cases, the United States welcomes-indeed, it urge Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CL&RARf ?q-pq?24A000I OV70005-0 THE MUTUAL SECURI participation in these continuing programs of countries which have'. already been helped. The military aspects of the mutual security program are part of the national defense effort. Foreign military assistance is one of the important instruments which the United States uses to increase; its own defensive strength by increasing the total defensive strength of the free world. It is one of the means by which we seek to counter the Soviet threat. The nature of this threat has changed in the last year. The Soviets now emphasize economic and political activities relative to military,. So far as our own military programs are concerned, however, the important point is that Soviet military capabilities have not been significantly weakened. Military programs must be concerned with military realities. They cannot be tailored to fit a facade of smiles. and sweet talk. But, however necessary they may be, defensive military activities of the kind authorized by this bill are essentially negative. The positive aspects of the mutual security program are those having to do with economic development and technical assistance. The chang- ing nature of Soviet activities makes these programs more urgent, but they would be in the national interest of the United States if the Soviet. Union did not exist. Irrespective of the Soviet threat, the United States would benefit, from a growing rate of economic development in countries such as, for example, India, Pakistan, and Indonesia. Markets for American products, opportunities for American investment, and sources of American imports would be increased. One could also expect a strengthening of those countries' democratic political institutions." As this is, to a large degree, irrelevant to the Soviet threat, so. also is it irrelevant to the creation of gratitude toward the United States. The success or failure of these programs is not to be measured by the popularity rating of the United States in the recipient countries. It is to be measured, rather, by the growth in these countries of institutions. and conditions favorable to their national independence and to peace and stability. Such a growth will be in the national interest of the. United States, and its results will endure. The objectives-and also the complexities-of these programs thus go considerably beyond merely countrren the Soviet economic and cultural offensive in developing areas of the world. But the fact that the Soviets have undertaken such an offensive makes it all the more important that the United States not withdraw and leave the field to the Kremlin by default. The bill clearly states the intention of the United States not to withdraw. It is now 8 years since the Congress passed the Economic Coopera- tion Act of 1948, inaugurating the Marshall plan. In those 8 years, our foreign assistance has had both successes and failures. Despite he mistakes that have been made in carrying out these programs, the -nmittee believes that the Congress and the American people have d":grounds for satisfaction. Friends, as well as foes, of these pro ,is should contemplate what the world would be like today, for )le, if we had not come. to the assistance of Greece and Turkey Western Europe, if we had stood aside while Korea and For- ,e overrun by Communist China, if we had done nothing to he independence of Iran, if we had not supplied marginal Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 8 THE MUTUAL SECURITY ACT OF 1956 help toward the success of the Indian first 5-year plan, if we had not supported the courageous efforts of Ngo Dinh Diem to create a new nation out of chaos in Vietnam. On the basis of past performance, therefore, the prospects are good that the mutual security program will continue to yield favorable results. But here a, word of caution is in order. The committee anticipates that the next few years may be more difficult in some re- spects than the last few. The problems are becoming subtler and more complex. The mutual security program must be adapted to meet the new circumstances. There is room for argument as to the precise form this adaptation should take. In this connection, the committee has proposed a careful study of the mutual security program in all its ramifications so that. the senate may have the results of that study before it next year. In the committee's considered judgment, however, it would be an enor- mous national folly to abandon or drastically to curtail the pro- grains authorized by this bill. There is simply no acceptable alterna- tive to some program involving direct and continued United, States interest in the economic development and political freedom of much of the non-Communist world. The committee is firmly of the opin- ion that any careful, realistic appraisal of the position of the United States in the world today can only result in the. conclusion that the mutual security program not only promotes the national interest, but that it is affirmatively required by the national interest. 5. MILITARY ASSISTANCE (SEC. 3) Section 3 of the bill authorizes $925 million for military assistance plus $1.6 billion for replacing equipment and materials of the United States Armed Forces furnished to foreign countries from defense stocks. In. past years, military assistance has been authorized either as a worldwide total or as a series of total figures for geographic areas. The committee this year adopted a new breakdown to give a more real- istic picture of the manner in which military assistance funds are actually used and the purposes which they serve. Under the system now prevailing, approximately two-thirds of all military assistance appropriations are spent for common items, that is, items which are used by the American Armed Forces themselves and are also furnished to foreign forces under the military assistance pro- gram. This fact has meant that military assistance funds have con- tributed to the modernization of American forces. Wien the military assistance program needs a tank for shipment abroad, for example, it places a common-item order with the Army which in turn provides the tank. Because improvements in all types of equipment are con- stant:ly being; made in the course of production, the latest :items off the assembly line are somewhat better than the earlier items. It is usually-1 the earlier items which are furnished through the military assistai program, while the later items are kept by United States forces. This is a process which has been financed to a considerable de,=.? by military assistance appropriations, and it is this fact which is Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 9 nized by the committee bill. It does not mean that the military assistance program is loaded down with obsolete or secondhand equipment. On the contrary, the policy is to furnish military assist- ance equipment on an as-good-as-new basis. It means simply that the military assistance program has in it, for example, more F-86 aircraft than F-100 aircraft. It should also be pointed out that under the accounting system which now exists, the Army, Navy, and Air Force are reimbursed by military assistance appropriations for the cost of a new and often better piece of equipment than that which was furnished. Thus, to an undeterminable degree (estimated by the Comptroller General at $1 billion), the military assistance program has subsidized the procure- ment programs of the Army, Navy, and Air Force. Section 11 (b) of this bill (see sec. 26 of this report) changes the definition of value so that these transactions will be brought into better balance, but there will be no change in the fundamental principle involved namely, that as one consequence of military assistance the United States Armed Forces have generally newer and better equipment than they would otherwise have. This bill authorizes an appropriation of $925 million specifically for military assistance. This money will be largely used for services and for such things as administration, military assistance training programs, packing, crating, handling, and transportation, contribu- tions to international military head. quarters, foreign military fa- cilities assistance, and the procurement of items not used by Amer- ican forces-for example, wooden minesweepers and simpler types of weapons suited for the less well-trained and less mobile forces of some of our allies. It will also finance a portion of the advanced new weapons. The additional sum of $1.6 billion can be used only to buy equip- ment and materials for the Armed Forces of the United States in replacement of equipment and materials of a corresponding value furnished from Defense Department stocks under the military assist- ance program. The bill authorizes replacement in advance of deliv- ery to the military assistance program, thus at no time requiring the depletion of United States equipment which is in use. It also author- izes obligations for replacements to be incurred in anticipation of reimbursement. The replacements will not necessarily be identical items or even items of the same general type; and reimbursement, as in the past, would be made only upon delivery of end items to the military assistance program. The distinction between these two funds is that the $925 million fund can be used for any purposes for which military assistance appro- priations can now be used; the $1.6 billion fund can be used only for goods which are used by United States forces. This arrangement should clarify the present basis of operations of the military assistance program and point tip the fact that the pro- grain is one which benefits our own defense forces. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 ,to THE MUTUAL SECURITY ACT OF 1956 The committee gave earnest consideration to the question of the total amount to be authorized for direct military assistance plus replacement for items furnished from United States stocks. The total carried in the bill is $2,525 million. This is $600 million more than approved by the house and $400 million less than requested by the administration. It should be noted that the authorization for military assistance this year includes funds for direct forces support which have previously been authorized separately. Of the total amount of $2,925 million requested by the administration, it was contemplated that $374.3 mil- lionn would. be used for direct forces support-that is, the supply of civilian-type items (for example, gasoline, clothing, truck and auto- mobile tires) directly to the armed forces of a country. The net administration request for military asistance, in the sense that the term was formerly used, was $2,550.7 million. This may be compared to $1,278.0 million requested, $1,133 million authorized., and $705 million appropriated last year. For direct forces support,$317.2 rrril.lion was requested, authorized, and appropriated last year, com- pared to the illustrative request of $374.3 million this year. Th administration's request for military assistance this year was thus roughly twice what it requested last year and more than three times what was actually appropriated. The total authorization recom- mended by the committee will give the administration, for military end-item assistance plus direct forces support, $1,502.8 million more than it had for those items last year, but $400 million less than it requested. The committee believes that both the increase (as compared. to last year) and the cut (as compared to the administration's request) are justified. In connection with the former, it should be remembered that such an increase was clearly anticipated when the Senate acted upon this bill last year. In its report on last year's bill (S. Itept? 383, 84th Cong., 1st sess.), the committee pointed out that the amount rec- ommended for military assistance was "largely composed of items of current expense, and will result in reducing the forward programing of military assistance almost to a standby basis." Further, the com- mittee report said : New end-item equipment is included in the 1956 program for only a few countries * * * it should be noted that the proposed 1956 program does not meet present needs; all but the most immediate and. essential of those needs have been deferred to 1957 or later. It should be stressed that the military assistance program is based upon the realistic requirements necessary to meet force goals in each of the recipient countries. A reduction in the program does not mean a reduction in the requirements; it means only a stretch-out in the time needed to fill the requirements. Despite the increase con- pared with last year, the proposed program for fiscal 1957 makes no provision for a buildup of forces beyond previously fixed objectives. The program continues to be one largely of maintenance, of supply- ing spare parts, and of training. If these needs are not met there may Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP5~-00A24A00010OR70005-0 THE MUTUAL SECURITY ACT F actually be deterioration in the foreign forces which we are helping to support. These are items which are largely nonpostponable. Di- rect forces support falls into the same category. reductions in ap- propriations, therefore, have to be absorbed from new items. On the basis of the appropriation authorized by this bill, the 1957 program is estimated to consist of: hfUlion.s I Fixed charges----------------- $255 Facilities assistance----------- $25 Spare parts--------------------- 510 Mutual weapons development___ 48 376 Ammunition--;---------------- 283 Advanced weapons------------- Direct forces support ----------- 374 Training---------------------- 103 20 Aircraft------=----------------- 217 Other------------------------- Navy vessels ------------------- 191 Other materiel---------------- 153 General purpose vehicles------- 45 The most important new element this year is the category of ad- vanced new weapons. This item accounts for $530 million in the administration's total. request, reduced to $376 million in the illustra- tive breakdown of the reduced authorization. These weapons are not nuclear. They have to do, rather, with missiles, advanced electronics systems and things of that type. General Gruenther described these new weapons as "absolutely necessary * * * vital for the development of our military posture, and essential to our strategy" (Hearings, p. 1023). If this portion of the program is authorized in fiscal 1957, the weap- ons cannot be delivered until 1959 or later. It is, therefore, important that the authorization not be longer postponed. The committee is encouraged by statements of administration wit- nesses that some speedup in deliveries of previously ordered equip- ment is in prospect for fiscal 1957. For the fiscal years 1950 through 1956, total military assistance programed amounted to $19.7 billion. But of this amount, as of February 29, only $13.7 billion, or 70 percent, had actually been delivered. This in itself is evidence of some degree of overprograrning, and it was taken into account by the committee in reducing the administration's request. The committee also. takes occasion once more to urge the Defense Department to press ahead more vigorously with activities designed to increase the maintenance capabilities of countries receiving mili- tary assistance, so as to make possible future reductions in requests for items such as spare parts and replacements. The sum authorized by this bill for military assistance is a large one. The figures for individual countries are classified, but are available, along with other details of the program in the committee room, for any interested Senator. It can be said, however, that NATO, Korea, and Formosa account for almost two-thirds of the total. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 European NATO Countries Finance The Bulk Of Their Military Effort 1950 1951 1952 1953 1954 1955 Calendar Years Although the committee doubts the wisdom of any substantial cuts in military assistance to these areas, it is unconvinced of the necessity for the full amount recommended by the administration. Except fot' NATO, there is a question as to the absorptive capacities of the coun- tries concerned. Unless military assistance is given a higher priority within the Defense Department, there is a further question of the ability of that Department to deliver on a program of th.e size requested. Or, balance, it is the considered judgment of the committee that tl ie amount authorized by the bill is a reasonable minimum to accom- plish the objectives of the program. It is unlikely that a larger amount could be wisely spent. A lower amount would represent an unacceptable gamble with the national security. Section 3 (b) of the bill strikes out sections 105 (c) and (d) of the bill as well as references to these subsections in other sections of the Mutual Security Act. The stricken sections established delivery ceilings on military assistance to different geographic areas and allow a 15 percent transferability between areas. The, delivery ceilings were cumulative since the passage of the Mutual Defense Assistance Act of 1949 and have become obsolete in view of the more recent practice of Congress of authorizing and appropriating military assistance funds on a worldwide basis. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 13 6. DEFENSE 8 "PORT (SEC. 4) The bill authorizes a total of $1,167,700,000 for defense support, as follows : Europe (excluding Greece and Turkey) ------------------------- $78,700,000 Near East (including Greece and Turkey) and Africa------------- 170, 000, 000 Asia---------------------------------------------------------- 882,000.000 Latin America--------------------------------- -------------- 37,000,000 The total is $37 million more than the administration had requested (accounted for by a transfer of aid to Latin America from develop- ment assistance to defense support) and $15 million more than the House approved (accounted for by restoration of the European pro- gram to the level requested by the administration). The executive branch illustrative presentation shows the following unclassified country breakdown: Thousands of dollars Europe : Spain --------------------------------------------------------- $ IV), 000 Yugoslavia---------------------------------------------------- 30,000 Interregional expenses------------------------------------------ 2,000 Western Europe technical exchange----------------------------- 2,500 Far East : Korea ------------------------------------------------------- 300,000 Philippines -------------------- -------------------------------- 25, 000 Taiwan------------------------------------------------------- 86;000 Thailand ----------------------------------------------- --------- ;.0, In addition, the following countries will receive defense support in amounts which are classified : Greece, Iran, Turkey, Pakistan, Cambodia, Laos, and Vietnam. In the case of Latin America, the administration had programed development assistance, instead of defense support. Only two coun- tries--Bolivia and Guatemala-are involved. The amount for each is classified, but the total, in the administration program, came to $27 million., In .increasing this figure by $10 million, the committee in- tends $5 million to go to Guatemala and $5 million to be available for use generally in the area. The committee gave serious consideration to the question of whether assistance to Latin America should be increased substantially beyond what is authorized in the bill. Proponents of greater aid to Latin America make a very persuasive case on the basis that this area, which is so close and so important to the United States, receives only small percentages of our worldwide foreign assistance. What this argu- ment overlooks, however, is that the need for assistance of the type provided by this bill is much less in Latin America than in other parts of the world. Further, the other dollar resources available to Latin America are much greater than those available to other parts of the world. For example, Latin America earns almost $3.5 billion a year from trade with the United States. Over the period 1947-1054, United States private investments in Latin America averaged about $400 million a year. And, in addition, Export-Import Bank loans to Latin America averaged more than $200 million a year. The com- mittee hopes that the Export-Import Bank will be able to lend even more money in the future. In this connection, it should be pointed out that the inclusion of Latin American assistance in the defense support section of the bill 78850- -56---- 3 Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 makes it possible for this assistance to be extended oii. a grant basis. The bill provides a total of approximately $100 million for Latin America---$37 million for defense support, $33.9 million for technical cooperation, and an amount for military assistance which, on the basis of the administration's full request, came to $35.5 million. Defense support is economic assistance designed to enable it country to support a larger military establishment than would otherwise be possible. Approximately three-fourths of the total authorized this year is for Asia, and of that amount more than half is for Korea and Vietnam. As a general rule, defense support is furnished in lien of develop nient assistance to countries receiving military assistance. This con- cept is stretched somewhat in the pending bill, particularly so far as Latin America is concerned. Of the only two Latin American coun- tries involved, one, Bolivia, receives no military assistance at allrand: the other, Guatemala, receives only a very small amount. In these countries, as also in some Asian countries, such as particularly Pak ista.n and Iran, the purpose is in fact more economic than military. Rio far as the practical effect of the assistance is concerned., it does not, make very much difference whether it is called defense support or development assistance. The principal distinction is that d ffrent sets of conditions apply to the ' two categories. To receive defense support, it country must sign an agreement under section 142 of 'the Mutual Security Act providing among; other things that it will- fulfill the military obligations, if any, which it has assumed under multilateral or bilateral agreements or treaties to which the United States is a party; * * * make, consistent with its political and economic stability, the full contribution per- mitted by its manpower, resources, facilities, and general economic conditions to the development and maintenance of its own defensive strength and the defensive strength of the free world ; * * * take all reasonable measures which may be needed to develop its defense capacities; * * * furnish equipment and materials, services, or other assistance consistent with the Charter of the United Nations, to' the United States or to and among other nations to further the policies and purpose of chapter 1 of this title [i. e., military assistance]. Nations receiving development assistance are not required to Sign these agreements. But development assistance is furnished. largely on a, loan basis; defense support is largely on a grant basis. Thus, nations which sign section 142 agreements do not ordinarily have to repay the United States for economic aid; nations which do not sign the agreements do have to repay most of the aid. This distinction does not apply in the case of Latin American countries which are parties to the Rio Treaty and to the Caracas Declaration against the intervention of international communism in the 'Western Hemisphere. All Latin American countries are parties to the Rio Treaty and all but Mexico have adhered to the Caracas Declaration. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 15 This means that these Latin American countries may receive aid on a grant basis without signing section 142 agreements, and that, unlike other defense support funds, this aid may%e used for purposes primarily directed to economic development and unrelated to military efforts. In countries such as Korea, Vietnam, and Taiwan, defense support; has a much more direct relation to military purposes. In these coun- tries, the level of armed forces which must be maintained is far beyond the capacity of the local government. The whole military program., which is of great importance, would fail in the absence of economic support. To a large degree, this support takes the form of supplies and equip- ment and of financing the import of saleable commodities which are sold for local currency which in turn is used further to carry out the purposes of the program. Supplies, equipment, and other commodi- ties programed by the administration to be financed out of. defense support funds in fiscal 1957 amount to $1,032,443,000, or almost.90 percent of the total authorized for defense support. Included are: Grain------------------ $107,600,000 Cotton,- -------------- 82, 200, 000 Fats and oils----------- 24, 300, 000 Dairy products --------- 24, 000, 000 Fertilizers-------------- 68, 190, 000 Coal ------------------- 23,200,000 Petroleum-------------- $56, 850,000 Raw materials and semi- finished industrial products ------------- 314, 843, 000 Machinery and vehicles__ 285, 246,000 Section 5 of the bill provides that, effective 90 days after its enact- ment, no assistance shall be furnished to Yugoslavia unless the Presi- dent finds- (1) that there has been no change in the Yugoslavian policies on the basis of which assistance under this Act has been furnished to Yugoslavia in the past, and that Yugoslavia is independent of control by the Soviet Union, and (2) that it is in the interest of the national security of the United States to continue the furnishing of assistance to Yugo- slavia * * *The committee views this section primarily as a statement of con- gressional concern over the state of our relations with Yugoslavia and articularly the state of Yugoslav relations with the Soviet Union. ection 141 of the Mutual Security Act of 1954, of course, forbids military assistance or defense support (the only types of aid received by Yugoslavia) to be furnished to any nation- unless the President shall. have found that furnishing such assistance will strengthen the security of the United States and promote world peace. The new section in this bill emphasizes the additional point that assistance to Yugoslavia is predicated upon that country's independ- ence. The United States believed that the interests of world peace and freedom were advanced when Yugoslavia reasserted its independence from the Kremlin. The United States wants to see it retain that independence. If, unhappily, it should not, then the justification for Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 16 THE MUTUAL SECURITY ACT OF 1956 United States military assistance and defense support would no longer exist. Iii the committee's view, this is a determination which can be made most appropriately by the President. The course of events in Yugo- slavia obviously calls for some reexamination, but it would be unwise for Congress to act with finality upon the basis of the information .now available. Some other aspects of our policy toward Yugoslavia are set forth in more detail in the following letter from the Secretary of State to the chairman of the Committee on Foreign Relations : DEPARTMENT OF STATE, Washington, June .13, 1956,, DEAR SENATOR GEORGE : I welcome the opportunity presented. by your letter of June 6 to make it clear that the Department vigorously opposes Senate bill 4001 which seeks to cut off all United States assistance to Yugoslavia. Within the past 6 months, the executive branch of this Government, with the participation of the President, has reviewed the question of United States policy toward Yugoslavia, and both the programs now being implemented and those proposed in the mutual security bill before your committee are consonant with and in support of the national policy thus established. :During the deliberations at all levels which preceded the final formulation of United States policy in the executive branch, all of the many and frequently complicated factors which enter into United States relations with Yugoslavia were given the most careful attention. In their own independent deliberations on mutual security programs for Yugoslavia, the members of your committee, and of the entire Senate, may find helpful the following summary of the principal considerations which weighed most heavily with the executive branch in determining the final policy adopted. It was agreed that the American attitude toward Yugoslavia had to be formulated in the context of the overall foreign policy of the United States which seeks to meet the basic challenge to American national security and economic well-being emanating from. the Soviet Union. The expansionist tendencies of the U. S. S. R. have been particularly apparent in Europe, where the U. S. S. R. now sits astride the middle of the continent and has stifled all but the illusory sovereignty of a number of once independent countries in Eastern Europe. In this area, only one nation, Yugoslavia, has had both. the opportunity and the steadfastness to stake its virtual existence as an independent State on a defiance of Moscow's ambitions to dominate it, and the United States can take satisfaction from its record of support for Yugoslavia during the recent years of crisis. It is natural, of course, that the focus of attention today rests on Yuigoslavia's present position, which is symbolized in part by the visit Of President Tito to the U. S. S. R. In essence, however, this visit, like the widely noted trip of the Russian leaders to Belgrade in May 1955, marks an acceptance by the Soviets of the defeat of their efforts, to press Yugoslavia into the satellite mold. It is no wonder, there fore, that the Kremlin is trying to gloss over the failure of its anti- Tito policies from 1948 through 1953 by assiduously wooing Belgrade Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 and by working to undermine the manifold Yugoslav ties with the West built up since 1948.e Since the Yugoslav rgime is a communist one, it is understand- able that its leaders now look hopefully to the Kremlin to rescue the U. S. S. R. and the worldwide reputation of communism from the dis- repute to which the totalitarian system perfected by Stalin brought it. In that sense, the United States cannot overlook the tendencies in Yugoslavia toward rapprochement with the Soviet Union induced both by ideology and by the memories of long Communist Party col- laboration prior to 1948. Also to be taken into account is the weak= ness of the Yugoslav economy which still requires much help from abroad and which cannot afford to pass up the relatively generous offers of credits and trade from the Soviet orbit. Finally, the Yugo- slavs have welcomed and seek to take advantage of the normalization of their formerly beleaguered frontiers with the neighboring Soviet orbit countries. None of this obscures the fact, however, that decisions on Yugoslav Government problems and policies are being made in Belgrade and not in Moscow. To be sure, many of these decisions in the foreign- policy field do not correspond with our own. This is partly under= standable in the light of Yugoslavia's different geographical, economic, historical, and ideological circumstances. Yet there has been no credi- ble evidence that President Tito wishes or is going to enter into a sub- servient status vis-a-vis the Soviet Union. Moreover, it is illogical that he should wish to do so, especially in view of his presently favor- able international position vis-a-vis East and West, and of his record since 1948, unless dire economic necessity forces him to become over- dependent on the U. S. S. R. without the alternative availability of American assistance. The Yugoslav portion of the pending mutual security legislation is designed to contribute toward preventing that situation from arising. Its enactment would also be a sign to other West European countries, almost all of which have cordial relations with Yugoslavia, that the United States, as of the present, sees no cause for a major shift in its Yugoslav policy. Such an American judgment would coincide with the conclusions reached lately by a number of responsible West European statesmen. It is evident that the state of United States-Yugoslav relations has important implications for Eastern as well as Western Europe. Docile as they have been in Soviet hands, the satellite chieftains cannot fail to have secretly admired Belgrade's resistance to Moscow in the cause of national independence and to be envious of Moscow's present gen- erosity toward Yugoslavia as compared with its parsimony toward themselves. Undoubtedly, these rulers will be anxious to take advan- tage of whatever greater degree of independent action is permitted them by the new Soviet leadership, and it may well be useful for them to know that the United States is holding to its record of assisting nations, such as Yugoslavia., which make efforts to assert and preserve their independence. I am aware that there is considerable criticism in this country of the system of government now prevailing in Yugoslavia. Properly speak- ing, the nature of another nation's regime is of no official concern to the United States Government, provided that such regime is not asso- ciated with the worldwide movement still directed from Moscow with Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 X THE MUTUAL SECURITY ACT OF 1958 the aim of subverting the independent states not in the Soviet bloc, Yugoslavia does not now seem to be cooperating with this phase of Soviet endeavor and, indeed, gives indications of its disapproval of the continued Soviet effort to expand its orbit and "export" its revo- lution. Still, I should make clear that this Government recognizes that a dictatorship prevails in Yugoslavia and that an unfortunate denial of some human freedoms still persists there. On the other hand, fairness requires that this situation be compared with the Soviet- type political conditions prevailing in Yugoslavia 8 years ago, and any such comparison will demonstrate that there have been substantial ameliorations for the average citizen brought on both by the regime's critical reexamination of some of its own tenets and practices and by the :influence of its expanding official and unofficial contacts with the 'Vest. In reviewing the elements which have entered into the recent for- mulation by the executive branch of United States policy toward Yugoslavia, I have, to be sure, not meant to imply that. this evaluation was final and definitive for the Executive. As you know, procedures are in operation within the executive branch to insure that all policies toward individual countries are kept under continuing review regard- ing their effectiveness and correctness, and this applies, of course, to the Yugoslav case. It is our aim to remain alert to the implications of new international developments for existing programs, and before new appropriations were obligated for Yugoslavia, the Department would in any event; review the then-current situation, whether there were a congressional mandate to this effect or not. It is my hope, however, which I know the President has shared, that the Congress will not want to deprive us of the :instrumentalities and funds whereby the executive branch will be enabled to pursue the flexible policy toward Yugoslavia which is needed to counter the present Soviet drive to retrieve its own failure in Yugoslavia since 1948. Sincerely yours, JOHN FOSTER DUrl i,Fs. 8. DEVELOPMENT ASSISTANCE (SEC. 6) This section of the bill authorizes a total of $243 million for develop- ment and other economic assistance, distributed as follows: iiiUion Near :East and Africa --_-------_-_ $63 Asia-?------------------------- ----------------------------------- 80 Special authorization, Middle East, and Africa------------------------------ 100 These are the same amounts as requested for these purposes by the administration and as passed by the House. The bill carriesa proviso that i 5 percent of these funds may be used only on a loan basis with two exceptions: (1) when they are used to finance sales of surplus agricul- tural commodities; and (2) when they are used for a regional project involving two or more beneficiary nations. And, no more than 25 percent can be used for bilateral dollar expenditures. This loan requirement deserves emphasis. The committee seriously considered requiring all of these funds to be used on a loan basis. It did not do so because, in the present state of the world, such a require- ment would defeat the purpose of the bill in a, few countries. Some latitude must be allowed for grants. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved F TB E or Reles~,~1qIF~IP?q-PA?24A00010,370005-0 The committee feels, however, that it is important to establish the loan principle in programs of this character. The conduct of these programs on a loan basis should do much to improve political relations between the United States and the other countries involved by remov- ing the irritant which is inevitably present in the donor-grantee rela- tionship. There. is considerable evidence that the other countries theiii- selves would prefer to get loans than to receive gifts. The committee realizes that the borrowing capacity of many of the countries involved is too low to support hard loans of the magnitude authorized. The bill, however, authorizes the President to make the loans "on such terms and conditions * * * as he may specify." The committee does not. expect the President to take a banker's approach to this matter. On the contrary, it expects the bulk of the loans to be for long terms at low interest rates. In this way, assistance is more likely to be tied to specific projects, and is, therefore, more likely to be more effective in accomplishing its purpose. The loan provision should likewise serve to put program planning on a more concrete basis. The $63 million authorized for development assistance in the Near East and Africa is intended for Egypt, Israel, Jordan, Lebanon, and Libya. The amounts for each country are classified, but these amounts, together with supporting data, are available in the committee room for the inspection of any interested Senator. In general, however, it may be said that plans contemplate such projects as the supply of power transmission and telephone equipment., railroad rolling stock, highway machinery, irrigation surveys, grain elevators, and roads to link agricultural producing areas with markets. In the case of Israel, the assistance will largely consist of commodity imports, as German reparations are supplying most, of Israel's capital goods requirements: The $80 million authorized for Asia consists of: Ceylon------------------- $5, 000, 000 Nepal -------------------- $1, 000,000 India-------------------- 70, 000, 000 I Indonesia---------------- 4, 000,000 The Indian program is closely related to the Indian Government's own development efforts. The first 5-year plan, which ended in the spring of 1956, was aimed primarily at increasing Indian food pro- duction and in this respect it exceeded its goals. There was a short- fall, however, in the industrial pleases of the plan. The second 5-year plan, now getting underway, emphasizes industrial development. In some respects, it will present more difficult problems than the first plan. It is important to the interests of the United States that India succeed in her efforts for economic development. American assist- ance plays a small but crucial part in the program. The second 5-year plan calls for total public expenditures on development over the 5-year period of $10.1 billion. This may be. compared with proposed United States assistance of $80 million in the first year ($70 million develop- ment assistance plus $10 million technical cooperation). American aid thus amounts to less than 5 percent of the Indian Government's -own efforts on an. annual basis. The aid program in fiscal 1957 will include grain storage, power projects, transportation facilities, and a continuation of the spectac- ularly successful malaria control program. Approved For Release : CIA-RDP59-00224A000100370005-0 Apigroved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 The special authorization of $100 million for the Middle East and Africa is designed, over and above the individual country programs, to give the President authority and funds to take advantage of oppor- tunities which may present themselves to contribute to peace and stability in the area. Although the fund may be used for individual country assistance and is not limited to regional projects, it is the hope of the committee that it can be used to promote the economic growth of the area as a whole. There; is no need to emphasize the extremely critical and unsettled condition prevailing in the Middle East today. The situation in Africa is also changing rapidly and projects which are not now foreseeable may develop quickly in the future. The special authorization for the Middle East and.Africa may be used for defense support, for development assistance, for technical cooperation, or for relief, rehabilitation or resettlement of Palestine refugees. Regardless of purpose, however, it must be used in compli- ance with the 75-percent loan requirement. Throughout the Middle East and Africa as well as Asia, there is the need for the kind of flexibility provided by this fund and for the imaginative administration required to take advantage of it. This is why the committee struck from the House bill the paragraph repealing the President's Fund for Asian Economic Development. This fund was authorized last year (sec. 418 of the Mutual Security Act) in the amount of $200 million, available until June 30, 1958. Only $100 mil- lion was appropriated last year, leaving an unappropriated authoriza- tion of $100 million. By virtue of the committee's action, this author- ization remains in the law, subject to appropriation this year or next year. Finally, it should be noted that section 6 (a) (1) of the bill also adds a new subsection (e) to section 201 of the Mutual Security Act. This new subsection authorizes the use of development assistance funds for nonadministrative expenses to assist in carrying out functions dele- gated to the International Cooperation Administration under the Agricultural Trade Development and Assistance Act (Public Law 480). As sales of surplus agricultural commodities under title I of Public Law 480 increase, the tasks of ICA also increase in thi? respect. It is contemplated that the funds authorized under this section of the bill will be used for such nonadministrative expenses as, for example, engineering advice on how best t o use those foreign currencies accruing under Public Law 480 for which ICA is assigned responsibility. 9. BILATERAL PROGRAMS OF TECIIN ICAL COOPERATION (SEC. 7 (a) AND 7 (C) ) The bill authorizes appropriation of a total of $157,500,000 for vari- ous programs of technical cooperation in fiscal 1957. Of this amount, $140,500,000 is for bilateral programs, $15,500,000 is for the United States contribution to the United Nations expanded technical-as-- sistance program, and $1,500,000 is for the United States contribution to the technical assistance program of the Organization of- American States. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 21 In the illustrative programs presented to the committee by the ex- ecutive branch, it is proposed to use the $140.5 million in bilateral technical assistance funds as follows: EIn thousands of dollars] Near East and Africa : 3,8()0 Egypt --------------------------------------------------------- 3,000 Ethiopia ------------------------------------------ --- 1,000 Greece------------------------------------------------------ 8, 8,000 Iran 2,800 ------------------ ---- 2,000 Iraq -----------------------------._r- Israel-------------------------------------------------------- Jordan---------------------------------------------------------- 2,700 - 2,100 Lebanon-------------------------------------------------------- Liberia------------------------------------------------------1,800 2,000 Libya ----------------------------------------------------------- 2,000 Turkey------------------------------------------------- Overseas territories------------------------------------------- _ 1,200 Regional and undistributed----__---_ -- 2'"200 Subtotal------------------------ ---------------------------- 34,100 Asia : South Asia : 000 3 _ Afghanistan----------------------------------------------_ , 000 1 Ceylon----------------------- ---- India------------------------------------------------------ , 10,000 1,000 Nepal------------------ ----------------------------------- 000 9 Pakistan--------- --------------------------- , Subtotal------------------------------------------------- 24,000 Far East: 2 500 ---____-- Cambodia ----------------------------------------- , 000 8 Indonesia_------------------------------------------------- , 850 2 Japan------------------------------------- ---------------- , 500 5 Korea------------------------------------------------------ , 500 1 Laos------------------------------------------------------ ------- , 1 5,900 Philippines----------------------------------------- 400 3 ----------------------------- ------------ --------- Taiwan-------------------------------------------------- , 600 4 Thailand--------------------------------------------------- , 000 5 Vietnam--------------------------------------------------- , Subtotal, Far East-------------------------------------- 39,250 Subtotal, A.sia------------------------------------------- - 63,250 Latin America : Argentina----------------------------------------------------- 50 Bolivia---------------------------------------------------------- 3,195 Brazil----------------------------------------------------------- 4,739 Chile ------------------------------------------ ?---------------- 2,521 Colombia------------------------------------------------------- 1,536 Costa Rica-------------- --------------------------------------- 1,026 Cuba----------------------------------------------------------- 690 Dominican Republic-------------------------------------------- 330 -- 1,993 Ecuador ----------------------------------------------------- El Salvador---------------------------------------------------- 1,005 Guatemala----------------------------------------------------- 1,730 Haiti---------------------------------------------------------- 1,152 Honduras------------------------------------------------------ 1,290 Mexico--------------------------------------------------------- 1,185 Nicaragua----------- -------?-------------- 919 Panama------------------------------------------------------- 1,195 Paraguay------------------------------------------------------ 1,684 Peru---------------------------------------------------------- 2,996 UJrnguay---------------------------------------------------- -- 619 Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 22 THE MUTUAL SECURITY ACT OF 1956 [In thousands of dollars] Latin America-Continued Venezuela ------------------------- 2''5 Overseas territories _______________________ 8112 Regional and undistributed ------------------------------------------- 1,458 Subtotal, Latin A merica------------------------------------- 32,350 Interregional expenses ------------------------------------------------ --- 10,800 Grand total ---------------------------------------------------- _-- 140, ,00 By major activity field, the fol [owing programs are proposed : [In thousands of dollars] Agriculture and natural resources 31,828 Industry andmining________________ -_--15,836 Tran---------------------- sportation-------------------------------------------------------- 7,411 Labor----------------------------------- --------- ---------------- 3,233 Health and sanitation ------------------------------- .................. 16, 380 Education-------------------------------------------------------------- 25, 303 PubLe administration--------------------------------------------------- 9, 862 Community development., social welfare, and ' 5, 245 General and miscellaneous___________ 14, 602 Other costs - - - -- - 10,800 Total-------------------- --------------------------------------------------------- 140,500. In terms of major cost components, the program breaks down like this: [In thousands of dollars] Grants to cooperative services---------------- 8, 109 Supplies and equipment -------------- --------------- -- 15,6()3 United States employed technicians__---------------------------------- 43, 538 Contract services ------------------------------------------------------- 33,161 Participants (i. e., foreigners trained in United States) ----------------- 18.90(1 Other costs----------------------------------------------------------- 21,093 Total--------------------------- 140, 500 In its annual reviews of the technical cooperation program, as well as in special studies which it has made from time to time, the com- mittee has been impressed with the value of this program to the United States national interest. The committee has likewise been impressed with the widespread--indeed, the almost universal-public support for this program within the United States. The program has also been supported annually by Congress at approximately the level recom~ mended for 1957. Although the administration of the program has not been without its faults, the committee is convinced that on the whole the program is a sound one and should be continued as recommended in the pending bill. The committee is pleased to note that the item for supplies and equip- ment is only 11.2 percent of the total, the lowest proportion in recent years. The point has frequently been made that technical cooperation is a program for extending knowledge and skills. As such, it does not call for large amounts of supplies and equipment, though some. minimal quantities are necessary for purposes of demonstration. The low per- centage of supplies and equipment planned for 1957 is welcome evi- dence of a reversal of an earlier tendency to make technical assistance an economic impact program rather than a training program. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUTUAL SECURITY ACT OF 1956 23 The funds authorized will provide for a total of 4,389 technicians to be sent abroad by the United States and for 5,731 foreign trainees to come to the United States or elsewhere for training. Of the tech- nicians, 2,909 will be Government employees and 1,480 will be provided for by contract. The committee notes that the cost of Government- employed technicians will average $14,967 each, while the cost of con- tract technicians will average $22,406. The higher cost of contract technicians tends to confirm the impres- sion of this committee's Subcommittee on Technical Assistance Pro- grams as previously reported to the Senate (S. Rept. 1956, May 1956) that contracts- have been resorted to in many instances as a personnel recruit- ment device and as a means of avoiding Government salary ceilings. The committee takes this occasion to underwrite the subcommittee's recommendation that this aspect of private contracting procedures be reviewed by the International Cooperation Administration and the Department of State. At the same time, the committee recognizes that private contracting has an important role in the technical cooperation program and it does not wish to discourage in any way the use of such contracts where appropriate. Section 7 (c) of the bill makes a technical, but important, amend- ment to existing law in this regard. Section 307 of the Mutual Security Act of 1954, as amended, now provides, among other thins, that a contract may "run for not to exceed three years." Section i (c) of the bill would amend that section to provide that such contracts may "extend at any time for not more. than three years." The purpose of the amendment is to make it clear that such contracts may be renewed for periods of not more than 3 years. This is par- ticularly important with regard to college contracts, i. e., those which are made between an American college and a foreign institution and which are underwritten by ICA. Many of these contracts involve long-term projects which are not completed within 3 years. The contracts should be extended in order not to lose the benefit of the work already done and the relationships already established. It is im- portant, also, that American universities participating in these con- tracts know what to expect so that they can plan for their own future. The amendment proposed by this bill does not change the require- ment of existing law that the contracts are "subject to any fixture action of the Congress." In this connection, however, the committee feels impelled to express its dissatisfaction with ICA administration of the college. contract program. ICA should give urgent attention to developing procedures for the more rapid servicing of university contracts and for avoiding the intolerable delays which have characterized this program here- tofore. This program has great potentialities, but if colleges are to be ex- pected to participate, they have a right to know what their status is and what ICA's intentions are. Indeed, they must know if they are to Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 24 plan their own programs intelligently. This situation demands prompt corrective action. 10. UNITED NATIONS TECHNICAL ASSISTANCE (SEC. 7 (b) (1)) The bill authorizes $1'5.5 million as the United States contribution to the United Nations expanded technical assistance program. The contribution will be made from fiscal year 1957 funds for the United Nation's calendar year 1957 program. It will amount to not more than 50 percent of the total contributions to the U. N. program's entrai fund. This is the same ratio as is being contributed in 1.956. The following table shows the. steady growth of the United Nations program accompanied by a decline in the United States percentage {:ontribution : [In millions of dollars] Other gov- I ernments United States TTn tied States percentage 1950-51-------------------- ---------------------------- 8.0 12.0 20.0 60.0 I9b2--------------------------------------- ------------- 7.4 11.4 1s. 8 60.0 19.13- ------------------------------------- 9.8 12.8 22.4 57.0 1934---'----------------------------`------------_---- 11.4 13.9 25.3 55.0 1955------------------------ ----------------------- ------ 13.0 15.0 28.0 53.6 1956 114.5 114.5 29.0 60.0 19:7---------------- 115.5 915.5 31.0 50.0 Estimated. Proposed. This trend, it seems to the committee, is an entirely healthy one and should be continued. Although the U. N. program operates in substantially the same fields of activity and in many of the same countries as the United States bilateral program, the two programs supplement, rather than duplicate, each other. In certain fields and in certain situations, each has advantages over the other. Among the more important advan- tages of the U. N. program are : 1. Advice and assistance rendered under multilateral auspices are more acceptable in some countries. The U. N. can frequently enter situations where the United States, for political reasons, cannot. The U. N. can consequently brinabout results which are in the national interest of=the United States-but which the United States itself could not achieve. It is frequently easier for the U. N. to recruit qualified technicians .in countries other than the United States. This is particularly the case in such. fields as tropical medicine. Foreign technicians also sometimes have language skills not abundantly available in the United States,, Finally, foreign technicians sometimes have fewer problems of personal adjustment. This is especially true of technicians from countries in, an intermediate stage of development working in less well- developed countries. 3. Participation in the multilateral U. N. program has important political advantages to the United States. It demonstrates that we are willing to join with other nations in cooperative endeavors for the improvement of living standards. Curtailment of United States support of the U. N. program would, in the opinion of the committee, have seriously adverse political consequences for the United States. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved Fq)ftp -191&-DpPSQQ;4A000100?x0005-0 1i., ORGANIZATION OF AMERICAN STATES TECHNICAL ASSISTANCE.. (SEC. 7 (b) (2) ) The'bill authorizes $1,500,000 as the United States contribution, in fiscal year 1957, to the calendar year 1957 technical cooperation pro- gram of. the Organization of American States. This is the same amount as was appropriated for 1956, but it is anticipated that actual contributions in 1956 will amount to only $1,200,000. This arises be- cause of the United States policy against contributing more than 70 percent of the total. The committee deems it advisable that the full; amount of $1.5 million be approved, however, so that it will be avail able if contributions from other countries increase. The OAS technical cooperation program consists of seven regional projects in the fields of economic statistics, housing, rural education,. natural resource evaluation, children's welfare, agriculture, and foot- and-mouth disease control. The program is relatively small, dollarwise, but one with impor- tant economic and political benefits to the United States. In the judg ment of the committee, it deserves continued support at the scale rec- ommended. Section 8 (a) of the bill increases from $50 million to $150 million the amount of funds otherwise made available under the act which can be used by the President in his special fund. It likewise increases the amount which can be used in any one country from $20 million to $30 million. Under this authority and within its limitations, the President may use any funds made available under the act for pur- poses deemed essential to the security of the United States without regard to the requirements of the Mutual Security Act or any other act for which funds are authorized by the Mutual Security Act. The bill also authorizes a separate appropriation of $100 million for the special fund, in addition to the authority to use $150 million of other funds available under the act. The committee deems this provision of great importance in invest- ing the Executive with the necessary latitude and flexibility to meet international emergencies and new requirements which may arise dur- ing fiscal year 1957. It has been demonstrated by past operations that this special fund is needed to deal with unforeseen contingencies, and with those programs which, at the time of congressional presentation, were not firm enough to be included. Examples of the type of action made possible by this fund during fiscal 1956 are hurricane relief in Haiti, flood relief in India and Pakistan, additional requirements of Korea, and relief necessitated by the unusually severe winter in Europe. In view of the recent Soviet maneuvers in the field of economic and technical assistance, it is important that the administration retain its capacity to move quickly in emergencies and to take advantage of new opportunities as they develop during the fiscal year. A technical amendment is also made in the language of section 401 of the Mutual Security Act. This section, among other things, au- thorizes assistance to refugees from Soviet bloc areas, including "Com- Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 213, THE MUTUAL SECURITY ACT OF 1956 munist-dominated or Communi:4-occupied areas of Germany and Austria." In recognition of the attainment of Austrian independence and the withdrawal of Russian occupation forces since this section was first enacted, the words "and Austria" are deleted. 13. SURPLUS AGRICULTURAL COMMODITIES (SEC. 8 (b) ) Mutual security legislation for fiscal years 1955 and 1956 (sec. 402) required that not less than $350 million and $300 million respectively should be used to finance the export and sale for foreign currency of surplus agricultural commodities of the United States. For fiscal 1957 the required minimum, approved by the committee, i:i $250 million. The reason for this declining 1;rend lies in the continuing .ii-ft in emphasis of the mutual security program from Europe to Asia. The less developed countries, now recipients of the greater part of United States assistance, are largely agricultural, and some of therm are them- selves looking for markets for their own agricultural production. T iese countries, moreover, need aid for other purposes which cannot be, met through surplus commodities. Inasmuch as the emphasis ol the aid program will remain on underdeveloped areas, there will be fewer opportunities to use agricultural commodities. The committee emphasizes, however, that the $250 million require- ment of the bill is a minimum. The administration should take full advantage of whatever opportunities develop during the year for dis- posing of more than the required amount of surpluses. It should be noted that actual sales of surplus agricultural com- modities have in the past exceeded the requirements of section 402. In fiscal 1955, sales amounted to $467 million against a requirement of $350 million, and in 1956, it is anticipated that such sales will total $349 :million against a requirement of $300 million. The estimated composition of the fiscal 1957 program is: .Midli.on Bread grains --------------------------------------------------- ------- $110.7 Cotton.----------------------------------------------------------?------ 93.2 Fats and oils-----------------------.---------------------------.----- 12.3 Coarse grains-------------------------------------------------------- 9.0 Dairy products .--------------------- ---------------------------.-----. 21. 0 Other -------------------------------------------------------------------- 3.8 Total ---------------------------------------------------------- 250.00 For special assistance in joint control areas, the adminiz tration requested and the committee approved an authorization of $12,200,000. This compares with $21 million authorized and appropriated for fiscal year 1956. The assistance contemplated is largely in Berlin. This city, iso- lated from Vilest Germany, has long been of unusual importance and concern to the three Western occupation powers, which still carry the responsibility for the city. Its isolation also produced unusual prob- lems, which snake continued assistance necessary. Although unern- ployment has been reduced, it still amounts to 14 percent of the labor force. The city consumes more than it produces, leaving a $401) mil- Approved For Release : CIA-RDP59-00224A000100370005-0 Approved FT F ,plp eS-& I P550,Q224A0001 OQ370005-0 lion gap between exports and imports. The situation is further 'age gravated by the steady influx of refugees from the eastern zbne, of Germany. Although the Federal Republic of Germany has increased annually its assistance to the city, now at about $300 million a year, marginal outside economic help is still required. Morally, and as a result of responsibilities retained by the three Western occupying powers under the Paris-Bonn agreements, continuation of this assistance--on a reduced basis-is unquestionably necessary. Although Austria has now happily regained its independence, it comes under the definition of joint control areas in section 403 of the Mutual Security Act of 1954--namely, "nations and areas for which the United States has responsibility at the time of the enactment of this act [i. e. August 26, 1954] as a result of participation in joint control arrangements * * * "A small technical exchange program for Austria is planned with the funds authorized under this section for 1957." 15. REFUGEES AND ESCAPEES (SEC. 8 (d) ) For United States contribution to the United Nations Refugee Fund (UNREF), the executive branch requested and the committee ap- proved an authorization of $2,300,000 to be appropriated for fiscal 1957. Of this amount, $1,500,000 will cover the United States cal- endar year 1956 contributions and $800,000 will be the contribution for the first half of 1957. It is desirable that at least part of the calendar 1957 contribution be authorized and appropriated in advance so that the management of the fund will have a firmer basis on which to plan. The appropriation authorized in this bill will enable the United States Government to make a firm commitment for the first 6 months of the next year when the annual pledging conference is held in the fall. UNREF was established for a 4-year period by the General.assem- bly of the United Nations in 1954 to deal with the problem of the remaining World War IT refugees. Last year, after less than a year of active operations, UNREF was awarded the Nobel Peace Prize for its worthy humanitarian efforts on behalf of these residual refugees. As the committee pointed out in its report last year, UNREF's task is a difficult one because a great number of the remaining refugees are unproductive due to age, illness, or other disabilities. Institutional care is frequently the only solution. A further complicating factor is that most of the. refugees are concentrated in the already overpopu- lated countries of Austria, Greece, Italy, and Germany. Several small countries, however, such as the Netherlands, Sweden, Denmark, Nor- way, Switzerland, and Ireland, have been taking these so-called diffi- cult cases in increasing numbers for permanent institutional care. When the UNREF authorization was considered last year the ad- ministration stated that it intended to limit the United States contribu- tion to one-third of the total contributions to the central account. This was endorsed in the report of the Foreign Relations Committee, but no statutory limitation was set. It is now proposed to compute the one-third United States contribution on the basis of total contribu- tions to the central account plus expenditures made by governments accepting refugees for institutionalization. This latter category would include only. costs undertaken on behalf of the "difficult cases" and not Approved For Release : CIA-RDP59-00224A000100370005-0 Approved F9 Release :SC'CURTY ACT OF IAIRDP59-00 924A000100370005-0 6 other local expenses of countries of first asylum. The administration expects that such computation might encourage further acceptance of difficult cases by the participating countries. It would also constitute recognition of their service to humanity. The new forr(rula"seems to the committee to be a reasonable one. Through December 31, 1951i, UNREF aided a total of 23,356 refugees. The target program for 1956 contemplates aid to 38,810_ In. both cases, permanent solutions are found for about two-thirds of 11ose aided. The cost of the program through December 31, 1955, was $3.1 million. The target for 1956 is $6.6 million. In view of the vigorous redefection campaign by the Soviet Union designed to lure refugees and escapees back to their countries of origin, .it appears particularly important that the free world maintain a pro- gram designed to help them find a permanent place in society. The committee agrees with the statement issued by the White house on May 24, 19.56, that- the right of asylum is one of the treasured traditions of free peoples. The United States intends to continue firmly to adhere to and uphold this principle. For the escapee program the Al dministration requested and the com- mittee approved $7 million for fiscal year 1957 operations. In fiscal year 1956 $6 million was authorized and appropriated for this purpose. Time escapee program is an effort to aid those persons who have escaped from Communist countries since 1948. These people are living testimony of Communist oppression and ruthlessness. They deserve our assistance in finding a place in the free world. Among them, as among other refugees, the Communists are working with enticements and false promises to persuade them to return to their countries of origin. These activities make it doubly important for the United States not to fail there now. It is estimated that the caseload of 30,745 escapees as of December 31, 195, will have been reduced to 18,105 by the end of this year and to 12,89:0 by December 31, 1957. This is made possible by the decline in additions to the caseload. It should be pointed out, however, that past estimates have been highly unreliable. During last year's con- gressional presentation, for example, the executive branch estimated the caseload as of the end of 1955 at 19,850, but it was in fact 30,745. The Administration states that a reduction in appropriations is not feasible at this time. Resettlement is more difficult and therefore more costly. A larger percentage of the remaining escapees on the rolls are older persons requiring institutional care. There is also planned a small increase in the Far Eastern program. The escapee program is largely carried on by United States volun- tary foreign relief agencies under contract with the State Department, using their own resources as well as local government contributions. 16. UNITED NATIONS CHILDREN'S FUND (SEC. S (e)). The committee recommends $1.0 million, the full amount requested by the executive branch, for the calendar year 1957 contribution. to the United Nations Children's Fund (UNICEF). Last year. $14,- 500,000 was appropriated for this purpose, of which $4.8 million was Approved For Release : CIA-RDP59-00224A000100370005-0 Approved Fob ejq-k~#Q P 9-AOUASA00010031O005-0 for the second half of calendar year 1955 and $9.7 million was for all of calendar year 1956. In terms of percentages of the total, the United States contributions have been progressively decreasing from 71 percent in 1952 to 57.5 percent in 1956 with 55 percent proposed in 1957. At the same time contributions from other govermnents have risen from $2.7 million in 1952 to an estimated $7.2 million in 1956 and $8.2 million in 1957. If local contributions to UNICEF projects, which amounted to $27 million last year, are added to these figures, the relative United States contribution is reduced to 21 percent. During the past year, UNICEF continued its farflung hulnani- tarian: operations, reaching more than 31 million mothers and children, mainly in Asia, Africa, and Latin America. A summary table of its calendar year 1955 activities is reprinted below. United Nations Children's Fund summary of beneficiaries in 1955 Number of programs aided by UNICEF in 1955------------------- Number of countries and territories assisted---------------------- 264 Number of beneficiaries : BCG antituberculosis vaccination (children vaccinated) ------- 16, 521, 000 Antimalaria campaigns (children and mothers protected) ----- 6,107, 000 Yaws control (children and mothers treated) ----------------- 1,660,000 Trachoma control (children treated) ------------------------ Feeding through school lunches and maternal and child welfare 1,131, 000 centers (peak number of children receiving daily ration) ---- Emergency feeding (peak number of children receiving daily 3,000,000 ration) --------------------------------------------------- 2,700,000 Total------------------------------------------------- 131,129,000 Not included in the above are the many children and mothers who receive benefits (other than milk) from the over 10,000 maternal and child welfare centers, clinics, and children's and maternity hospitals aided by UNICEF. There are still more beneficiaries from UNICEF assistance to vaccine production plants, leprosy control, communicable disease control, and milk-drying and pasteurization plants. The IJNICEF programs are well worthwhile and deserve the con- tinued support, not only of the United States but also of other mem- bers of the United Nations. 17. PALESTINE REFUGEES IN TILE NEAR EAST (SEC. 8 (f) ) Last year Congress authorized the appropriation of $65 million for the fiscal year 1956 for contributions to the United Nations Relief and '"rorks Agency for Palestine Refugees in the Near East. Of this amount, $62 million was appropriated, but only $16.7 million was ex- pended due to lack of progress on the rehabilitation program. There remains an unobligated balance of $45.3 million. Section 8 (f) of the committee bill amends last year's authorization by striking out the words "for the fiscal year 1956" so as to remove all doubt that this unobligated balance will continue to be available. In the past, the United States contribution for the relief of these refugees has amounted to $16.7 million a year. During fiscal year 1957, this will be increased to $17.5 million. The increase is accounted for by two factors: (1) the number of refugees is increasing, due to an excess of births over deaths and to the continued failure of resettle- ment and (2) the United States contribution will be made partly in the form of commodities, largely flour, at prices higher than 78850-56--5 Approved For Release : CIA-RDP59-00224A000100370005-0 ypproved FIB I glpASeSj CIA RDP5o 00224A000100370005-0 the open.market. The United States contribution amounts to approxi- mately 70 percent of contributions from all sources. The committee felt last year that this was -justified but at the same. time it believed "that greater effort might be, made to increase worldwide participa- tion in the program." The committee still maintains this view. Attempts to reach agreement on rehabilitation and resettlement programs have, since 1949, been marked by alternating periods. of hope and of frustration. Last year, 'agreement on a number of projects, it was hoped, would be realized during fiscal year 1956. Once again, however, such agreements were not forthcoming. The committee cannot emphasize too strongly its belief that indefinite relief operations lead only to deterioration in the morale of the ref- ugees and in the political situation in the Near East. It regards. as of utmost importance the compelling necessity of reaching agreement between the nations of the area and beginning the implementation of resettlement projects. After the _[Tnited States contribution to relief in fiscal year 1957, there will remain a balance of $27.8 million which will again be set, aside for rehabilitation projects if they can be undertaken. I. s. OCEAN FREIGHT a)IIARGES (SEC. 8 ((Y)) section 8 (g) of the bill authorizes S3 million for the payment of ocean freight charges on relief goods shipped by the voluntary agencies. The administration requested, and the House approved, $1.4 mil- lion, which, it was estimated, would pay for shipment of about 57 million pounds of relief supplies, valued at an estimated $20 million. The voluntary agencies bear the costs of soliciting, packaging, and transporting the goods to United States ports. The receiving coun- try, for its part, normally provides duty-free entry of the relief ship- ments and pays for transportation from the foreign port. to final destination. Thus, for a relatively small sum, a great deal of good is accomplished. Public 540, the Agricultural Act of 19.56, makes other provisions for these payments in regard to surpluses made available by the Commodity Credit Corporation. These account. for the bulk of the surpluses involved, and the committee, therefore, deleted the separate authorization of $14 million from the mutual security bill. There remain, however, some surpluses which are acquired and shipped by the voluntary agencies independently of the CCC. In order to provide for ocean freight payments on this category of surpluses, the committee increased the other authorization from '$1.4 million to $3 million. 19. ADMINISTRATIVE EXPENSES (SEC. 8 (11) AND (i)) Battle Act.--The Mutual Defense Assistance Control Act iss ad- ministered by the Director of International Cooperation, and appro- priations for the expense of administering it are, therefore, authorized in the Mutual Security Act. The present bill contains $1,175,000 for such expenses-the same amount that was appropriated. last year. This is used for ICA expenses and for partial reimbursement of State and Commerce Department outlays in connection with Battle Act activities. These agencies, as well as the Department of Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 THE MUT-ITAL S )CURITY ACT OF 1956 31 the Treasury and intelligence units, finance other Battle Act..gpera- tions out of their regular budgets. International Cooperation Administration.-The committee recom- mends $35,250,000, the full amount requested, for expenses' of ad- ministering the nonmilitary programs. Expenses for the : admiiiis- tration of the military programs are absorbed by the Department of Defense from military assistance funds. For fiscal 1956, the Con- gress appropriated $33,500,000 for administration but actual expenses will be $34,845,000 (the difference being met by transfers from other appropriations). The funds requested this year represent a small increase, therefore. This is needed for these reasons: (1) the Fed- eral Government employee pay increase; (2) too rapid staff reduc- tions in past years, some of which had to be refilled; and (3) infla- tionary trends overseas resultiii-cr in greater operating costs. The committee, in approving this amount, desires the International Cooperation Administration to give the closest attention to the recom- mendations made by the Comptroller General of the United States, before this committee on May 21, 1956, particularly as they relate to planning programs beyond the agency's capacity for carrying them out, to overestimating obligations, and to a lack of advanced planning. Administrative expenses for Agricultural Trade Development and Assistance Act of 1944.-A new item of $1,500,000 is contained in the bill as approved by the committee this year for administrative ex- penses arising from ICA's administration of foreign currencies re- ceived for saes of surplus agricultural. commodities tinder title I of Public Law 480 (the Agricultural Trade Development and Assistance Act) No provisions for such expenses are made at the present, and it is felt desirable to do so in view of the increasing scope of Public Law 480 activities. As of March 31, about $472 million worth of Public Law 480 foreign currencies were under ICA administration, and it is estimated that this figure may reach $800 million by the end of the fiscal year. Department of State expenses.--A new provision has been added to authorize the appropriation of not more than $7 million in each fiscal year for administrative expenses which are incurred for normal functions of the State Department relating to mutual security activi- ties. In the past, these expenses have been in the neighborhood of $6 million a year and have been met from ICA'- fund for administra tive expenses. The new subsection makes it possible for the T)epart, ment of State, if it should so desire, to request these funds in its own annual appropriation bill. If this arrangement is followed in fiscal 1958, there should be a corresponding reduction'in ICA administrative expenses. 20. TAX AND COMMERCIAL TREATIES (SEC. 8 (j) ) Section 413 of the existing law deals with encouragement of free enterprise and private participation in achieving the objectives of the Mutual Security Act. In subsection (b) (2) of that section, 'the President is directed to accelerate a program of negotiating treaties for commerce and trade, including tax treaties, which shall include provi- Approved For Release : CIA-RDP59-00224A000100370005-0 I I Approved For Release : CIA-RDP59-00224A000100370005-0 32 THE MUTUAL SECURITY ACT OF 1956 sions to encourage and facilitate the flow of priv;,i, ,,invest- ment to nations participating in' programs under this act. The pending bill adds "the equitable treatment" of private investment in participating countries as one of the objectives to be encouraged and facilitated in these treaties. 21. INVESTMENT OTTARANTIEs (SEC. S (1")) The bill, in section 8 (k) nukes three changes in the investment guaranty program now provided for in section 4113 (b) (4) of the Mutual Security Act. These changes are : 1. Authority to issue guaranties is extended from June 30, 1957, to June 30, 1967. This should facilitate the negotiation of guaranty agr.ee1nents. with foreign countries, some of which have contended that the prospective early expiration of the program renders their participation of little significance. 2. The limitation on the face value of outstanding guaranties is increased from $200 million to $500 million. This increase is even greater than it appears. The present $200 million limit applies to investment guaranties plus informational media guaranties. The proposed $500 million limit applies only to investment guaranties, informational media being dealt with separately. (See sec. 11 (a), ,lew subsection 544 (g) of the bill, sec. 24 of this report.) Further, under existing legislation, issuing authority is diminished by the face amount of every guaranty written; only when a guaranty is canceled. reduced, or expires is issuing authority restored. Under the bill, issuing authority will also be increased when dollars are received by the Government after June 30,1955, for foreign assets which it acquires when it makes a payment under a guaranty. The bill also makes these funds available for paying off other guaranties. 3. For guaranties issued after June 30, 1956, the bill establishes fractional reserve instead. of the full reserve now required. Guar- anties are now backed by notes issued to the Treasury in an amount equal to the amount of the guaranties. By the end of the current fiscal year, it is estimated that $138.5 million of the existing note issue authority will have been utilized, leaving $61.5 million together with $1.5 million in collected fees, or a total of $63 million. The bill in- creases that sum to $100.5 million by authorizing the Director of the International. Cooperation Administration to issue additional notes in an amount not to exceed $37.5 million. Thus, the bill provides a, total reserve of $100.5 million against the maximum face value of guar- anties of $500 million. This is in accord with insurance practice. The investments protected by the guaranties are widely dispersed geo- (rraphically, and it is unlikely that all guaranties in all countries will 1e invoked. Further, it is not anticipated that payments made in discharging liability under the guaranty contracts will be a complete loss. When payments are made by the United States, it is subrogated to the investors' claims, and any proceeds obtained from disposing of them. become available, under the bill, for payments on account of other guaranty contracts. Finally, inasmuch as many investors ob- tain convertibility and expropriation guaranties to safeguard the same investment, it is hardly likely that both guaranties in it given. case Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 would be called on; yet they are now both charged in full to the guar- anty authority. The committee believes these considerations to be sound and con- siders that, in the light of prevailing circumstances, the reserve fixed by the bill should be more than adequate to meet foreseeable contin- gencies. The investment guaranty program stems from the Economic Co- operation Act of 1948. Under it, the Government will guarantee in- vestors in approved projects against losses arising from currency inconvertibility or from expropriation or confiscation. The program, does not guarantee a profit nor does it underwrite the normal risks of doing business. Guaranties for approved projects are available in any country with which the United States has agreed to institute the guaranty program. The agreements express the foreign government's willingness to participate in the program and provide for diplomatic settlement or international arbitration of any claims against that government to which the United States may become subrogated by discharging its obligations under the guaranty. There are now 30 participating countries :-Austria, Belgium, Bolivia, China (Formosa), Colombia, Costa Rica, Denmark, Ecuador, France, Germany, Greece, Guatemala, Haiti, Ilonduras, Ireland, Israel, Italy, Japan, Netherlands, Norway, Pakistan, Paraguay, Peru, Philippines, Portugal, Spain, Thailand, Turkey, United Kingdom, and Yugo- slavia. Guaranties may cover both convertibility and expropriation in al l of these countries except Colombia, Peru, Turkey, and the United Kingdom, where they apply only to convertibility. As of May 31, 1956, a total of 121 guaranties had been issued, repre- senting a coverage of $1.09,394,260 which includes $82,403,862 con- vertibility guaranties and $26,990,398 expropriation guaranties. There are, in addition, approximately 200 applications now in process, which would, if granted, add $324,886,288 to the coverage. To the present time, no losses have occurred under either heading, and. over $1,522,687 in fees have been collected. The annual cost of operating the program is estimated at $92,000. The investment guaranty program is designed to encourage the in.- vestment of private United States capital in friendly foreign comn- tries for the purpose of contributing to their agricultural, industrial, and general economic development. To the extent that private capi- tal and enterprise can be encouraged to participate in productive ventures of this kind, the burden of foreign aid now carried by Government funds and financed by the American taxpayers will be correspondingly reduced. At the same time, the principle of respect for private enterprise and an understanding of what it can accomplish in improving living standards is encouraged. A major consequence of this activity is the strengthening of the economic power of the free world. The committee believes that the moderate expansion of the program provided in this bill is sound and that it will contribute to achieving the objectives of the Mutual Security Act at little or no cost to the United States. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 22. FOOD AND AGRICULTURE ORGANI7,ATTON (SEC. 8 (1) ) This section of the bill increases the ceiling on United States con- tributions to the Food and Agriculture Organization from $2 million a year to $3 million a year, with a proviso that in no case can our contributions exceed 31.5 percent of the total annual budgets of the organization. This section of the bill is the same as section (a) of Senate Joint Resolution 97 which passed the Senate April 19, 1956. Senate Joint Resolution 97 also increased the ceiling on United States contributions to the International Labor Organization, but that matter is not dealt with in this bill. The Food and Agriculture Organization provision was added to the mutual security bill by the House Foreign Affairs Committee. The proviso limiting United States contributions to 31.5 percent was added by the Senate Foreign Relations Committee in consonance with t-lie earlier action of the Senate. For reasons whicli are more fully explained in its report on. Senate .Joint Resolution 97 (S. Rept. 1172), the committee believes the ncrease here provided is needed and justified. GENERAI, ADmTINTSTRATIVz PR(;VI:SIONS (SECS. 95 105 AND 11 (A) NEW SUBSECTIONS 544 (C), (D), (E), AND (F) ) Transferability (see. 9 (a)).-This section of the bill corrects a clerical. error which was made in 1954 and repeated in, 1955 in section x,01 of the Mutual Security Act, relating to transferability of funds. The last two sentences of this section, which are deleted by section 0 (a.) of the bill, deal with the requirement that given percentages of funds transferred to development assistance must be furnished on a loan. basis. As the law now stands, these two sentences are contra- dictory. Through inadvertence the next to the last sentence of section 501 was left in the law last year although the reason for it ceased with the repeal of the loan requirement in section 201 of title II. The last sentence was included through a clerical error in the final print of the act though it was not in the bill reported by the conference committee and passed by the Congress. The bill also strikes out the third from last sentence in section 501 which becomes obsolete with the repeal of section 1.05 (c). The basic transferability provisions of the act are unaffected by these changes. Use of foreign currency sec. 9 (b) ) .-This subsection adds the Senate Select Committee on Small Business to the congressional com- mittees which are entitled to use, counterpart funds to meet their local currency expenses in carrying out their duties. The Small. Business Committee has hitherto had the use of these funds, but the General Accounting Office has raised a technical question about the matter and this amendment will make it perfectly. clear. Section 502 (b) of the Mutual Security Act originally granted this authority to- appropriate committees of the Congress engaged in carrying out their duties under section 136 of the Legislative Reorgan- ization Act. Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 Last year, to remove some doubt, the Joint Commitee on Atomic Energy and the Joint Committee on the Economic Report were added by name to the section. The General Accounting Office interpreted this to exclude other committees not mentioned by the Legislative Reorganization Act; hence the desirability of the Small Business Committee amendment. Availability of funds (see. 9 (c) ).----Section 507 of the present law states the important principle that funds shall be available to carry out the act as they are authorized and appropriated to the President each fiscal year. This means that for these important programs a separate review is conducted in the Senate by the Committee on For- eign Relations and the. Committee on Appr?opriations. Specific ex- ceptions have heretofore been made to this principle and noted in section 507. These include the infrastructure program, contributions to the Intergovernmental Committee for European Migration, par- ticipation in NATO, and assistance to certain Chinese and Korean students. Other sections of the Mutual Security Act, however, also authorize appropriations to be available for longer than 1 year. These other sections include section 103 (no-year funds for military assist- ance), section 418 (the Asian development fund, available to June 30, 1958), and section 411 (d) (administrative expenses of the State Department). To remove any possibility of conflict between section 507 and these other sections, the committee has approved an amend- ment to section 507 making it clear that the rule of section 507 dons not. apply if other provisions of the act provide otherwise. Shipping on United States vessels (sec. 9 (d) ).-Section 509 of the act prescribes the operation of the 50-50 shipping principle for the mutual security program, i. e., that in most cases 50 percent of the goods financed under the program must be shipped on American vessels. In 1955, this section was amended to exempt from this re- quirement the transportation from one foreign country to another of commodities procured with foreign currencies derived from dollar funds made available under the Mutual Security Act. This means, for example, that when mutual security funds are used to purchase wheat in the United States which is sold in a foreign country, and when the foreign. currency accruing from that sale is used to purchase commod- ities which are needed in the aid program, then these commodities may be shipped from one foreign country to another without regard. to the 50-50 shipping requirement. Section 9 (d) of the bill would t'urther amend section 509 by extending this exemption to commodities pro- cured with foreign currencies received for surplus agricultural com- modities under the Agricultural Trade Development and Assistance Act of 1954, as amended (Public Law 480, 83d Cong.). This amend- ment should simplify the disposal overseas of United States surplus agricultural commodities. The committee emphasizes that the amend- ment relates only to shipments between two foreign countries and in no way affects shipments from the. United States. Procurement services of the General Services Administration (sec. 10 (a) (1)) .-This paragraph of the bill confirms the authority for the procedure currently being followed in handling funds to cover admin- istrative expenses of the General Services Administration (GSA) in performing procurement services under the foreign aid program. Under this procedure, payments made to GSA for administrative sur- Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 charges on foreign aid procurement are consolidated in a separate no- year account which may be drawn upon to cover administrative ex- penses of GSA in connection with such procurement. This eliminates serious bookkeeping difficulties which would arise if GSA adminis- trative expenses, such. as salaries of personnel, had to be distributed voucher by voucher among the numerous individual appropriation accounts maintained in the foreign-aid program. Allocation and reim,bursemnent among agencies (sec. 10 (a) (2)) This provision would. add it new subsection (f) to section 522 of the :act, which relates to allocation and reimbursement canon Q+ a ~ n N ^'J .r 00 __ n u', CV [J .. o m rn CG 06 OG CV WC.q W r. F'~' O 77 a > N CV 00 OD k ~ ycC ~'~ I E Fw~. r I I _ al p ro w o a a mII ~o l d p p qq '~3 ?~ (A t ~. N 40 N> C M 00 00 `n - t ... I m .-~ N N co rn o 0 0 0 0 l - - -- ~ _ dP~'~o~aWi~ O o O o N N N N Z ..-- ''1J~'O M,ri T N N ; tD ep Qa O CA c~~.y '~hw o w cFi' _ `~ cB N W rn I wa .d .o R aw . $ A ~o S ow y p p 0,o AU P~ 9 "~C) . C ~z Qo aay ? roF a ~~; age ar ~ lo- ap?~ o w Approved For Release : CIA-RDP59-00224A000100370005-0 Approved For Release : CIA-RDP59-00224A000100370005-0 6FU THE MUTUAL SECURITY ACT OF 1956 b N d.kN N~n N CO m C a mNCO as O O OO he ~'ypRgC?~ w q 7 M ~WM C. yy N NaCC.C-C ~M : 0. 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